Sunday, February 24, 2008

Cambodia's Future: Norway or Nigeria?

I am in Cambodia this week researching the expected offshore oil and gas boom. The big question is: Will one of Asia’s poorest and most corrupt countries use its newfound wealth to invest in infrastructure and education or will it simply shore up its corrupt practices? Will Cambodia become a Norway or a Nigeria?

Yesterday I met a foreign energy businessman with years of experience in Cambodia. His prognosis for Cambodia’s future was optimistic. He sees Cambodia as becoming a hub for a rapidly growing region, potentially taking advantage of its central location. In terms of governance, he has witnessed several years of improvement and sees things as only getting better.

China’s recent mining disaster is clearly on the minds of businesspeople here. Not only is China's mining sector the world's most dangerous, it is also extremely corrupt. The businessman said many people, including Cambodians, are reluctant to make deals with Chinese investors and partners. He listed several risks: opacity of contracts; hidden stipulations in contracts; lack of employment opportunities for local workers (Chinese use their own contractors); corrupt practices; and outdated equipment. Although Chinese technology will improve within a decade or so, he wasn’t so sure about the other practices.

Corruption is a rotten disease that many businesses are trying to fight. This businessman’s company is partnered with an American company, meaning it must follow the Foreign Corrupt Practices Act. He said it is a lot of work to comply with these rigorous standards, but he sees corrupt practices as antithetical to profitable business for several reasons: first, it is a waste of money that is thrown away without accountability; second, bribes seem to compound and send signals that a company is willing to play a dirty game; finally, good practices are central to ethical business and a calm soul. “I am able to sleep at night,” he said.

Due to his company’s large profile in Cambodia, an international NGO recently investigated how it was able to secure large contracts. After its investigation, the NGO concluded that his company was clean. He wasn’t worried. I only wished that clean companies like that were showcased for their exemplary behavior. If businesspeople knew they had a choice to act ethically, I bet cleaner practices would catch on.

2 comments:

Jalal Alamgir said...

Can you shed some light on who is investing in Cambodia's oil and gas? Is there a state-run company in charge, like in China? Is it mostly Chinese companies investing in the energy sector (even though you mention Cambodians have qualms about it)?

A lot about whether it will go Norway's path may have to do with how it decides to share/invest revenues from the energy sector. Norway has one of the best policies to use/invest oil wealth.

Devin Stewart said...

There are six blocks. Block A was awarded to Chevron; block B to Singapore Petroleum Company; block C Polytec, Hong Kong; block D to Petrotech Holdings of China; block E to Medco of Indonesia; and block F to Chinese National Offshore Oil Co. (CNOOC). The process for awarding these blocks has been criticized for its lack of transparency. A senior Cambodian official told me that the blocks were given out in accordance with "geostrategic considerations," balancing the country's important relationships.