Phnom Penh—The 328 acres known as Boeung Kak Lake still appear on maps of Cambodia’s capital as a large blue patch, though its waters are now only a memory. Pumped full of sand, the area is being readied for a promised development that has already displaced some 4,000 families. Looming over the puddles and dirt, two massive billboards display portraits of the high-end residential and commercial wonderland intended for the plot.

In 2007, the Cambodian government handed Boeung Kak Lake to Phnom Penh-based Shukaku Inc. in the form of a 99-year lease, which allows the company to clear the land for economic development. The local company belongs to Lao Meng Khin, a close friend of Prime Minister Hun Sen and a senator from the ruling Cambodian People’s Party, but several Chinese companies also have a share in the new development project....

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