In Brief: Oil and the Poor, an Intern First, Debt Swap

News Brief, VOA Khmer
Washington
26 October 2007

Soaring oil prices are threatening the prospects of millions of the region's poor, and Cambodia is one of the most vulnerable, according to a UNDP report issued Friday. As oil prices climb, the impact on the poor may worsen, warns the report, "Overcoming Vulnerability to Rising Oil Prices." Oil prices have tripled in the last four years, and absorbing the growing price is a staggering issue for poor Southeast Asian countries, Hafiz Pasha, UNDP Regional Director for Asia and Pacific, said at the launch of the report in Bangkok. The Oil Price Vulnerability Index developed in the report ranks countries in terms of their economic strength and extent to which growth depends on imported oil. Countries ranked most vulnerable were Cambodia, the Maldives and Sri Lanka. Between 2002 and 2005, the UNDP found an average household paid 74 percent more for energy needs. This included 171 percent more for cooking fuels; 120 percent more for transportation; 67 percent more for electricity; and 55 percent more for lighting fuels.

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Third-year journalism student Chhor Yi Eung finished a three-month internship Friday at the office of Dr. Horst Posdorf, a German member of the European Parliament, becoming the first Cambodian to complete such an assignment within the European Parliament. Chhor Yi Eung, 23, also worked in the governing body's press department, where she was tasked with studying European Parliament by attending meetings, public hearings and writing articles and reports. The program was made possible by a partnership between the Department of Media and Communications of the Royal University of Phnom Penh and the German aid agency the Konrad-Adenauer Foundation.

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Outgoing Polish Ambassador Habil Ryszard Olszewski announced Friday Poland plans to erase Cambodia's foreign debt, on the condition the money be used to preserve Angkor Wat. Poland will also continue to back Cambodia for a place on the non-permanent committee of the UN Security Council, a Polish embassy consul said. The spokesman declined to disclose the total amount of Cambodia's debt to Poland, but government statistics put Poland's contribution for 2006 alone at around $10 million. Poland also donated armored personnel carriers to Cambodia in 1995. The countries first established diplomatic relations more than 50 years ago, and Poland was the first to answer the call of Cambodia's newly installed Vietnamese-backed government in 1979 to assist in preserving the Angkor Wat temple complex.

DEVELOPMENT: Oil Prices May Impact MDGs - UN Report

By Marwaan Macan-Markar

BANGKOK, Oct 25 (IPS) - A new mechanism to measure the impact of rising oil prices on Asia’s poor offers a sobering forecast. There is a clear threat to the region’s gains in reducing the numbers living poverty.

Using 18 different indicators, the recently conceived Oil Price Vulnerability Index (OPVI) suggests that countries surveyed have been hit by varying degrees as the price of oil rose from around 22 US dollars per barrel in 2003 to over 80 dollars per barrel in the years since. Last week, oil fetched a record high of 90.07 dollars per barrel, leading to speculation that the 100 dollar mark was a growing possibility.

The most vulnerable countries are those that have ‘’low economic strength, low economic performance and high oil dependency,’’ states a report released Thursday by the United Nations Development Programme (UNDP), which used the OPVI to confirm its region-wide assessment of how the continent’s poor are coping with the rise in fuel prices.

In South Asia, the worst off countries are Afghanistan, Bangladesh, the Maldives, Nepal, Pakistan and Sri Lanka. In South-east Asia, the list includes Cambodia, Laos and the Philippines. In the Pacific, they range from the island nations of Fiji, Samoa, Solomon Islands to Vanuatu.

The moderately vulnerable countries, on the other hand, stretch from Bhutan and India on one end to Burma, Thailand, Vietnam, Indonesia, Papua New Guinea and Mongolia. What has saved these countries from being at the bottom of the barrel are the capacities of their respective economies to ‘’absorb oil price shocks, performing better with high or medium gross domestic product and economic growth rates,’’ states the UNDP report, ‘Overcoming Vulnerability to Rising Oil Prices’. ‘’(They also have) a low reliance on oil or being a net exporter of oil.’’

But such a distinction would pale if oil prices continue to remain high, consequently posing an unforeseen challenge to the region’s Millenium Development Goals (MDGS) described by the report as ‘’the overarching goal to eradicate extreme poverty and hunger’’.

‘’The threat to the MDGs depends on the length of oil prices continuing to rise,’’ Nandita Mongia, the lead author of the report, told IPS. ‘’If the prices continue to rise over the next three to five years, then we are in big trouble.’’

The MDGs were eight development targets that were set by the world’s leaders at a U.N. summit at the world body’s headquarters in New York in 2000. The first of them was to halve by 2015 the number of people whose income was less than one U.S. dollar a day. The Asia-Pacific region has come in for praise due to the drop in poverty rates from 32 percent of the region’s population to 17 percent. In 2004, some 641 million people were still living in extreme poverty in this region.

There is equal concern that another MDG target -- to ensure that by 2015 children everywhere, both boys and girls, will be able to complete a full course of primary education -- will take a hit. Rising transport costs can come in the way of children in rural communities gaining access to good schools, states the 149-page UNDP study.

At the time the MDG’s were conceived, however, the prospect of high oil prices posing a major hurdle appeared remote. ‘’The issue of an oil price hike was never discussed seven years ago as a possible hindrance to the MDGs,’’ says Mongia. ‘’We were living in a happy world when the price was around 25 dollars a barrel.’’

Yet the new reality that the spike in oil prices has posed to the region’s development plans is stark. ‘’The Asia-Pacific region has had to pay 400 billion dollars as an additional oil bill to what was spent in 2003,’’ Hafiz Pasha, U.N. assistant secretary-general, said during the launch of the report. ‘’This is 20 times the annual aid flow to the region.’’

This has forced a change among rural and urban communities, with many shifting to ‘’more traditional, dirtier, and more difficult to access fuels,’’ he added. ‘’It has also made their attempts to climb out of poverty more difficult.’’

Interviews conducted by the UNDP’s researchers among poor households in rural and urban China, India, Indonesia and Laos conveyed the emerging reality. ‘’Between 2002 and 2005, the households interviewed suffered some dramatic price increases, paying as a whole 74 percent more for their energy needs,’’ states the report. That included 171 percent more for cooking fuels, 120 percent more for transportation, 67 percent more for electricity and 55 percent more for lighting fuels.

The millions who have been forced ‘’to climb down the energy ladder,’’ as the UN agency describes it, have been left with limited choices, prompting many households to be forced to stay in the dark. While the urban poor ‘’tend to be worse off since they do not have the alternative of collecting fuel wood or biomass,’’ the rural poor are no better off, since they are ‘’more vulnerable to higher prices for lighting fuels, especially in unelectrified villages.’’

For least developed countries like Nepal, the pressure has had a bearing on the quality of life. ‘’There has been an increase in the disparity between the rich and the poor,’’ said Posh Raj Pandey, member of the South Asian nation’s national planning commission. ‘’This poses a critical threat to achieving our MDGs.’’

Soaring Oil Prices Hit Hard on Asia’s Poor

Petroleum sector
Energy Bangla (Bengladesh)

Bangkok, 25 October 2007 – Soaring oil prices are threatening the prospects of millions of the region’s poor and forcing them further into poverty, says a report issued here today by the UN Development Programme (UNDP). As oil prices climb, the impact on the poor may presage worse to come warns the publication, Overcoming Vulnerability to Rising Oil Prices: Options for Asia and the Pacific.

“Oil Prices have tripled over the last four years. Today the price is approaching $90 a barrel. This has meant that the Asia and Pacific region has had to pay an additional bill of almost $400 billion for imports compared to the amount spent in 2003. This is 20 times the annual aid flow to the region,” said Hafiz Pasha, UNDP Regional Director for Asia and Pacific, at the launch of the report in Bangkok . “It has become a real issue for an otherwise fast-growing region to absorb this staggeringly large bill,” said Mr. Pasha.

An alternative perspective was presented by H.E. Piyasvasti Amranand, Minister for Energy, Royal Government of Thailand at the launch. “This time around, the price of oil has gone up so much that we are seeing renewable technologies developing and materializing. These new technologies will be beneficial to everyone,” he said .

Interviews conducted for the report among poor rural and urban households in China , India , Indonesia and Lao PDR reveal that rising oil prices are starting to put a brake on human development and in some cases, shifting it into reverse. Between 2002-5, the households interviewed suffered dramatic price increases – paying on average 74 percent more for their energy needs. This included 171 percent more for cooking fuels; 120 percent more for transportation; 67 percent more for electricity; and 55 percent more for lighting fuels.

This has provoked huge public outcries – and incredible hardships for the poor - who are being literally, pushed into the dark. Millions are being forced “to climb down the energy ladder”, reverting to traditional fuels that are unhealthy and inefficient, says the report. The poor are cutting back even on bare essentials of travel and services which are increasingly beyond their reach.

The Oil Price Vulnerability Index (OPVI) developed in this report ranks countries in terms of their economic strength and performance, and the extent to which this growth depends upon imported oil. The OPVI is a composite index which brings together 18 indicators which tracks the level of dependence of economies to imported oil, and thereby, their vulnerability to fluctuations in global oil prices.

The countries that are ranked most vulnerable are Maldives , Cambodia and Sri Lanka , whose low economic strength, lower economic performance and high oil dependence, are immediately evident.

Countries that seemingly appear less vulnerable, are also not immune to the effects of these oil hikes: Malaysia and Thailand , for example, with their rapidly growing oil consumption, could become more vulnerable in the future. China and India, on the other hand, at present do not seem to be as immediately impacted, since their reliance is greater on other energy sources like coal, and their stronger performing economies and larger reserves enable them to ride through this period.

Thailand’s Minister Amranand noted at the report launch that “ Thailand has been providing a lot more incentive for renewable energy for very small power producers using various waste agriculture and raw materials. Biofuels are doing well to the extent that we will probably have enough raw material for the production of biodiesel by the end of next year, and now effort has to be spent in the production of palm oil,” he said.

But this ability of the economy to sustain economic fluctuations is not the same as the ability of the poor in those countries to cope with the impact of high prices and inflation. The report demonstrates how poor household have suffered from the increases in prices of oil-based commodities and transport costs.

From the point of view of countries that are vulnerable to the oil price fluctuations, particularly the LDCs, the report proposes a new mechanism that will enable countries to cope with sudden downturns – the Asia-Pacific Compensatory Oil Finance Facility. AP-COIL will help countries cope with their prolonged liquidity problems. At present these vulnerable countries finance their oil bill through their debt which squeezes their capacity to invest in critical economic, social and infrastructural investments. The AP-COIL will enable these countries to tide over the immediate balance of payments or fiscal deficit crunch, and secondly, to move towards a less oil-intensive future by investing in alternative forms of energy.