Report says Cambodian mining, oil sector corrupt

By DENIS D. GRAY –

BANGKOK, Thailand (AP) — The corrupt elite of Cambodia, one of the world's most impoverished nations, has laid the groundwork for siphoning off vast profits from a coming boom in mining and oil exploitation, a nongovernment organization said Thursday.

Britain-based Global Witness said that rights to exploit the resources have been allocated behind closed doors by a small number of power brokers around Prime Minister Hun Sen and other senior officials. The report, titled "Country for Sale," said "the same political elite that pillaged the country's timber resources has now gained control of its mineral and petroleum wealth."

"Unless this is changed, there is a real risk that the opportunity to lift a whole generation out of poverty will be squandered," the report said.

The allegations were denied by Information Minister Khieu Kanharith and Suy Sem, the minister of Industry, Mines and Energy, who said Global Witness "always defames the government."

Global Witness, which has worked in Cambodia for more than a decade, said its findings were based on numerous interviews with industry insiders in the country and with others around the world over the course of 2008. The report's appendix also cites a number of academics, journals and newspaper reports.

Over the past few years, Cambodia has been buzzing with excitement — and anxiety — about an oil discovery by U.S. energy giant Chevron Corp. off the southwestern coast. There have also been discoveries of other minerals including bauxite, iron ore, copper and chromium, while onshore oil reserves are also being explored.

Some estimate that in coming years Cambodia may reap some $1 billion in annual oil revenues, enough to cut its ties to foreign development aid if the funds are properly utilized.

But others have raised concerns that rather than pulling Cambodia out of its "beggar status," the revenue windfall will further fuel already rampant corruption. The Berlin-based Transparency International ranked Cambodia 166 out of 180 on its 2008 world corruption index.

U.S. Ambassador Joseph Mussomeli told The Associated Press in 2006, shortly after the discovery, that Cambodia could fall victim to an "oil curse" that has afflicted other developing countries.

Yet the report said international donors, which prop up the country, have so far turned a blind eye to the looming "corruption disaster." Donors, including the United States, European Commission and the World Bank, pledged $1 billion in development aid two months ago, without using the opportunity to demand transparency in the emerging industries, it said.

More than 75 companies, including such internationals as Chevron Corp. and BHP Billiton, were already working in the mining and oil sectors and have paid upfront sums to the government, the report said.

"Companies need to come clean on what they have paid to the government to secure access to these natural resources, or risk becoming complicit in a corrupt system," the report said.

Of the mine sites investigated in 2008, Global Witness said every one was controlled or owned by members of Cambodia's political and military elite, including top military commanders and relatives of Hun Sen and cabinet ministers.

Information Minister Khieu Kanharith denied that anyone in Hun Sen's close circle had received any payments for concessions granted to individuals or oil and gas companies.

"But these companies, while conducting explorations, have been ordered to pay into a state social welfare fund and their money has been registered in state accounts," he said.

Suy Sem, the minister of Industry, Mines and Energy told The Associated Press in the Cambodian capital, Phnom Penh: "Regarding the exploration for oil and gas, we operate under procedures that are very fair and transparent and based on the rule of law."

Global Witness said it wrote to both Chevron and BHP asking them to reveal any payments made to the Cambodian government or government officials. Chevron, it said, did not respond while BHP said it had made no illegal payments related to its mining operations.

Chevron spokesman Gareth Johnstone told the AP on Thursday that the company could not comment until they had a chance to read the report.

The report said the government's actions duplicate the wholesale destruction of forests with few of the resulting profits ending up in national coffers or among the general population.

Associated Press writer Sopheng Cheang in Phnom Penh contributed to this report.