Middle East targets land, energy deals

Phnom Penh Post | Friday the 13th of March 2009

Written by George Mcleod

Cambodia's traditional sectors are foundering in the wake of the global financial crisis, but the Kingdom's farmlands could bring billions from Middle Eastern countries seeking food security.

BANGKOK - With high-profile government visits and massive deals in the works, Middle Eastern countries are competing to carve out an economic and political stake in Cambodia. Land leases and energy agreements are being negotiated by Kuwait and Qatar, while Israeli companies are hoping to ink agricultural technology and telecoms contracts.

Governments are backing the push into Cambodia, and the prime ministers of Kuwait and Qatar already visited last year.

Israel is joining the game, with its first major delegation scheduled to arrive Monday. Iran is also taking a role under its Look East policy to boost Asian trade in the face of Western sanctions.

Analysts say growing Middle Eastern interest puts Cambodia on the map and in the middle of a power contest for political and economic footholds in Asia.

"In a way, the economic crisis has made Asia an even greater focus for the Middle East because there is more competition for markets," said Middle East expert Yossi Mekelberg from Chatham House in London.

"Middle Eastern countries are attracted to Cambodia in part because [Cambodia] doesn't care about the Arab-Israeli conflict, or about politics.

[Cambodia] wants investment. It gives Middle Eastern countries soft power in the region," he said.

Mekelberg added that growing consumer markets and rich natural resources have helped make Asia a focus for Middle Eastern powers.

The Cambodian government could not provide figures on future Kuwaiti and Qatari investment, but sources say deals are currently under negotiation, and could be announced this year. Cambodia's foreign ministry said Kuwait invested US$300 million in hydropower projects, millions more in irrigation, and pledged $5 million for an Islamic centre. Kuwait also plans to build an embassy and pledged nearly $600 million in loans.

A food security expert from New York University said that Kuwait and Qatar's investments in Cambodia are largely strategic.

"These countries can't grow much of their own food, and the price shocks last year were a wake-up call for them. ... They are keen to have secure food supplies for the future," said Alex Evans by phone from London.

New markets for Israel
The Israelis, on the other hand, are interested in gaining markets for their technology and increasing their political influence, analysts say.

Figures from the Cambodian Investment Board say Israel was Cambodia's fourth-largest foreign investor in terms of approved projects in 2008, with $300 million in fixed assets. The Israeli embassy said it expects trade and investment to increase substantially after next week's delegation, which will see 15 Israeli telecoms companies, as well as agricultural technology companies visit Phnom Penh.

The Israeli ambassador in Bangkok, who is also responsible for Cambodia, told the Post that additional high-level visits may materialise in 2009.

Agriculture in focus
Of most interest for the Middle East is agriculture - something that Qatar and Kuwait have very little of. Local conglomerate Mong Reththy Group is among the companies involved, and the CEO said discussions are underway with the two countries.

"Cambodia lacks technology and capital, but we have plenty of land. Qatar will provide the financing and we will share the land," Mong Reththy said. Qatar is discussing a $20-million joint venture to lease 10,000 hectares of rice growing land in Stung Treng province. Mong Reththy said the deal was in the planning stages, with talks scheduled for Monday when a group of Qatari businessmen are set to visit - incidentally, the same day the Israeli delegation arrives.

"We are getting ready to finish our discussions with Qatar and, if successful, we will start our project this year," said Mong Reththy.

"We also plan to discuss this with Israel and Kuwait, possibly to grow rice and corn because we are experts in these crops," said Mong Reththy.

The Cambodia Chamber of Commerce has been in contact with Kuwait, Qatar and Israel, and officials say Cambodia's food-producing potential has put the country in the spotlight. Director General Nguon Meng Tech said: "Kuwait, Qatar and Israel all want rice from Cambodia because these countries are mostly sand."

"Eighty-percent of Cambodia's population are farmers, so if they invest in agriculture, I believe that we will be able to succeed in applying our plan," said Nguon Meng Tech.

But petroleum-rich countries will have to invest heavily if they wish to make their investments in Cambodia worthwhile, say other investors.

Local rice yields are a poor 2.5 tonnes per hectare, versus about 3.5 in Thailand and about six in China. Lack of storage and milling capacity also means Cambodian rice is lower quality than product from neighbouring countries.

One foreign investor said Gulf States are well-positioned to improve that.

"Improving Cambodia's agricultural output and quality will require huge investment - something countries like Kuwait and Qatar have a lot of.

The Israelis can offer technology that would let Cambodia do more with what it already has," he said.

While the Arab states have their sights set of food security, the Israelis say their main goal is to create a market for high technology goods.

"Cambodia is potentially a huge market for [Israel] it is also a totally new market for us," said Yitzak Kiriati, director of the Israel Export and International Cooperation Institute, a government-private sector agency.

"There is a lot of potential for cooperation because Israel can offer some of the world's best irrigation, desalinisation and greenhouse technology," he said in Bangkok.

But Alex Evans from New York University said some of the investments could fuel land grabs and food insecurity. "What you are seeing in Cambodia is quite similar to what has taken place in other developing countries. ... There is a real lack of transparency, and these agreements are often made at the highest levels of government," he said, referring to Kuwaiti and Qatari land leases.

"There is a lot of concern about the deals - concern that these developing countries are not getting a fair deal," he told the Post.

Original source: Phnom Penh Post

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