May 6, 2007

Big Oil in Tiny Cambodia: The Burden of New Wealth

Still clawing its way out of the ruins of its brutal past, Cambodia has come face to face with an extraordinary new future: It seems to have struck oil.

Exploratory drilling began two years ago, and the oil giant Chevron says it has found potentially huge deposits off the southern shore. The company has not made the results known, but together with other likely deposits nearby and with mineral finds being explored onshore, experts say, Cambodia could be a resource-rich nation.

Top officials, including Prime Minister Hun Sen, have been feeding the excitement this year, offering extravagantly optimistic estimates that the oil money could start to flow within two to three years.

But all of this is not necessarily good news.

For many struggling countries, like Nigeria and Chad, oil has been a poisoned bonanza, paradoxically dragging them into deeper poverty and corruption in what some call the oil curse.

“This will be a watershed event for this country one way or another,” said the American ambassador, Joseph A. Mussomeli. “Everyone knows that it will be either a tremendous blessing or a terrific curse. They are unlikely to come out unscathed.”

Indeed, this is a land that already suffers many of the symptoms of the oil curse, even before a drop of oil has been pumped.

With its tiny economy, weak government institutions, widespread poverty and crippling corruption, Cambodia seems as ill-suited as any country to absorb the oil wealth widely expected come its way.

Its people remain traumatized by the mass killings by the Khmer Rouge from 1975 to 1979, when 1.7 million people died, and by the decades of civil war, brutality and poverty that have followed. Now, 28 years after the ouster of the Khmer Rouge, Cambodia is fitfully approaching the start of a trial of a handful of surviving leaders that could bring some belated healing.

Coming together, the impending trial and the approaching flow of oil mark a transition in Cambodia from its still-raw past to a suddenly more challenging future.

“I do believe this is Cambodia’s last best chance to take its place in the world and the region,” Mr. Mussomeli said. “If not, they’re going to be a basket case into the next century.”

Cambodia has six potential fields in the Gulf of Thailand, more than 100 miles off Sihanoukville, as well as several other fields in areas that are disputed by Thailand.

Onshore, mining companies have found deposits of a variety of minerals, primarily bauxite and gold, that could add to the country’s riches.

The rush of foreign countries whose oil companies have staked claims includes China, which controls one of the six potential fields in the gulf. China has become Cambodia’s biggest commercial investor, its biggest aid donor and its hungriest consumer of raw materials, pushing ahead with major hydropower and road-building projects.

In early 2005, in the first of the six Gulf of Thailand fields to be explored, Chevron said it had found oil in four out of five wells. Two more rounds of exploratory drilling have followed.

A company spokeswoman, Nicole Hodgson, said in late April that those results were being analyzed and would be announced later this year. She declined to estimate the size of the field.

If used wisely — as Prime Minister Hun Sen promises it will be — oil wealth could be the salvation of this country of 14 million, where 35 percent of the population lives on less than 50 cents a day.

Over all, it could dwarf a small-scale economic recovery that reached 10 percent growth last year, based mostly on garment manufacturing and tourism, as well as construction and agriculture.

Money from oil could help build clinics and schools and roads and irrigation canals and bring electricity to the 82 percent of Cambodians who now live without it.

Or it could be sucked up by a small, powerful elite that already devours most of the wealth and bring on the symptoms of the oil curse: a breakdown in government services, economic stability and social order.

“We will try our best to make sure that the oil income is a blessing, not a curse,” Mr. Hun Sen said. “These revenues will be directed to productive investment and poverty reduction.”

Source : www.nytimes.com

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