Monday, March 31, 2008

Mekong Times Interview on Cambodia's Oil and Gas Prospects

I was recently interviewed about my recent trip to Cambodia by Craig Guthrie of the Mekong Times. This interview ran in the March 26, 2008 edition of the newspaper:

Policy expert: oil revenue mismanagement could cause social unrest

Do you think that oil and gas revenues have great potential to help poverty reduction in Cambodia?

As you know it is unclear how much oil and gas will be accessible. Everyone is waiting for Chevron's assessment. I have heard estimates from 200 million to 2 billion dollars a year. But clearly the Cambodian government is trying to play it down and manage expectations. While it does seem that many average Cambodians are aware of the potential oil and gas revenue, the government will likely try to lower expectations. Of course, the revenue could potentially be used for the good of Cambodian society to build roads, schools, and hospitals. I understand the Cambodian government is looking at Azerbaijan as a possible model. Other models might be East Timor or Norway. However, it is more likely that half of the revenue will go into the private bank accounts of government officials, thereby strengthening Cambodia's system of patronage. Will the other half be used for good or will it be used on meaningless projects? That is an open question.

What are the biggest risks posed by the injection of oil revenues into the country?

The biggest risk appears to be a possible people power movement or social unrest as a reaction to what is often called the resource curse. You have an explosive mix in Cambodia of a young population--many of whom did not experience Pol Pot's regime and are therefore less fearful--a high youth joblessness rate, rising inflation in the energy, food, and real estate sectors, and new opportunities for corruption. Even the government is worried about this scenario. I think it is particularly interesting that these problems could conflate with low quality Chinese investment in the hydropower and mining sector, which is destroying any progress Cambodia has made in strengthening human rights over the past few years, as one politician told me.

What steps should Cambodia take to avoid the "resource curse" and do you think there is the political will to take these steps?

Although it is difficult to predict political will, there are a few steps Cambodia might take to make it more likely that it will avoid the resource curse. First, it would help to get civil society groups involved with bringing transparency to the collection of oil and gas revenue. One step would be for the government to implement the Extractive Industries Transparency Initiative (EITI) and work with civil society partners like Cambodians for Resource Revenue Transparency. Second, the parliamentary budgetary process should be fair. A petroleum law that ensured the responsible use of oil revenues may help. I understand that Oxfam America has offered to help in this area. Third, it may help to have companies like Chevron involved that are bound by the US Foreign Corrupt Practices Act. This is a case in which foreign direct investment may help to open up the sector and introduce some good practices. Finally, the government should keep the Cambodian people informed and allow the public to express its concerns--whether through democratic participation or peaceful assembly.

1 comment:

Warren Wilczewski said...

This discussion reminds me of a past event at the Council, Innovations in Fighting Corruption, at which Brian Levy suggested that the one development that might derail the recent progress in Ghana would be the discovery of substantial oil reserves off its coast. The concept of the resource curse also came up during my recent trip to Russia. One person I met with suggested the best thing for Russian democracy and rule of law would be a precipitous drop in the price of oil and a temporary return to the chaos of the 90's.