CAMBODIA: Cursed by oil and poverty

About 35 percent of the country's more than 14 million inhabitants live below the poverty line (Photo: WFP Cambodia)

PHNOM PENH, 25 February 2009 (IRIN) - Having allegedly exhausted Cambodia's timber resources to fund its 1990s civil war, business and military elites are plundering mining resources while failing to uphold international human rights and transparency standards, a new report warns.

The long-term effects could fuel corruption and contribute to a "resource curse", whereby a tiny elite soaks up the profits instead of using oil and mining revenues to alleviate poverty, London-based Global Witness states in Country for Sale.

Cambodia is Southeast Asia’s second-poorest country after East Timor, with 35 percent of its population living on less than US$1 a day, according to government statistics.

Revenues from the 2005 oil find, which could total more than $1.5 billion annually, according to some estimates, should be directed to achieving its 2015 Millennium Development Goals, say critics.

"I see the rise of Cambodia's mining and oil sectors as just one part of the wholesale diversification of natural resource and state asset exploitation in Cambodia," Eleanor Nichols, a campaigner for Global Witness, told IRIN.

"Historically, the revenue generated by their misappropriation has reinforced the position and impunity of elites, further strengthening their hold on the levers of power," she said.

Global Witness has had a rocky relationship with the government, having closed its office in Phnom Penh in 2005 after threats over a report implicating top officials of illegal logging.

The Nobel-prize nominated group first monitored the country's forestry resources in the 1990s when international donors urged logging reform.

Greater transparency demanded

The group, with several other NGOs, continues to urge international donors to demand more transparency in Cambodia’s young oil and mining sectors as a condition for aid.

Cambodia receives about $600 million aid every year. In 2009, the national budget is $1.77 billion, with donors pledging around $1 billion.

"It is fair to say that the revenue generated would be significant for a country which still relies on donor countries to provide the equivalent of over 50 percent of the annual government budget in development aid," Nichols said.

Secretive mining contracts, mostly in the country's remote northern provinces, allegedly require the forced, mass evictions of rural poor and indigenous people.

"On some sites, land has been taken from local people and cases of intimidation of residents are reported," Global Witness stated. "There has been no free, prior and informed consent by the local population in any of these cases."

The Cambodian embassy in London issued an angry response to the report, denying the accusations.

"The Global Witness report was fairly underhanded and failed to recognise the tireless work and vision of some in government," Michael McWalter, the Asian Development Bank's oil and gas adviser to the government, told IRIN in an e-mail.

Oil worries

The International Monetary Fund estimated the find off the southwest coast at two billion barrels, though energy giant Chevron has been tight-lipped about numbers.

Cambodia could follow the patterns of Nigeria, Venezuela and Iraq, where mismanagement and secrecy surrounding oil contracts plunged the countries into further poverty, said Ou Virak, an economist and head of the Cambodian Center for Human Rights.

"There's every indication Cambodia is heading towards Nigeria. We fit very well of a profile of countries facing a resource curse," he told IRIN. "The fact that all key institutions with money are headed by only a few people indicates there is no intention of having a system in place for transparency and accountability."

Donors last year asked the government to consider joining the Extractive Industries Transparency Initiative (EITI) a global coalition of governments, companies and civil society groups that requires full disclosure of oil, gas and mineral revenues.

The government originally considered signing on to EITI, but reportedly said in October it would not endorse the initiative.

The UN Development Programme (UNDP) hosted a conference last March to address how the government should manage oil and gas revenues to alleviate poverty.

At the conference, delegates from the Cambodian National Petroleum Authority, Supreme National Economic Council, and Norwegian Petroleum Directorate discussed the possibility of establishing an independent fund to manage revenues transparently, a model that has worked in Norway.