Oil dispute optimism

Thursday, 21 July 2011
James O'Toole and Tom Brennan
The Phnom Penh Post

THE election of Puea Thai has made a solution to the disputed Overlapping Claims Area in the Gulf of Thailand more likely, experts say.

Petroleum companies say they are ready to explore the 27,000 square kilometre region, which is claimed by both Thailand and Cambodia and is thought to contain significant reserves of oil and gas.

The area still remains largely unexplored a decade after the two countries signed a Memorandun of Understanding stipulating joint management of its petroleum resources.

In 2001, Cambodia and Thailand agreed on joint development of the southern portion of the disputed area, with the northern portion to be divided by a defined maritime border.

Cambodia Urged To Join Transparency Initiative

By Ros Sothea, VOA Khmer
Original report from Phnom Penh
06 April 2010

International mining experts have called on Cambodia to join an organization to promote transparency in the extractive industries to help prevent a resource curse as it moves toward oil and mineral exploitation.

Under the Extractive Industries Transparency Initiative, resource-rich countries work to ensure the revenue from their natural resources go toward improving the lives of its citizens.

“Now is the best time for Cambodia to actually join the EITI and prepare itself for those future revenue flows, since it is much more difficult to join the EITI once you already have extractive activities in place and huge revenues are flowing in,” Radhik Sarin, international coordinator of Publish What You Pay, said in an interview.

The appeal came during a three-day workshop among mineral experts from 15 countries in Phnom Penh to pave the way for a better mineral resource management and as Cambodia’s government says it could begin mineral resource extraction in the next two to five years.

“[EITI] is basically a tool for getting a clear understanding of all the financial resources to make sure that the revenue are properly spend for development issues,” said Sarin, who also serves on the board at EITI.

Cambodia expects to extract oil and gas in 2012 and mineral resources in 2015. The International Monetary Fund has estimated revenue of $172 million in the first stage of oil and gas extraction, with the amount increasing to $1.7 billion by 2021.

But experts worry that money could end up in the pockets of corrupt officials. Cambodia was listed as one of the most corrupt countries in 2009 by Transparency International.

Fabby Tumiwa, director of the Institute for Essential Service Reforms, which is based in Indonesia, said EITI could help.

“By implementing EITI, a country can avoid the resource curse,” he said. “So Cambodia has to avoid that scrape. EITI will help the country in their economic development, in particular investment in extractive industries, because investors will think that the risk of investment will be lower, [and it can help] reduce corruption and provide transparency on revenue management.”

To become a member of EITI, a country must publish on a regular basis all material from its oil, gas and mining payments and all revenues received from them, as well as performing independent audits and engaging civil society.

By implementing EITI, a country can improve its investment climate as well as promote greater economic and political stability, proponents of the initiative say.

Timor Leste, which produces 100,000 barrels of oil per day and receives an annual revenue of $1 billion, is an example.

“Before EITI, there is no information from governments and companies to us and to the public,” said Mericio Akara, director of the Luta Hamutuk institute. “We have no control of the budget. So 30 percent of the money was missing. But when we joined EITI, we controled every single revenue from the oil and gas sector.”

Indonesia, one of the largest oil producers in Southeast Asia with a total of annual revenue of $20 billion, is now applying to become a member of EITI.

“We’ve already produced oil and mining for more than 20 years,” said Muhammed Husen, deputy coordinating minister at Indonesia’s Ministry of Economic Affairs for Energy, Mineral Resources and Forestry. “Finally now our production is already half less than 20 years ago, but we have nothing. That is our mistake, because…corruption ocurred in all sectors.”

“EITI is one of the tools to attract more investors to come to Indonesia and learn how to manage the money,” Husen told VOA Khmer in an interview. “By learning from Indonesia, Cambodia should try its best to become an EITI’s member.”

Cambodian lawmaker Cheam Yeap said the government recognizes the benefit of EITI and wants to join, but he was not sure when.

“We need to have a petroleum law, a law on taxation, on human resource development, and to well prepare business contracts to make sure that investors can’t cheat us and that government officials must not practice corruption,” he said. “As soon as we have these things, we will join EITI.”

Experts Gather to Debate Mineral Extraction

By Kong Sothanarith, VOA Khmer
Original report from Phnom Penh
31 March 2010

Mineral extraction and development experts opened three days of meetings with government officials Tuesday in an effort to ease Cambodia’s move into a lucrative sector expected to bear fruit in the near future.

“Currently, knowledge about oil, gas and mining in this country is limited,” Douglas Broderick, the UN’s chief Cambodia coordinator, said in opening remarks Tuesday, before extraction experts from across Asia. “Learning from the lessons of others will help Cambodia in the extraction industry in a way that will bring benefits to all.”

Cambodia has the potential to yield silver, gold, oil and other precious minerals in at least a dozen provinces. Exploration is already underway, but there are wide concerns the industry’s abundant profits will not help all Cambodians and could find their way into the pockets of the rich, powerful or corrupt.

“The sharing of information is so critical,” Brian Lund, regional director for Oxfam America, which sponsored the conference, told reporters Tuesday, calling this week’s meetings “a starting point.”

Members of the government, private sector and civil society were all realizing the importance of minerals in the development of Southeast Asia, he said.

“Cambodia is a part of that,” he added, warning that possible downsides of extraction must be countered with clever management.

First up for Cambodia is oil and gas, which some estimates predict will start to flow by 2013, with an estimated revenue stream of $1.7 billion by 2021. Next would be mineral extraction, which could start bringing in money by 2015.

Experts warn that without transparent means to distribute the wealth of these industries, profits will not filter down to everyday Cambodians. They point to Cambodia’s disastrous forestry policies of the 1990s, when most of the country’s timber resources were cut down and sold off—legally and illegally—in trade that benefitted an elite few.

Tuesday’s meetings were a start at mitigating those concerns, participants said.

“Debate is a positive process that will ensure that Cambodia adopts good governance and, in the long term, develops a strong mining sector,” Richard Thompson, an international investment expert from the UK, said.

Meanwhile, Hang Chuon Naron, secretary general of the Ministry of Economy and Finance, said Cambodia now must “balance taxation and build up the capacity of government officials.”

Sacrava's Political Cartoon: The Fox and The Grapes

Cartoon by Sacrava (on the web at http://sacrava.blogspot.com)

"THE FOX AND THE GRAPES"
Jean de La Fontaine's fable

A fox, from Gascogne or from Normandy,
we don't know,
almost dying with hunger, going around
saw a vine-branch with grapes on
so beautiful and ripe to all appearances,
that he thought of reaching and eating them.
But after uselessly jumping and jumping
As the vine was too high for him to reach
He had a second thought,
“They're sour, I can see it,
These grapes are good just for loirs and squirrels!”
I leave for you what I can't have.

(Jean de La Fontaine)

NGOs to monitor national budget

10 July 2008
Touch Yuthea
The Mekong Times

A committee has been formed by NGOs and associations including the NGO Forum on Cambodia, the Economic Institute of Cambodia (EIC) and the Center for Social Development, to closely monitor government revenues and expenditures.

Cambodians for National Revenue Transparency (CNRT) has been formed amid expectations that cash-strapped Cambodia, which currently needs millions of US dollars of aid annually, will reap billions from oil, gas and other natural resources in the future.

“The NGOs have established the alliance to monitor Cambodia’s management of national incomes from oil, minerals and gas — to ensure the money is utilized effectively to serve the common interests of the Cambodian people,” Chhith Sam Ath, executive director of the NGO Forum on Cambodia, said on Wednesday.

EIC Director Dr. Sok Hach did not elaborate on the CNRT yesterday, but said he would wait until after the July 27 national election before giving in-depth comment.

The CNRT has joined with another existing NGO alliance, Commercial Network and Economic Development (CNED), which was created in 2007 by some 10 NGOs and associations.

The CNED aims at annually analyzing budget practices and revenue management to ascertain whether government revenues and expenditures are consistent with prioritized plans set by the National Assembly in the 2007 national budget and the 2008 budget law.

“Since its inception in 2007, the NGO alliance has noticed that our national budget, compared to 2007 and 2008, has increased. Overall, the budget packages – both the current and funding budget – have been on the rise,” said Chhith Sam Ath.

Government spokesman and Information Minister Khieu Kanharith welcomed the formation of the NGO alliances to monitor the distribution of national budgets, but questioned their ability.

“First, how many economists who are skilled and able to monitor national budget do the NGO alliances have?” he asked. “The establishment of the monitoring NGO alliances seems to be a slap in the face of the opposition. It implies opposition legislators are stupid and have no knowledge of how to monitor the national budget, which is why they have set up another [budget monitoring institution].”

The influx of huge oil and gas revenues into Cambodia’s economy has raised fears among NGOs that it could be struck by the ‘resource curse,’ which has seriously destabilized natural resource rich countries such as Nigeria.

Cambodia faces challenge of oil [-Looming oil curse still present as long as Hun Sen is in power]

June 13, 2008
James Norman, Cambodia
The Age (Australia)

HERE in Siem Reap, in northern Cambodia, there is a sense of optimism that after decades of brutality, corruption and endemic poverty, better times are finally on the horizon.

Cambodia has struck oil off its southern coast, near the town of Sihanoukville, but no one knows exactly how much is there.

According to Marvin Yeo, who left the Asian Development Bank to establish a Cambodian venture-capital company, it is the only country that has untapped oil and gas reserves and land available for agriculture.

Yet there is good reason for concern that Cambodia's energy reserves might prove to be a poison chalice. In countries such as Nigeria and Chad, the people have been left worse off after big resource booms dragged them further into poverty and corruption. Today, 70% of Nigerians live on less than $1 a day, despite the country earning $450 billion from oil over the past 35 years.

The discovery of oil in Cambodia has attracted significant international investment, and exploration rights are divided between American (Chevron), Chinese, Indonesian, Hong Kong and Singaporean investors. As an indicator of regional enthusiasm, China reportedly gave a $600 million donation to Cambodia, just as Chinese companies were fighting for a larger share of the exploration rights.

During an international oil and gas conference in Phnom Penh in March, Cambodia was told by regional government and energy sector representatives to eradicate corruption or risk losing out on sustained investment. It was also urged to sign the Extractive Industries Transparency Initiative that requires governments and companies to disclose their financial records relating to oil, gas or mining deals.

Cambodia remains deeply traumatised by the "killing fields" of the Khmer Rouge, when 1.7 million people died between 1975 and 1979. In a country where 60% of the land is forested, 82% of Cambodians still live without electricity or proper irrigation, and 35% live on less than 50¢ a day.

Moreover, a recent tourism boom — evident in Siem Reap, with its opulent French cafes and bakeries — is having a negative impact on Cambodia's ethnic minorities. There has been a rush of foreign investment in real estate, often cutting into traditional tribal land, with no tangible benefit to the people living there.

Prime Minister Hun Sen and his ruling Cambodian People's Party, buoyed by the tourism boom, last year smoothed the way for investors to form 100% foreign-owned companies that can buy real estate outright.

"Neither the central government nor local officials consider the impacts on minority groups when awarding land concessions to local companies," said Pen Bunna, the Ratanakkiri co-ordinator for the Cambodian rights group Adhoc. Attempted protests by ethnic minorities over the past month have been effectively made illegal by regional authorities.

Lee Tan, the Asia-Pacific region co-ordinator for the Australian Conservation Foundation, said it did not take "rocket science" to work out what was ahead for Cambodia if its oil resources were exploited when corruption remained such a problem. "The governance track record of Cambodia is a problem," she said. "As long as there is no political will or effective governance, oil revenue can be abused.

"Unfortunately, the hunger for oil will see that such resource is exploited — often with support from development banks like the World Bank (which facilitated logging in Cambodia, Papua New Guinea and other forested nations that fuels corruption) and the Asian Development Bank or even AusAID."

The question for Cambodians is closer to home. Prime Minister Hun Sen has said explicitly that "we will try our best to make sure that the oil income is a blessing, not a curse. These revenues will be directed to productive investment and poverty reduction."

But many observers remain wary. Will the revenue be used to improve the appalling road and transport infrastructure, to build clinics and schools and irrigation channels, to raise the standard of living and to provide affordable power to its rural communities?

Or will it be sucked up by a powerful elite, again condemning the 14 million people in this damaged country to continue to suffer?

Sadly, history would indicate the latter to be the more likely outcome.

James Norman, a former Australian Conservation Foundation communications adviser, is writing as an independent journalist.

Dek Cham (sleep and wait) for oil fortune: Is this what the Dek Cho leader wants us to do?

An unidentified Cambodian man sleeps under a poster of a petroleum advertisement on a street in the capital Phnom Penh, Cambodia, Wednesday, Nov. 7, 2007. Cambodia's dream of seeing the money flow in from the discovery of oil will not happen overnight, a deputy prime minister said Thursday, Nov. 8, 2007, in the latest warning against over-excitement about the country's oil bonanza. (AP Photo/Heng Sinith)

Economic Brief: Oil and Gas Dynamics in the Gulf of Thailand

24 September 2007
PINR

A recent report from the International Monetary Fund (I.M.F.) has stated that in a moderate scenario oil revenue income for Cambodia would start at US$174 million by 2011 and peak at $1.7 billion per year by 2021. These predictions are based on the current project led by Chevron off the coast of southern Cambodia that looks set to begin production in 2008. The project holds an estimated reserve of 700 million barrels of oil in a technologically challenging arrangement. The I.M.F. predictions do not include the potentially larger basin that is currently in a disputed Overlapping Claims Area (O.C.A.) on the maritime border between Thailand and Cambodia. The Cambodian Ministry of National Defense has recently announced plans for a tripling in the size of the navy in order to provide security for the oil production facilities. According to Cambodian Minister of Defense Tea Banh, the recent expansion plans cite anti-terrorism and anti-piracy as the underlying justification for the expansion.

The implications for Cambodia are significant. The economic benefits of the resource revenue generated by the oil projects have the potential to make considerable improvements to Cambodian society. However, factors are already in place which suggest that the impact may not be positive. The income based on resource rents would in effect double the country's G.D.P. in the initial stages of the project. If this massive input is managed poorly, it could lead to severe inflation and have a considerable impact on the garment sector that currently makes up 80 percent of Cambodia's export economy.

Significant governance issues, chronic rates of corruption, a significant population bubble of young adult males, a reported high rate of availability of small arms due to 30 years of internal conflict, weak economic institutions, a recent history of civil war and a predilection toward political violence suggest that Cambodia has a strong possibility to face other and more considerable obstacles on the path to economic benefits. The pattern to date of resource extraction benefit in the forestry and fishing sectors is one of collusion between the political and military elite for self-enrichment at the expense of traditional stakeholders. According to some observers, the diversion of benefits from social investment to self-enrichment has meant that the social cleavages within the society have had little opportunity to heal. If this pattern is extended to the oil and gas sector, then the potential for systemic abuse is strong as is the potential for social unrest.

The tripling of the size of the Cambodian navy will likely make Cambodia's neighbors nervous. The O.C.A. with Thailand in particular is a sensitive area due to the considerable resources represented under the claim. Border disputes with Thailand in the past have been a cause for nationalist displays of violence, producing an alarming opportunity for nationalist political expression especially in the face of domestic social unrest due to the previously mentioned impact of resource revenue. Instruments are in place for the resolution of the disputed area, but there has been no movement since the memorandum of understanding was signed in 2001. Despite a diplomatic breakdown in 2003, the two sides continue to meet annually in an attempt to resolve the dispute.

In regard to China, the post-coup (1997) relationship with the country continues to strengthen. Economic, strategic, diplomatic and cultural ties have filled the void left by the international community, which generally withdrew from Cambodia after 1997. China continues to be the major donor for the Cambodian armed forces and is likely to remain so in the near future. The diplomatic benefit of the relationship for China accrues from the anti-Taiwanese stance of the Cambodians, along with an important ally in the Association of Southeast Asian Nations (A.S.E.A.N.) community. The discovery and production of oil in the immediate vicinity of China will only strengthen Beijing's efforts to cultivate and promote a regional ally.

In regard to the United States, for the first time in three decades the U.S. Navy paid a visit to Cambodia early in 2007. The United States has had poor relations with Cambodia since the coup in 1997, but it is now making strong overtures to the present leadership. In February, the ten year ban on aid to the country was lifted and a bilateral trade and investment framework agreement was signed in 2006 to promote better trade relations. The benefits for the United States include economic interests in the oil and gas sector, governance and democracy promotion in the region and an attempt to counter Chinese influence in Southeast Asia. The strongest opportunity for Washington to influence Cambodian policy in the short term lies in the garment sector, which faces an end to favorable trade status at the end of this year. Cambodian officials have been lobbying Washington to provide some reprieve from the anticipated sharp impact that the cessation of quotas will generate.

The bottom line is that the sudden and considerable flow of resource revenue may have a serious impact on the Cambodian state. The O.C.A. between Thailand and Cambodia offers a strong potential for revenue sharing and bilateral cooperation but requires a concerted effort to avoid nationalist sentiment and a problematic precedent of conflict over border issues. Chinese influence may continue to deflect and dilute international efforts to establish the strong governance and economic institutions required to properly manage the inflationary impact of the large revenue increase. The seemingly positive news of an oil and gas discovery must be tempered in light of the complex issues surrounding revenue generation and its impact in Cambodia.

The Power and Interest News Report (PINR) is an independent organization that utilizes open source intelligence to provide conflict analysis services in the context of international relations. PINR approaches a subject based upon the powers and interests involved, leaving the moral judgments to the reader.

Cambodia can earn 174 mln USD from oil production in 2011: IMF

September 08, 2007

The International Monetary Fund (IMF) has predicted Cambodia could earn 174 million U.S. dollars from oil production in 2011, with the windfall rising to 1.7 billion U.S. dollars after 10 years, said the latest issue of the Phnom Penh Post published this weekend.

The IMF said in its new report that 2011 is a realistic date to assume that U.S. oil giant Chevron would begin production given that oil is already produced on both sides of Cambodia's waters in the gulf of Thailand, the newspaper said.

It projected that after 10 years of production Cambodia's share of oil revenues would peak in 2021 at 1.7 billion U.S. dollars. Then revenues would begin to decline.

The IMF called the report a "moderate scenario", which was based on a variety of assumptions, such as oil production sharing agreements, size of recoverable resources and oil prices.

The Cambodian government's current revenues are 11.5 percent of current GDP, or 632 million U.S. dollars, so an additional 174 million U.S. dollars in new revenues from a new source is a significant windfall, the newspaper said.

Source: Xinhua

Cambodia warned not leap into taxation and licensing agreements to attract investors, and then try to strongarm a better deal when oil start to flow

Sunday June 10, 2007
Cambodia's oil bonanza muted by uncertainties

PHNOM PENH (AFP) - Two years after discovering oil off its coast, uncertainty clouds Cambodia's nascent petroleum sector, with analysts saying it is impossible to gauge the extent of the country's fuel deposits or their impact on one of the world's poorest economies.

Predictions of vast new wealth are now being reconsidered, with some international institutions already drastically scaling back previous estimates of a billion barrels of oil.

Even Prime Minister Hun Sen has tempered earlier claims that the country would begin tapping oil by 2010, saying last week that Cambodia's petroleum prospects were now "uncertain".

"Oil under the sea is still a dream," he said Wednesday.

Diplomats have reacted with caution to Cambodia's possible petroleum windfall amid rising hopes that annual revenues would dwarf the current budget and pull the country out of poverty.

"Whether Cambodia will ultimately benefit from its future oil revenue is uncertain," said US Ambassador to Cambodia Joseph Mussomeli.

Analysts agree that it is too early to tell how oil could impact Cambodia, where 35 percent of the population lives on less than 50 US cents a day.

"The exact size of the reserves, how much is entirely recoverable, is still unknown," said International Monetary Fund advisor Jeremy Carter.

"One has to hold off from making very large-scale assumptions about what will happen," he said.

Momentum, however, is building after the US energy giant Chevron announced two years ago that it had struck oil in four of five wells dug in the waters off Cambodia's southern coast.

While Chevron confirms the presence of oil and continues drilling, the company has not released any data from Block A, one of six open to exploration in Cambodia's water in the Gulf of Thailand.

But the sheer size of estimated deposits -- the government has tentatively put petroleum reserves in Block A alone at 700 million barrels -- has other internationals rushing into talks for exploration and production rights.

The government has divulged very little about these negotiations.

But companies from Thailand, Singapore, Malaysia, Indonesia and Kuwait, as well as China's state energy giant CNOOC, have all bid for rights in other blocks, said Te Duong Tara, executive director of the Cambodian National Petroleum Authority (CNPA), at a conference in February.

Since Chevron's announcement, the debate has largely focused on Cambodia's ability to manage its oil wealth.

The money could be used to repair infrastructure, or build schools and hospitals, said Sok Hach, president of the Economic Institute of Cambodia, a private think tank.

"I think it could be very, very helpful if it was managed well," he told AFP.

But the potential for a sudden influx of billions of dollars has some observers warning of disaster for corruption-plagued Cambodia.

Sok Hach agreed that there was "the dark side of the story"; Cambodia's weak governance and institutionalised graft that could see oil wealth simply devoured by the powerful.

Hun Sen has repeatedly vowed that oil would not become a "curse", referring to other poor countries like Nigeria whose resource riches have benefited only the elite.

The world's sixth largest oil exporter in 2005, Nigeria remains one of the poorest nations in sub-Sahara Africa and has "come to epitomise what can go wrong with oil wealth," according to the World Bank.

"The challenge for Cambodia will be to channel this new-found wealth through strong institutions, reinforcing the capacity of the state to collect and spend for the benefit of all Cambodians," said World Bank economist Robert Taliercio.

But this is not easy in a country that has limped along under a system of political patronage, kickbacks and buy-offs.

Hun Sen's promises of oil sector transparency are also likely to be blunted by recent accusations from the forestry watchdog Global Witness that his relatives and other politically-connected families were plundering Cambodia's other key natural resource, timber, "with complete immunity."

Amid the uncertainties surrounding Cambodia's fuel sector, the Chevron project is an important indicator of whether foreign companies will be able to work with the government here, analysts say.

"The success of that project will be a hot test for other companies sitting on the sidelines," said Dave Ernsberger, Asia oil director at Singapore-based energy information giant Platts.

"How those partners fare with the national government, taxation, and ability to export and sell the crude oil and natural gas will be a key test for Cambodia," he added.

Ernsberger warned, however, that Cambodia should not leap into taxation and licensing agreements simply to attract investors, only to then try to strongarm a better deal for itself once oil has started flowing.

"There is a trend around the world for developing nations to aggressively renegotiate contracts," he told AFP.

Already, Hun Sen is urging donors to pressure oil companies to ink revenue sharing agreements that more heavily favour Cambodia.

But this tactic could backfire, according to Ernsberger.

"The issue for a country like Cambodia is that ... there is simply not yet the proven potential for gas and oil exports and track record of performance for many companies to tolerate that sort of behavior," Ernsberger said.

Foreign companies should provide high benefit for Cambodia from oil revenue: PM

June 07, 2007

Cambodian Prime Minister Hun Sen on Wednesday said that the foreign companies which invested and explored oil fields at offshore Cambodia should provide high share to this country from their oil revenue.

"I requested some countries that cared about the curse of oil benefit in Cambodia. They should tell their companies which invested oil field in Cambodia to provide high share of oil revenue for the Cambodian side," Hun Sen said at a ceremony in Kandal province, adding that the companies should also pay high tax to the Cambodian government.

"They did not talk about how to earn money but they started talking about spending money and cursing," he said.

The international institutions should consider how to provide high benefit from oil revenue to Cambodia, but nobody has talked about the issue, he added.

At least 700 million barrels of crude oil are estimated to lie off the Cambodian coast and the government is now preparing an oil and gas management law in anticipation of oil and gas revenues starting from 2009 or 2010.

The United States oil giant Chevron, together with LG from South Korea and a Japanese company, is allowed by the Cambodian government to invest and conduct exploration at its western sea shore.

Source: Xinhua

IMF warning to Cambodia: China and Vietnam could pose increasing competition to [Cambodia's] narrowly based economy

Jun 5, 2007
IMF sees positive growth but warns of external risks for Cambodia

DPA

Phnom Penh - The International Monetary Fund (IMF) praised Cambodia's macroeconomic policies Tuesday, saying positive economic growth should continue but warning that China and Vietnam could pose increasing competition to its narrowly based economy.

An IMF delegation from Washington ended a two-week high-level visit to the country Tuesday with a rosy overall impression of the national economy, IMF Asia Pacific advisor Jeremy Carter told a press conference.

However looming competitive pressures on the vital garment sector due to a lifting of safeguards on China's garment industry at the end of next year, competition in the same area from neighbouring Vietnam following its World Trade Organisation accession and the danger of poor weather affecting the agriculturally dependent nation still loomed as risks, the IMF said in a statement.

'Prudent macroeconomic policy implementation has provided stability, in turn boosting investors' and consumers' confidence, and has underpinned very strong macroeconomic performance,' the statement said.

'Impressive rates of growth have been sustained, inflation remains low, external debt is sustainable and headway is being made in a number of important structural reforms.

'The mission noted that the environment provides ideal conditions to re-energise reforms in key areas where progress has been less rapid, and to address the key constraints to broader poverty reduction.'

It said these factors had encouraged significantly increasing Foreign Direct Investment (FDI) which augured well for the economy.

The IMF said it estimates real Gross Domestic Product (GDP) to increase by around nine-per-cent this year, fanned by increased agricultural production and 'robust growth' in the areas of tourism, garment export and construction.

'Services, in particular finance and telecommunications, are increasingly contributing,' it added.

However the domestic growth in the key industries which form the narrow pedestal of the country's economy - garments, construction, agriculture and tourism - were also subject to fluctuation due to international trends and environmental factors beyond the control of the government, it warned.

International oil price hikes had also had an influence, with inflation recently ticking up to 4 per cent, the IMF statement said, but assuming broadly stable international oil prices for the rest of 2007 it said it expected this rate to remain in the low single digits.

Carter told journalists the IMF expected oil revenues to prove a positive. These may begin trickling into the economy as early as 2009 when drilling begins on promising offshore oil and natural gas fields.

The IMF team met with a range of government officials during its visit, including Prime Minister Hun Sen and senior ministers and officials, as well as non-government representatives and union representatives.

The IMF provides technical assistance to Cambodia and has focused much of its work on reforming the rapidly developing country's banking and finance sectors.

Public opinion about oil issue in Cambodia [Please share with us your opinion on potential oil revenue and the development in Cambodia]

A street gasoline vendor is filling up the tank of a motorcycle in Phnom Penh on 11 April 2007. (Photo: AFP)

13 April 2007
By Kim Pov Sottan
Radio Free Asia
Translated from Khmer by KI-Media

“I have no faith that our country will change its situation towards a better living condition as in our neighboring countries. We will remain poor because the government leaders are the same, the governing system remains the same, there is no change. Therefore, I have no faith, even if we have oil, even if we have a lot of natural resources, we will still face hardship.” - Samrit Bunthol, teacher

Radio Free Asia interviewed many people, but none of them believe that oil will help improve the living condition of people in Cambodia, nor will it bring development to the country. This despair [on the potential oil revenue] stems from the corruption in Cambodia which is worsening by the days.

Ying, a 40-year-old man and a driver of a chartered car from Phnom Penh to Kompong Cham, shakes his head while saying that he doesn’t believe [on the oil revenue] because corruption exists at every level from the lowest level to the highest ranking official, he believes that this is the reason why Cambodian people remain poor: “It won’t happen, [people] will still remain poor. Look at the case of Angkor Wat, it is our national treasure which receives the largest number of tourists in Cambodia. The revenue it brings is the largest in Cambodia, but it is handed over to a private company which makes million [of dollars] in profit each year. When we produce oil, it will be the same, the only thing being that now, there are people who oppose it, they are more numerous now, so they can push it back somewhat only, so that the situation wouldn’t collapse entirely.”

He added the following request also: “We want the government to help resolve the corruption issue, they (government officials) should be full by now [from the stealen money], they should think about developing the country, they should not keep on claiming that we are still living in a period of conflict, and that there is no development possible. Out of this long period, aren’t they full yet [from the stolen money]? Please organize the country to be at least on par with our neighboring countries.”

A man who insists on keeping his anonymity said: “I have absolutely no faith in it (oil revenue) at all. The reason that I don’t believe it: look at the daily situation, it’s so bad already, let’s wait until that [collapse] day happens, they (government officials) are so corrupt.”

Sok, a man from Siem Reap claims that oil is Cambodia’s last resort following [the destruction] of forest, fishes, gem mining, the country is moving toward its destruction while it is becoming poorer and poorer. He has very little hope on this last Cambodian resource (oil). He said: “We can be better if there is no corruption, if the corruption still remains, it does not matter how many oil fields we have, we will still remain the same, in Cambodia, we lost everything already: forests, everything.”

Ly Dy, a teacher from Sihanoukville, said that Cambodian people are happy and proud when they heard about the major oil discovery in Cambodia, but at the same time, their hopelessness also takes place.

He said that there is no hope that the salary for teachers and civil servants will be commensurately increased because of the past corruption that existed: “Now, we can see that the salaries of civil servants and those of ministers [and high ranking officials] are not that much different from one another, but the high ranking officials have money stashed in the banks by the hundreds of thousands, by the millions, they have so many houses that they couldn’t remember anymore, we are wondering where do they get them from? And when the oil will be pumped out, and money will flow in by the millions, whose pockets will it flow into?”

Samrit Bunthol, another teacher, said that if there is no change [in the government], nothing could save [Cambodia] since the [current] governing system remains the same: “I have no faith that our country will change its situation towards a better living condition as in our neighboring countries. We will remain poor because the government leaders are the same, the governing system remains the same, there is no change. Therefore, I have no faith, even if we have oil, even if we have a lot of natural resources, we will still face hardship.”

Um Sophal, another teacher from Sihanoukville, is making the following request: “I want to ask the government that when the oil is pumped out, and that it becomes a common wealth of all the [Cambodian] people, I want the government to pay a lot of attention on the revenue from oil.”

Miss Moniroth, a student from Western University, said that she has only a small hope on the oil issue. She showed her optimism by saying: “I believe that if we can explore oil by ourselves, then I would believe that the salary of civil servants can be increased, and the price of gasoline could drop because we produce it on our own, and we don’t need to buy it from overseas anymore, and we don’t have to pay for taxes, high expenses, etc… If we can produce it on our own, the price could be lower than importing it.”

Miss Somaly, a member of the Cambodian Youth Association, said that she had absolutely no faith in the development. She said that after oil exploration, Cambodia could possibly become much poorer than before because of severe corruption: “I believe that not much [revenue] will flow into the national budget, but the majority of it will flow into individual pockets instead. Development could happen, but if corruption still remains rampant, inequity [of wealth] will still persist and the rich will become richer.”

Numerous people, including farmers, taxi drivers, tuk-tuk drivers, teachers, and students who were interviewed by RFA said that they have absolutely no faith that progress in Cambodia will occur in the near future because of oil exploration. Some decline to provide any comments, while others said that they only have little hope that price of gasoline could be lowered because of local production.

Politicians as well as International observers express the same concerns that Cambodia will become a poorer nation if the revenue from this last natural is not managed properly.

NA plans to prepare laws to govern oil resources

10 April 2007
By Huy Vannak
Radio Free Asia
Translated from Khmer by Socheata

[CPP] MP Chiem Yeap said on Tuesday morning that the National Assembly (NA) is initiating a study for 3 laws governing oil resources at a time when Cambodia believes that it will receive multi-million dollars in oil and gas revenue in the next few years.

CPP MP Chiem Yeap said that based on past experience in other countries in the world, oil rich countries are plagued with problems and poverty because of the greed of businessmen, [a phenomenon] usually called “oil curse,” whereas other countries have seen their lot improved. Chiem Yeap said that Cambodia thus needs a law to clearly govern its oil resources.

Chiem Yeap said: “The 3 main laws are: (1) a law to govern oil resources, (2) a law on the taxation of professions involved in oil, and (3) the taxation on the profit made from oil. Our law must be based on a number of international laws where their application was successful.”

The 3 laws above can guarantee the good governance of oil and preserve the stability of progress in revenue to the country.

Chiem Yeap said that the law governing oil resources will be accommodated according the actual situation in Cambodia, such as the existing laws and investment contracts, as well as the government role in the financial sector to guarantee the transparency of investments.

Regarding the drafting of the law governing oil, MP Sam Rainsy said that there should be an open discussion [on the issue] with the participation of civil society organizations.

Sam Rainsy said that Cambodia must have another important law: the anti-corruption law, in order to guarantee the common national interest. “Each law is linked to some other laws, and one main law [since] we say that we oppose corruption in all domains, now in each domain, we are preparing a special law for that particular domain, but it needs to agree with the main law which is the anti-corruption law.”

Regarding the oil issue, during his recent meeting with the Sultan of Brunei, Heng Samrin, president of the NA, requested the Sultan either to send over oil experts from Brunei to teach in Cambodia, or to send high-ranking Cambodian officials to learn in Brunei.

Prime Minister Hun Sen said in February that Cambodia could receive a significant amount of revenue from oil and gas exploration starting in 2010. The UNDP estimates that Cambodia could receive about $1.7 billion in revenue yearly from oil and gas exploration.