Major Bank Audit Finds Financing for ‘Blood Sugar’ Operation

Local human rights workers say the Australian and New Zealand-backed bank ANZ Royal, which operates widely in Cambodia, has been financing a sugar plantation connected to forced evictions and other rights violations.

The Phnom Penh Post reported Thursday that an internal audit by ANZ Royal showed it had financed the sugar operations of ruling party senator Ly Yong Phat, whose sugar plantations have been at the center of land disputes and claims of major rights abuses in Kampong Speu province.

Ean Vuthy, head of the rights group Equitable Cambodia, told “Hello VOA” on Thursday that a bank that lends to such a company has itself an impact on human rights. “Lending money legally is not wrong,” he said. “But normally each company has its own rules, and Cambodia also has the law.”

Ly Yong Phat’s Phnom Penh Sugar Company has come under increased scrutiny in recent years, and the EU has considered banning the import of its sugar under preferential trade agreements in the Anything But Arms scheme.

Phall Vannak, a community representative of villagers in Kampong Speu, told VOA Khmer that the sugar company has been behind the seizure of land, farms, rice paddies and forest, and has polluted the environment with waste that has killed livestock and made people sick. That was all done with financing from ANZ, he said.

“I wish to suggest that ANZ immediately pressure or work with Phnom Penh Sugar for the betterment of the lives of people in Am Laeng, because people are facing a shortage of food,” he said.

ANZ Royal’s chief executive officer, Grant Knuckey, told the Phnom Penh Post the bank was looking into the case.

“Where we have found that a client does not meet our environmental and social standards and they are not willing to adapt their practices, ANZ has declined funding or exited the relationship,” Knuckey told the Post. “ANZ Royal has requested that Phnom Penh Sugar has a direct dialogue with community leaders, and it will continue to review the way the company addresses its social and environmental obligations.”

But news of ANZ’s audit spread through much of the region Friday, putting increased focus on the sugar operations and inviting criticism of the bank’s policies.

ANZ’s financing of the Phnom Penh Sugar Company “raises questions over the bank’s due diligence process and its compliance with a global ethical banking code it is a signatory to, as well as its own policies,” the Sydney Morning Herald reported.

“It is hard to reconcile financing one of Cambodia’s most high-profile land grabs with the social and environmental commitments that ANZ made when it signed on to the Equator Principles,” said David Pred, managing associate of Inclusive Development International, a land rights organization.

In a statement, the organization said ANZ green-lighted a deal with Phnom Penh Sugar and its sister company, Kampong Speu Sugar, while a public land conflict was under way and “where their sprawling 23,000 hectare sugar plantation was established by seizing homes, rice fields, orchards, grazing land and community forests relied upon by local farmers in at least 21 villages.”

“Lending money to Ly Yong Phat is hardly befitting of a bank that has been repeatedly ranked as the most sustainable bank globally by the Dow Jones Sustainability Index,” Pred said. “This is someone who has been implicated in violent forced evictions and land grabbing in three provinces, illegal logging and deforestation, child labor, and the use of military, police and the courts to intimidate, arrest and imprison villagers who dared to protest.”

Government spokesman Phay Siphan said the case needs further inquiry but that the lending was done legally. “We know the issue is complicated,” he said. “In a complex issue, we can’t solve it through reaction. We have to solve it through what system we can.”