Cambodia faces challenge of oil

James Norman, Cambodia.

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.