Will Cambodia be the next Nigeria or the next Malaysia?

Will Cambodia’s approaching oil and natural gas boom end up being a blessing or a curse for the Cambodian people? That is the subject of a recent article in Australia’s The Age. Exploration, primarily by Chevron so far, has shown that there are substantial off-shore deposits of oil and natural gas.

Although the exact size of the deposits are still not known, previous World Bank estimates placed them at 2 billion barrels of oil. If that were true, the United Nations Development Program had said it could see a doubling of Cambodia’s GDP.

That’s a major amount of money and a major amount of temptation. That money could be used to create a significant transformation in the lives of the Cambodian people allowing for massive investment in infrastructure, health care and education. On the other hand, it could also lead to a new silver lining for the pockets of corrupt government and business officials.

A very good example of the former phenomenon is Malaysia who used it’s oil and gas discoveries to transform the country over a 20 year period from a third world agricultural economy into a modern developing nation with massive investments in industry, education, infrastructure and health care systems.

On the other end of the scale are countries like Nigeria who has earned $450 billion in oil revenues over the past 35 years while leaving 75% of its people in destitute poverty earning less than $1 a day. And as we see, one of the results is also severe political instability that even threatens the continued viability of the oil industry. For example, Shell has and continues to experience massive shut-downs of operations due to attacks including a recent daring off-shore attack.

The big difference between Nigeria and Malaysia’s experience can be reflected I believe in the degree of corruption each of those countries practices. Nigeria first appeared in the CPI in 1996 where it was #54 out of 54 countries. In the oldest CPI available from 1995, when Malaysia was halfway through its 2 decade development spurt, it was #23 out of the 40 countries that were rated. Perhaps not a shining example of honesty or transparency by Western standards, it left more than enough income over to transform the country. Today Nigeria still comes in towards the bottom – 147 out of the 179 countries on the list. Malaysia in contrast is #43.

The situation in Cambodia does not provide much grounds for hope if corruption is indeed one predictor of what happens in a country that experiences a massive natural resources boom. It was first included in the CPI in 2005 when it came in at #130 out of 158 countries rated. And two years later things haven’t gotten any better. In 2007, the latest CPI available, Cambodia had fallen to #162 out of 179 countries.

One can only hope that as the day of actual large scale extraction approaches, organizations such the World Bank, the United Nations Development Program, NGOs and the foreign governments of companies receiving large concessions (in particular the USA and France and China whose Total and CNOOC respectively just reached agreements) will do their utmost best in pressuring Cambodia to return the oil and gas windfall to their people.

(If you are planning a trip to Angkor Wat please check out Savuth’s tuk tuk transportation services at Angkortuktuk.net)

~ by Leonard on July 22, 2008.

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