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Wednesday, March 18, 2009

Cambodia's coming Oil Economy

(This map, prepared by U.K. nonprofit Global Witness, reveals the offshore Cambodian territory U.S. energy firm Chevron plans to drill for petroleum. Source: Global Witness)


Analysis: What might oil drilling do to a poor country, its people, and its government?


By Patrick Winn - GlobalPost
BANGKOK – Haunted by war, and wracked by poverty, Cambodia has had little opportunity to enjoy one its few blessings.

The nation of 14 million people, sandwiched between Thailand and Vietnam, is flush with natural resources. Veins of iron and gold run beneath its soil. Natural forests offer a wealth of timber. Most promising of all are Cambodia’s deposits of oil and gas, believed to snake offshore all the way through the kingdom’s lush interior.

As Cambodia’s leaders begin to parlay these natural blessings into wealth, selling off drilling rights to firms across the globe, American oil companies are taking notice.

So, too, are the watchdogs.

Foreign aid, in large part from U.S. tax dollars, accounts for half of Cambodia’s national budget. Much of this is aimed at the more than one-third of Cambodians living on roughly 50 cents per day.

While Cambodia’s ruling party could use the coming resource wealth to wean the country off foreign aid — and potentially lift millions out of poverty — leaders already appear to be hording this money for themselves, watchdogs say.

According to Global Witness — the U.K.-based non-profit that helped expose the West African “blood diamonds” trade — the coming oil wealth will likely just entrench Cambodia’s ruling cabal in corruption.

“In a couple of years, the elites will be so wealthy it will be hard to rewind the tape,” said Global Witness Director Gavin Hayman during a business trip in Bangkok. The non-profit recently published an investigative report on Cambodia’s growing oil wealth.

According to International Monetary Fund forecasts, Cambodia’s annual oil revenue should begin at about $174 million in 2011 and climb to $1.7 billion by 2021 — and plunge thereafter as resources are sucked dry.

This oil future has grabbed the attention of the global oil industry.

Just this past weekend, U.S. oil industry representatives invited Cambodian energy leaders to observe drilling operations near the Gulf of Mexico, home to dozens of major offshore oil rigs.

“Cambodia is on the verge of an oil and minerals windfall,” said Eleanor Nichol, a Global Witness campaigner. “The stakes are very, very high.”

A global fuel chase has led many foreign firms to cut deals with Cambodia’s ruling party. They’ve since carved the nation into 20-odd oil-and-gas districts that will be developed.

Most firms with Cambodian oil concessions are Chinese, some with little experience in the energy sector. Various South Korean, Southeast Asian and Middle Eastern companies round out the concession holders.

But the best-known energy firm with Cambodian drilling rights is the California-based Chevron Corporation.

Chevron is preparing as many as nine wells for what it calls a “complex reservoir” off Cambodia’s coast. The firm is now “working closely with the Royal Government of Cambodia to complete the fiscal and legal framework that will be required for the development of petroleum resources in Cambodia,” said Gareth Johnstone, Chevron’s Asia-Pacific media director.

Chevron is a high-profile member of the Extracative Industries Transparency Initiative — an anti-corruption movement devoted to “full publication and verification of company payments and government revenues from oil, gas and mining.”

No allegations of corrupton have been made against the company, though the oil giant has come under pressure from watchdog groups to be more transparent in its dealings here.

Chevron will not reveal its payments to Cambodia nor its start-up drilling dates, said Johnstone, who is based in Singapore.

Cambodia is rated the world’s 18th most-corrupt country by Transparency International, which publishes the world’s leading corruption measure. Chevron also operates in Burma, run by an oppressive military junta.

When resource-rich areas are ready for excavation, Cambodia’s government is suspected of dispatching soldiers and police to forcibly remove residents. According to Human Rights Watch, armed government militants have torched homes and pushed out hundreds of families. Once excavation begins, soldiers are believed to stand watch over the sites as international firms do their work.

Global Witness’ work in Cambodia has brought death threats and a promise from one senior official to hit investigators “until their heads are broken,” Nichol said.

Repeated inquiries to the Cambodia’s National Petroleum Authority were ignored. With no explanation, some emails to the entity’s listed addresses were automatically routed to Petroleum Geo-Services, a Norwegian firm specializing in finding oil and gas reserves.

Cambodia’s U.K. ambassador, Hor Nambora, issued one of Cambodia’s more public rebuttals to corruption claims. “It is naive for Global Witness to imagine that Cambodia’s international donors are not fully aware of the way the Royal Cambodian Government’s (sic) conducts its affairs,” Nambora wrote in a release.

His response included an odd, mocking parody of a Global Witness document called “Rubbish Report by Global Witness.” It features an image of a comically upright baby sea lion saying, “I shall not tolerate such rubbish. Good day, sir.”

Last year, Cambodia absorbed roughly $1 billion in foreign aid. Even as major donors acknowledge Cambodia’s corruption, money continues to pour in.

In 2008, U.S. Agency for International Development offered $54,994,000 to Cambodia in various programs targeted at health, education, human rights and more. The agency, in a corruption assessment, expressed frustration that “donor resources are being wasted and diverted.”

Many Cambodian bureaucrats, the USAID report stated, are “masters of spin” and “… most reform efforts have had limited impact on a persistent, less-than-scrupulous opponent.”

Many donors decide that, even if aid is filtered through corrupt bureaucrats, pulling back funding will only deprive the poor, Hayman said. And further, Western powers and their donation arms now worry that strained relations will push Cambodia dangerously close to China.

Still, analysts say the Cambodian government craves something China can’t offer — legitimacy in the Western world. American aid, and ties to giant firms like Chevron, supply much of this esteem.

The Western world, however, can only use this leverage for so long. Once Cambodia’s rulers hit the oil-and-gas jackpot, Hayman said, they’ll be too rich to reign in.

“They’ll have so much money from oil and mining,” he said, “that they’ll be untouchable."
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A coming of age for Cambodian artists

"Prison Guard," by Leang Seckon is one of the works on display in a Hong Kong exhibition of contemporary Cambodian art at 10 Chancery Lane Gallery. (10 Chancery Lane Gallery)


By Alexandra A. Seno


HONG KONG: In this crucial year for Cambodia, a show in Hong Kong — entitled "Forever Until Now: Contemporary Art from Cambodia," and running until April 25 — is a rare and thoughtful cultural survey exploring the country's journey from tragedy to hope, seen through the evolution of its art.

The show, at the 10 Chancery Lane Gallery, along with several other events, mark a turning point for an international affirmation of Cambodian artistic life today. In December Cambodian artists will be represented for the first time at the sixth Asia Pacific Triennial in Brisbane, Australia, and a few weeks before, the Fukuoka Asian Art Triennial in Japan will again showcase the Southeast Asian nation.

As the United Nations conducts its trials in Phnom Penh to seek justice for atrocities committed by the Khmer Rouge, it seemed fitting — though it was not deliberately timed — that the international art world should be giving special recognition and visibility to Cambodia now. Under Pol Pot's rule in the 1970s, up to a fifth of the population of eight million perished — including 90 percent of the country's artists.

Because organizers are playing down the commercial side of the art, the Hong Kong show is left to focus more on the themes present in Cambodia life.

The gallery's owner, Katie de Tilly, worked as a fund-raiser with Médécins Sans Frontières and visited Thai refugee camps holding Cambodians in the 1990s.

The exhibit takes over the Chancery's Central District gallery and a space in the Chai Wan factory building, 25 minutes away by taxi. "Forever" features video, photography, painting, sculpture and installations by 14 of Cambodia's most important artists. It has something for everyone: decorative, serious, escapist and sophisticated.

"When I went to visit in June, I could feel Cambodian art was at the beginning of something," said de Tilly, and so she decided to document it. A longtime Hong Kong resident, she represents luminaries like Huang Rui, a leader of China's 1980s avant-garde movement, and the American painter Julian Schnabel.

At about the same time Russell Storer, the contemporary Asian art curator at the Queensland Art Gallery, a government museum that organizes the Asia Pacific Triennial, took his own research trip to Cambodia, and came back "very excited about the artists," he had met, he said. "Forever" includes the three artists selected by Mr. Storer for Brisbane.

Erin Gleeson, an American historian of Asian art who lives in Cambodia, curated the Chancery exhibit, conscious that it needed to go beyond what she called "the two Ts" — temples and trauma — that most people reflexively associate with the nation. Though those themes provide a starting point for some of the pieces, making them accessible, Ms. Gleeson keeps it all interesting by highlighting the merit and context of each work.

At the entrance of the main gallery, to set the mood, she hung "Pray for Peace," an eerie but optimistic 2008 oil-on-canvas by Vann Nath portraying Cambodians worshiping under a stormy sky. Now very ill and in his 60s, Mr. Vann Nath is one of only seven survivors of Tuol Sleng, the notorious camp where Pol Pot's functionaries killed up to 20,000 people.

Next to the piece, on a continuous loop, is "S-21: The Khmer Rouge Death Machine," the 2003 multi-award-winning documentary on Tuol Sleng, by a film festival favorite, Rithy Panh. The painting is for sale for 55,000 Hong Kong dollars, or about $7,100; the video is not, though it is widely available from DVD retailers.

Seven paintings by the late Svay Ken (from 75,000 to 100,000 Hong Kong dollars) occupy a place of honor in the Chai Wan gallery. They are scenes from daily life, made in the naïve, folk style for which he became known. Mr. Storer, who chose him for the triennial, said that "Svay Ken was a senior painter, self-taught, who lived through the turbulent history of the country and represented it through his work." He died in December at age 75. "Forever" also includes three amateurly rendered canvases by his 25-year-old granddaughter, Ouk Sochivy, who only began painting last year.

Back in Central, four colorful collages by Leang Seckon, who was born in 1974, are memorable for their crowd-pleasing appeal. Leang Seckon is the best-known artist of his generation, and Cambodians recognize him for his art collaborations with a 1960s pop icon named Dy Saveth, as well as for his solitary work. In "Prison Guard," he narrates the life of Duch, the man in charge of Tuol Sleng who, while awaiting trial, converted to Christianity and became the only Khmer Rouge leader to publicly repent.

Perhaps the Hong Kong show's most intriguing work — though not for sale — is by Than Sok, born in 1984. He constructs houses out of bright yellow incense sticks as installations, and then burns them, a commentary on how people become disposable commodities — once to the Khmer Rouge, now to eviction enforcers and factories.

Ms. Gleeson estimates that there are only 40 working artists in Cambodia and that this is a special, nearly innocent, moment in time because they seem to make things almost purely out of a need to express themselves. "There is no art market because this is just the beginning. Artists do not produce for the market," she said.

Yet validation happens. Sopheap Pich was born in Battambang in 1969 and left Cambodia after 1975, passing through a Thai refugee camp. His family resettled in the United States, and he graduated with a Bachelor of Fine Arts degree in painting from the University of Massachusetts, Amherst, finishing a Master of Fine Arts at the School of the Art Institute of Chicago in 1999.

Returning to Cambodia in 2003, he switched to sculpture. His rattan and bamboo pieces made an impact among the video and high-concept installations at the prestigious Best of Discovery section at Shanghai's "SHContemporary" art fair in 2008. Mr. Sopheap Pich was chosen for Fukuoka and Brisbane this year. He is also finishing a commission for a university in Saudi Arabia and preparing for a November solo exhibit at the Tyler Rollins Fine Art gallery in New York.

Ms. Gleeson credits him for helping raise international interest in Cambodian culture. "Sopheap is an icon for the younger artists," she said. Childhood memories of woven local baskets and handcrafted toys inspire works made out of natural materials, like "Cycle" and "The Duel." Yet he employs a very contemporary approach Storer called a "highly sophisticated yet a deeply grounded response to place and personal experience."

Vandy Rattana, another artist in the show, has a series of large, documentary photographs of a Phnom Penh slum as it burned down last April. Of his art, he said simply, "I need to tell a story."

Before financial bubbles and busts, this was the reason artists lived — for art's sake.
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Official: U.S. not to interfere in Cambodian-Thai border dispute

PHNOM PENH, The U.S. has affirmed that it will not interfere in the Cambodia-Thailand border dispute, said official news agency the Agence Kampuchea Presse (AKP) on Wednesday.

"The U.S. has never intervened in the border issues between the two neighboring countries," Stephen Blake, director of the Mainland Southeast Asia Bureau Office of the U.S. State Department, was quoted as saying.

The U.S. is instead encouraging both sides to solve their conflict peacefully, he said during a lecture named "Southeast Asia Politics and U.S. Policy in the Region," which was held here on Tuesday.

The Cambodian-Thai border conflict started on July 15, 2008, when Thai troops encroached on the Cambodian territory in the area near the disputed centuries-old Preah Vihear temple.

Rounds of high-level talks have been held since then, and both sides decided to withhold armed conflicts and stick to peaceful solutions.
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Cambodia’s Garment Exports Fall as Demand Drops in U.S., Europe

By Daniel Ten Kate and Carole Zimmer


March 18 (Bloomberg) -- Cambodia’s garment exports are declining as a global recession crimps demand in the U.S. and Europe, cutting into an industry that supports a 10th of the Southeast Asian country’s population.

In January, garment exports plunged 25 percent from a year earlier to $185 million, said Mean Sophea, who heads the Commerce Ministry’s Trade Preferences System Department. Over the past decade, they grew at an average pace of 28 percent per year, according to the World Bank.

“I’ve never seen garment exports drop this much,” Mean Sophea said by phone from Phnom Penh, the capital. “The government is trying to reduce expenses for exporters, but we have seen a lack of demand from the U.S. and Europe.”

The U.S. and Europe take more than 90 percent of clothes made in Cambodia. Southeast Asia’s second-smallest economy may shrink 0.5 percent in 2009, the International Monetary Fund said March 6, revising down its 4.8 percent growth projection made a month earlier.

The proportion of garment shipments to total exports is higher in Cambodia than any country except Bangladesh and Haiti, according to World Trade Organization data. Some 70 percent of the country’s clothes were shipped to the U.S., where it was the eighth-largest supplier in 2007, the World Bank has said.

Lost Jobs

About 30,000 Cambodian garment workers, or a 10th of the total, lost their jobs in the past year as factories closed, the World Bank said in a March 8 report. The industry accounted for 17 percent of Cambodia’s gross domestic product in 2007.

The garment industry took off 10 years ago after Cambodia signed a trade deal with the U.S. that linked market access with improved labor standards in its factories. Exports went from almost nothing in 1994 to $2.7 billion two years ago.

The money earned every month by those who sew and stitch jeans and T-shirts for retailers such as Gap Inc. and Stockholm- based Hennes & Mauritz AB supports as many as 1.5 million Cambodians, said Douglas Broderick, resident representative of the United Nations Development Fund in Phnom Penh.

“There’s a whole community around the garment sector, little vendors, landlords, food stalls,” he said. “All those people will get hit.”

Sary Muong, a Cambodian garment worker earning less than $2 per day, has struggled to provide her family basic goods like food and clothing. The 34-year-old single mother makes a monthly salary of $55 that supports her parents and 8-year-old daughter.

“Just look at the factories,” Sary Muong said from a one- room shack with no running water or toilet in Phnom Penh where she lives with her sister. “They’re closing. The living standards get worse and worse.”

Labor Standards

Cambodia’s garment industry has built a reputation for good labor standards over the past decade that the Commerce Ministry says contributed to its growth. In 2001, the government, garment factories, labor unions and the International Labor Organization, a UN agency, agreed to set up a monitoring agency called Better Factories Cambodia.

It files semi-annual reports on working conditions in factories that go to buyers like Nike Inc., Wal-Mart Stores Inc. and Adidas AG. Still, the higher labor standards haven’t stopped retailers from demanding ever lower prices, said Roger Tan, a factory manager and secretary-general of the Garment Manufacturers’ Association of Cambodia.

“Every factory is cutting costs now whether they like it or not,” he said. “The whole world is in deep trouble. Nothing should surprise anyone now.”

The government, reliant on overseas aid to finance a quarter of the national budget, has said it will extend tax breaks for clothing manufacturers to help reduce costs. Even so, Cambodia remains “increasingly affected” by the global slowdown, the IMF said, adding that its 2009 growth forecast may be revised again.

The world economy will shrink this year in a slump that is the worst “in most of our lifetimes,” Dominique Strauss-Kahn, the IMF’s managing director, said March 10. The World Bank, which also expects a contraction, said two days earlier that global trade would decline by the most in 80 years.

To contact the reporter on this story: Daniel Ten Kate in Bangkok at dtenkate@bloomberg.net; Carole Zimmer in New York at czimmer2@bloomberg.net.


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