In Cambodia, Timber Trade Comes Under Fire

Friday, June 1, 2007
By JAMES HOOKWAY
The Wall Street Journal

With international concern growing over whether Cambodia's newly found oil reserves will add fuel to the corruption plaguing the country's economy, the U.K.-based advocacy group Global Witness is set to publish a report on the way the impoverished nation's ruling elite is allegedly stripping the country of a key natural resource -- its forests.

After a three-year investigation, Global Witness says it found evidence that relatives and associates of Cambodian Prime Minister Hun Sen run an extensive, illegal logging syndicate that reaps millions of dollars a year shipping timber to buyers in China and elsewhere.

The operation is aided by the country's police and armed forces and is encouraged by the complacency of Cambodia's many international donors, the report alleges. The report, which was to be released Friday, draws on interviews, observations in the field and documents -- including corporate correspondence and contracts.

"Cambodia is run by a kleptocratic elite that generates much of its wealth via the seizure of public assets, particularly natural resources," the report alleges. "The forest sector provides a particularly vivid illustration of this asset-stripping process at work."

Neither Mr. Hun Sen's office nor a Cambodian government representative responded to written requests for comment on the Global Witness allegations. Efforts to contact the officials by phone were also unsuccessful.

Global Witness was founded in 1993 to highlight the link between the exploitation of natural resources and corruption, conflict and human-rights abuses. Since then it has exposed the trade in conflict diamonds and the illegal logging trade in Africa and elsewhere.

The report comes at a time when Cambodia is expecting the proceeds of oil exploration in its territorial waters. Chevron Corp. in 2005 discovered oil reserves off Cambodia's coast and is continuing to drill in the area. The government hopes to see the first revenue flows in 2010. Other international energy companies are also planning to search for oil reserves. It is unclear how much oil might lie off the country's coast.

Mr. Hun Sen, the country's autocratic prime minister since 1993, has said Cambodia will use the proceeds from the oil wisely. He says the country won't fall victim to the so-called oil curse that has retarded economic development in other poor but oil-rich nations, such as Nigeria, where oil revenue has enriched the country's elite while leaving the majority of its people mired in poverty.

But development economists warn that Cambodia, where power is concentrated in the hands of a relatively few people and where legal and other public institutions are ill-equipped to offset their influence, could follow a similar path.

"We thank our foreign friends for their concerns about oil -- they do not need to worry," Mr. Hun Sen said last month.

In its Cambodia report, Global Witness specifically accuses politically connected loggers of illegally felling timber in the Prey Long Forest, cutting down thousands of resin-bearing trees that local villagers depend on for a living, and exporting plywood valued at millions of dollars to China without paying taxes on the transactions. These are all offenses under Cambodian law.

The report didn't offer a specific estimate of the amount of timber shipped, but it calculated that between 2003 and 2007, timber valued at about $34 million was exported to China, without payment of any taxes or duties to the Cambodian government.

The report also alleges that a military unit known as Brigade 70, which bolsters Mr. Hun Sen's own bodyguard unit, runs an illegal logging-and-smuggling business that generates between $2 million and $2.75 million a year.

Global Witness contends that Cambodia's international aid donors are failing to use their influence to put a stop to the alleged illegal trade in timber. Wealthy nations together send about $600 million a year to Cambodia, which is equivalent to approximately half its national budget.

After years of civil war and the brutal regime of the Khmer Rouge, Cambodia is still coming to terms with its past, and multilateral agencies such as the World Bank, United Nations and various nongovernmental organizations play a prominent role in the country. Yet, the Global Witness report says, "donor support has failed to produce reforms that would make the government more accountable to its citizens. Instead, the government is successfully exploiting international aid as a source of political legitimacy."

The report's release is timed partially with an eye on a donor meeting in Phnom Penh on June 19 and 20, where representatives from donor nations and agencies will gather to discuss their aid programs for Cambodia.

Corruption is endemic in the mostly agrarian nation of 14 million people, of whom 35% survive on less than half a dollar a day. In 2006, the World Bank suspended $7.6 million in funding for three corruption-plagued projects and demanded that misused funds be repaid.

Write to James Hookway at james.hookway@awsj.com