NEAR BROMA VILLAGE, Cambodia (Reuters) - Cambodia's transformation from war-torn basket-case to one of Asia's most promising emerging economies is being overshadowed by a backwards lurch in human rights and land policies that critics say are entrenching poverty.
Next week's visit by Barack Obama, the first by a U.S. president, will in some ways set the seal on the emergence of Cambodia's $13 billion economy under Prime Minister Hun Sen as it draws unprecedented interest from investors.
Its garment export industry is booming, tourist numbers are surging and low-end manufacturing is taking off as companies seek a cheaper alternative to China. The capital Phnom Penh is being transformed by plush new buildings and luxury imported cars.
Then there are places like Broma village in the eastern province of Kratie. The mostly illiterate residents have no schools, medical center or roads and they also lack legal titles to their homes.
Like millions of Cambodians, that made them vulnerable when a company began encroaching onto their land to expand its rubber plantation this year. What happened next, according to Hun Sen and a court verdict last month, was an armed rebellion against authorities by the villagers.
Twelve residents and outside activists were handed jail terms last month of up to 30 years for taking part in a "secessionist" movement that soldiers brutally put down.
The reality, according to Reuters interviews in the remote area and research by human-rights groups, is that the villagers merely tried to resist the latest in an epidemic of land grabs that is casting a shadow over Cambodia's economic awakening.
"My husband was jailed for three years for nothing while others get six months for murder. Cambodia is finished now," said 54-year-old Sreng Pho, whose husband was one of the people convicted for taking part in the so-called secessionist bid.
Ahead of Obama's visit for an Asian summit, authorities in Phnom Penh plan to lock up street beggars, according to media reports citing city officials. Hundreds of families living around Phnom Penh's airport have been served with eviction notices.
Dozens of people protested outside the U.S. embassy last week, asking Obama to raise land and human rights issues with Cambodia. Sam Rainsy, the exiled leader of Cambodia's opposition, has urged Obama to cancel his visit to avoid giving legitimacy to the 61-year-old Hun Sen, who consolidated his power in a bloody 1997 coup.
PRESSURE ON DONORS
As well as raising human rights concerns, conflict over land risks stunting growth, especially in rural areas where more than 80 percent of Cambodians live, according to interviews with economists, opposition politicians and foreign diplomats.
An area the size of Israel has been leased to companies that often have cozy political connections, affecting more than 400,000 land dwellers, according to rights group Licadho. The so-called economic land concessions, totaling about 2.1 million hectares, have accelerated in the past few years, Licadho says.
Only about 20 percent of Cambodians have land titles - a hangover from the Khmer Rouge's abolition of private property during their 1975-1979 reign of terror - leaving people insecure and with little incentive to invest in farming.
While the government suggests the concessions will bring long-elusive prosperity to rural Cambodia, there is scant sign of that happening. In a damning report, the U.N. special rapporteur on human rights this year found "no evidence" that revenues from land concessions were used to alleviate poverty, which remains rife in rural areas despite brisk annual economic growth of more than 6 percent.
"Without land reform you can't really develop a middle class," said Adam McCarty at the Mekong Economics consultancy.
In rural Cambodia, he said, "it's either starve or work for a landlord."
The U.N. rapporteur also highlighted the risks to investors posed by land conflicts, such as delays in projects and reputation problems for companies.
The government's land policies are drawing increasing scrutiny from Cambodia's international donors - who supply almost half the country's budget - amid mounting evidence that land dwellers' rights have been systematically ignored.
European Union legal experts are carrying out a "thorough analysis" of the U.N. report for evidence that could lead to an investigation of whether Cambodia has broken conditions of its trade benefits with the bloc, EU Ambassador to Cambodia Jean-Francois Cautain told Reuters. The EU is under pressure from campaigners who say its "everything but arms" program that allows duty-free imports from Cambodia has fuelled land grabs.
The World Bank has frozen fresh aid to Cambodia since last year over forced evictions of families in Phnom Penh.
RUBBER FOR CHINA
Weak rule of law is another major constraint on Cambodia's ability to attract more investment and diversify its narrowly based economy, diplomats and economists say.
Government critics say the court verdict in the Broma case, which foreign diplomats who attended the 3-1/2 day trial say had little basis, worsened a dark year for human rights as Hun Sen clamps down on opposition ahead of elections next year.
The country's leading environmental activist was shot dead this year and a journalist covering illegal logging was also killed. Several activists have fled the country to avoid what they say are cooked-up charges.
Among those jailed in the court case over alleged secessionism was Mam Sonando, a 71-year-old radio broadcaster and government critic, who got 20 years for inciting the plot even though he never visited the area.
In an about-face, Hun Sen suspended the approval of new land concessions in May. Since June he has dispatched hundreds of volunteer students to the countryside to mark out 1.2 million hectares of land that will be given to about 350,000 families.
"If you compare the speed and achievements, Cambodia moves faster than other nations," Phay Siphan, secretary of state in Cambodia's Council of Ministers, or cabinet, told Reuters.
The government had at times not been able to control land developments due to a lack of legal clarity, he said. He skirted specific questions about the Mam Sonando trial, saying only that legal cases should be judged in court rather than by the media.
Land rights activists are skeptical about the titling drive, saying it smacks of electioneering and will not help those who are in disputed areas. Hun Sen has approved at least 12 new land concessions since May, saying they had been decided before the suspension.
A TALE OF TWO CAMBODIAS
Cambodia is scooping up a small but growing share of foreign investment in Southeast Asia, with Japanese flows alone at $300 million this year, up from $75 million in 2011. Phnom Penh's stock exchange opened last year, albeit with just one listed company.
More than 2.5 million tourists visited the country in the first nine months of this year, up 24 percent on the year, and were likely to generate about $2 billion in revenues.
Garment exports by big brands such as Nike and Adidas surged 50 percent last year and are up 10 percent in the first nine months of 2012 to $3.4 billion.
A World Trade Organisation member, Cambodia is perhaps Asia's most open country to investors, allowing 100 percent foreign ownership, easy repatriation of profits and a dollarized economy that minimizes currency risks.
Marvin Yeo, managing partner of Frontier Investment and Development Partners, said that while land was a "particularly sensitive" issue for investors in Cambodia, there were promising opportunities in agriculture, manufacturing and infrastructure.
"I'm very optimistic for Cambodia ... I think it's one of the most overlooked and undervalued relative to other countries."
But as economic activity expands, companies are reporting a struggle to find skilled workers, a result of poverty and poor education. The Asian Development Bank, calling for a "concerted approach to improving human capital", cited a survey showing that 73 percent of firms reported college graduates as lacking suitable skills.
"This is a constraint that will face Cambodia going forward unless they clean up land titling. The transfer of labor from agriculture into manufacturing and services will not happen as smoothly as they will need," said Jayant Menon, lead economist at the ADB's Office for Regional Economic Integration.
Cambodia also faces looming competition for investment from newly open Myanmar - which has vast natural resources and a population of nearly 60 million, four times Cambodia's.
Although income per capita has doubled since 2005, inequality has grown and Cambodia is ranked the second-lowest in Southeast Asia by the United Nations Development Programme's Human Development Index.
"This country's economy is going to be in trouble. It's dependent on cutting down trees, minerals and tourism," said opposition parliament member Son Chhay. "It's not sustainable."
Near Broma village, many residents were reluctant to speak about events leading to the trial, fearing reprisals by officials and soldiers who still patrol the area.
The red, fertile soil is ideal for growing rubber that is mostly exported to fuel Chinese industry. Rubber plantations, where workers toil for $2-$3 a day, already dominate much of the landscape.
Sreng Pho, the wife of one of the jailed men, confirmed that villagers had sought help from activists linked to Mam Sonando after workers started to bulldoze their land. But she and other villagers denied they had been armed and said soldiers fired without warning.
A 14-year-old girl was shot dead by the soldiers, who were backed by a helicopter when they moved in to the area on May 16. No one has been charged in her killing.
After the violence, officials posted a notice on villager Khat Saroeun's house saying that titles would be given to long-term residents, without specifying who would qualify. Khat, the only member of his family able to read the notice, is not optimistic he will get the paperwork.
"We are afraid to rise up. We have no money, we just have tears," said the 57-year-old, who avoided prison by confessing his involvement in the so-called uprising.
(Editing by Robert Birsel)