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Sudden Wealth Fund Cambodian oil & gas

                  Sovereign Stealth Fund

 'Sudden Wealth Fund' : coined at the UNDP press conference of March 28, 2008             

Resource-revenue management in the light of a sudden oil curse:

International Oil and Gas Conference Phnom Penh 26-28 March 2008, under the United Nations Development Programme. 

 Attended by LNGO.ORG  Global Outside Experts


Political Cartoon: Sign of the Devil

selected label:    (Dutch Disease/Paradox of plenty)

'Phnom Penh Dreams from Hell' report by Exxell coming up.


The Royal Government of Cambodia and the Cambodian National Petroleum Association, along with UNDP, the Norwegian Government and other sponsors, will be holding a conference on the comparative experiences of various countries' oil and gas development, on 26-28 March 2008 at the InterContinental Hotel.

Fuelling Poverty Reduction with Oil and Gas Revenues - Comparative Country Experiences will draw over 300 delegates, including ministers, policymakers and global experts. The two and a half day event will cover a wide range of technical issues, specifically the numerous pre-production challenges, optimizing fund flows, protecting the competitiveness of non-petroleum industries, corporate social responsibility, environmental safeguards and the establishment of national oil companies.Op-ed by Jo Scheuer, UNDP Cambodia Country Director

Workshop overview Workshop programme

 Next Stop for Big oil; Cambodia? 

Compare Beyond Rome under Casus Europae

dk2.jpg Khmer Rogue Dreams from Hell


Resources on Asia Pacific security issues . . .

50 years of walk and talk in the wrong direction and Royal Dutch Disease. The Rhine delta experience should be no curse for the Mekong delta oil & gas industry. The 1963 contract under pressure which defined globalization eversince, led to the 2008 broad financial pressure to contract, the present results of the global common culture of a grabbed and seized globalization trend while calls for 'change' and 'more' transparency abound without understanding  or even knowing the root cause: 45 years of existing and accumulating core problems and long-term unquestioned authoritarian abuse and arrogance within the completely non-transparent paradigm of the globalizing P3 doctrine: the silent privatization of the public good and services, now called demutualization even affecting the only quasi-public organizations and institutions to 'increase' flexibility and efficiency, a window for raising funds and increasing competitiveness. The culture of extremely complex P3 negotiating is not easing despite all the green talk to mask the international greed-technology of an incomprehensible industrial scale. Big & Easy Oil is about money and profit and just that. To make the most of sudden wealth as Jo Scheuer of UNDP suggests takes a lot of explanation to interested and invited parties before the democracy fundamentals of representation and participation could cope with energy fundamentals of settled power. Mere talks about 'more' transparency, openness and dialogue does not make mammoth tankers change direction. It's a hidden nightmare. The main problem of the key solution remains coping with very complex international private technology advantage and claimed foreknowledge of the prescience economy, national governments will never master. That's exactly where sovereign jurisdictions fail and will persist to do so under the market pressure of industrial dominance and inherent abuse a petroleum fund would only stimulate like the SEC-Fed US reserve bank promotes 'orderly market functionality' while bailing out a global and structural crime culture with the support of the Treasury Department's taxpayers money:

'Torpedoing a sinking ship to remove a hazard to others and avert a broader crisis'. (David Wyss, chief economist with Standard & Poors)


Petroleum Authority Talks About the Price of Oil

29th March 2008
By Sok Serey
Radio Free Asia
Translated from Khmer by Khmerization
On the web at

An official from the Petroleum Authority of Cambodia on Friday said that even if Cambodia can extract natural oil and gases from the Cambodian seabeds in 2011, the high prices of petrol in Cambodia will not drop lower than the prices of petrol in the world markets.

Mr Te Duong Dara, Secretary General of the Petroleum Authority of Cambodia, in a press conference in Phnom Penh on the management of oil and gas revenues for the alleviation of poverty in Cambodia, said that Cambodia cannot isolate itself from the rest of the world, so the local prices of oil and oil exports will have to depend on world market prices.

He stressed that the prices of Cambodian oil cannot be set differently from other countries of the world. Otherwise, all other countries will flock to buy oil from Cambodia and the Cambodian oil reserves will dry out very soon.

In relation to the above issue Mr Sok Hach, an economist based in Cambodia, declined to make any comments regarding the issue.

But Mr Son Chhay, a parliamentarian from the opposition Sam Rainsy Party, said there were so much secrecy regarding the oil issues. He said: �We have observed that there were so many hidden secrets regarding the oil explorations because the agreements made between the government and the oil exploration companies have never been released to the public. What we are very concerned about is the embezzlement of oil revenues by the persons who control those oil revenues.�

Mr Te Duong Dara�s comments were made at a time when there are anticipations that Cambodia can extract oil and gases for the first time from Block A in the next 3 years- that is in 2011.

He did not mention how much oil and gases can be extracted and how much revenues can be generated. But he noted that Cambodia�s partners in the oil exploration were not only the US oil company Chevron but they include the World Bank, the Asian Development Bank and some donor countries as well.

Based on the research conducted by the United Nations, the World Bank and other institutions in 2007, the oil reserves under the Cambodian seabeds were estimated to be about 2 billion barrels and natural gases at 283 million litres, which will generate revenues to the tune of 6 billion US dollars in the next two decades, based on the world market prices.

Other than Block A oil wells that Cambodia plans to extract for the first time in 2011, Cambodia has contracted with Singaporean and Malaysian companies to extract oil from Block B, with Hong Kong and Macau companies to extract oil from Block C, with Chinese companies in Block D and with Indonesian and Kuwaiti companies, Energy, in Block E.

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Hun Sen's latest promise: Oil blessing, not oil curse; Mussomeli: Not unless corruption is uprooted

Thursday, February 22, 2007
Cambodian premier says oil discovery will bring benefits, not problems

The Associated Press

PHNOM PENH, Cambodia: Expected revenues from recently discovered oil off the coast of Cambodia will be a boon to the impoverished country, not a curse, Prime Minister Hun Sen said Thursday.

Addressing concerns that huge and sudden income from the oil found in 2005 could exacerbate Cambodia's already widespread corruption problem, Hun Sen promised to direct the revenues "to productive investment and poverty reduction."

The oil money will help developing the country, he said at a seminar called "Cambodia: Economic Outlook for 2007."

U.S. energy giant Chevron Corp. discovered the oil in 2005 off the Cambodian coast, about 140 kilometers (87 miles) southwest of the seaport of Sihanoukville, which is about 185 kilometers (115 miles) southwest of the capital, Phnom Penh.

The company found the crude oil in four wells in an area called Block A and plans to drill 10 more wells by the end of 2007.

It is not clear yet how much oil Cambodia could expect to extract.

Last month, Te Duong Tara, the director-general of the Cambodian National Petroleum Authority, said that recent estimates that Block A holds 400 to 500 million barrels were mere speculation.

Still, he said income from the oil could have a "profound" impact on the future of Cambodia, where 35 percent of the country's 14 million people live below a national poverty line of U.S. 50 cents (40 cents) a day.

Hun Sen said that oil money will help bolster Cambodia's medium- to long-term growth, promote greater economic diversity and help reduce poverty.

"We will make sure that oil is a blessing, not a curse," he said Thursday.

U.S. Ambassador Joseph Mussomeli is among those who have voiced concern about how Cambodia would handle a sudden surge in national income.

Mussemeli said late last year that oil production could generate considerably more than US$1 billion (764 million) a year in revenue for Cambodia, although it might not begin until 2010.

Mussomeli noted that the prospective new income would be "an extraordinary jump" for a country that currently relies on some US$500 million (391 million) from aid donors every year.

"It's a lot of money to pump into the system," he said. "If Cambodia can put in place the proper mechanisms for accountability and transparency for the oil revenue, then this country can change dramatically in the next decade."

If not, "it simply will make the corruption problem in Cambodia even worse," he said, adding "then the blessing will become a curse."

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Phnom Penh

March 26, 2008

Conference subject: Fuelling Poverty Reduction with Oil and Gas Revenues - Comparative Country Experiences

The Phnom Penh Oil and Gas Conference delivered a golden opportunity on the very first day, just a few hours after the inaugural keynote address of H.E. Mr. Sok An, Deputy Prime Minister Kingdom of Cambodia, Minister in Charge of Council of Ministers, Chairman of CNPA. Representative of H.E. Samdech Hun Sen, Prime Minister of the Royal Government of cambodia: yours truly set the tone right after session 2a: Pre-Production Challenges - Reliable assessing the resource base, chaired by H.E. Te Duong Tara, Director general of the Cambodian national Petroluem Authoritywith the following first statement and questions:

'My name is Stephan Tychon, chief officer of change of the World Stability Council,'

'All protocol observed, I hear great democratic ideas for responsible development of this country, but the transatlantic paradigm of forced energy relations still promotes war due to the petrodollar peg of the Euro. How can the poor participate before you fuel poverty reduction, your main objective/slogan during this conference? How could you possibly explain and communicate holistic approaches versus technology abuse in the light of the global energy security context, so people would understand before they choose? Meaningful communication is contradictory to P3 special private interests, so I have serious doubts but nevertheless feel you invited some promesing speakers. What is the reason and goal of working with figures and numbers if defining of how much percentage of the volumetric assessment you would funnel to what poverty reduction is only delayed and not even discussed?'

I suggested Mr. David Moffat, Manager - Exploration & New Ventures Chevron Asia South Ltd. to answer these  questions, but when Mr. Michael McWalter, Energy Advisor to Governments of Cambodia, Papua Guinea, and Sao Tome et Principe started by himslef, I had to interrupt and insist. Mr. Moffat had no answer to these very complex questions, but to divert to the company's website! A total yoke. Consequently the whole panel had a go and tried their show and effort, but the conference's objective never came back for the first day. H.E. Te Duong Tara concluded that these complex matters needed more time and suggested to be patient and laugh more! Tomorrow is another day...


Standard Reserves Classifications presented by H.E. Mr.Te Duong Tara:

March 27, 2008

Session IV: Converting black gold into human resources.

Speaker: Prof. dr. Michael Hopkins

Statement & Question: 'The Royal Dutch Disease in fact is a cheap-oil doctrine resulting in peak-oil problems and lax innovation. So, why is a global energy transition still linked to a change in behavior and not matket-driven?'

Answer by Mr. Hopkins: "Quite a intriguing question from our visitor from Holland... why do price signals not peep through? Because education and health care are not traded goods and services".


March 28, 2008

I don't see the Khmer Lexus & NGO-Cruisers come out of their luxury SUVs and join real people in the streets... During this Oil & Gas conference in Phnom Pehn, NGOs were lined up with 'students' and had no questions nor spoke up, even while Big Oil Companies had no real answers ('still too early' - 'complex reservoir') and demonstrated they primarely care for big easy money and refuse to share knowledge, the main objective of these talks. The direction of further irresponsible and unsustainable development of this failing state - Cambodia - is obvious and ubiquitous. The rootcause, the Royal Dutch Disease legacy, is already an understatement before Chevron can tell how much oil and gas there is. The golden opportunity for the government to set a global example like they did with victim's right of speech in court - a world novelty - does not seem to submerge in these locked brains set for profit and lazyness. Government staff and officials' re-education was never discussed since they submitted to foreign UNDP 'aid' on paper and temporarely during the conference.

Nevertheless, it was stated that this conference was 'part of the process', also in the light of 'government chabge', so people 'understand it and trust the government'! A basic legal framework was needed to 'maximalise investor's benefit and the certainty of process'! 'Willingness' for good governance was signalled as development and exploration become more complex.

State power can no more 'win-win' with infiltrated private forces. The Khmer-cruisers and NGO-rovers have already taken over. Understanding questions and answers about the 'poverty reduction fuelling problem' starts in the streets at the gas station!


March 28, 2008

UNDP Press Conference report  

Phnom Penh Intercontinental Hotel, Sihanoukville Room.  14.00 - 15.00 

Before the press conference, I met UNDP country director Jo Schreuer on the stairway and asked if I could video during the press conference since Erika Kinetz, editor of The Cambodia Daily, objected to my transparent actions of communication and information...

to be continued soon...



Black Gold into Human Gold! 




Energy experts set sights on fuelling poverty reduction in Cambodia
27-MAR-2008 Intellasia | Xinhua
Mar 27, 2008 - 7:00:00 AM

More than 300 delegates from five continents are gathering here this week for a pioneering conference that aims to pinpoint ways developing countries like Cambodia can maximize their resource wealth to reduce poverty, an UNDP press release said Tuesday.

"This conference is well-timed as Cambodia and other developing countries seek ways to develop and manage newly found resource wealth to bring the greatest benefits to their people," said Te Doung Tara, Director General of the Cambodian National Petroleum Authority, which is co-hosting the conference along with UNDP, the Government of Norway and Cambodia's Supreme National Economic Council.

"Many assume that the discovery of oil and gas reserves automatically translates into greater prosperity," said Jo Scheuer, UNDP Cambodia Country Director.

"Unfortunately, this is not the case. Economic growth in resource-rich developing countries is on average two to three times lower than in resource-poor countries."

"We will be pinpointing methods that developing countries can and have used to channel resource wealth in ways that maximize benefits for their citizens, and create a legacy of opportunities for future generations," Scheuer explained.

The March 26-28 conference, "Fueling Poverty Reduction with Oil and Gas Revenues - Comparative Country Experiences," will provide a forum for developed and developing countries to share international best practices for development and management of their petroleum sectors, the press release said.

The two and a half day conference will comprise a series of technical workshops with a focus on pre-production and production phases, as well as the socio-economic consequences for developing countries, it said.

The event, the first of its kind in Cambodia, also aims to broaden public discussion on the development of the petroleum sector and management of revenues for sustainable socio-economic development, following more than two years of discussions between the Cambodian government and its development partners, it added.


Big fish, small fish, oily fish ... or gas? PDF Print E-mail

Written by Susan Postlewaite
Friday, 04 April 2008

Across the tranquil green waters of the Gulf of Thailand, boats are firing high powered sound beams across the waves to penetrate the deep-sea soil deposits.


The object is to determine the extent of the oil and gas hidden in the ground beneath the waters in the five offshore blocks that border the celebrated Block A, where Chevron two years ago announced it had struck significant deposits of oil and gas and has been exploring since then.


Although the oil rigs will not be arriving soon, at a March 26-28 international oil and gas conference in Phnom Penh, participants got their first glimpses of what Cambodia's future could look like when the oil and gas industry readies itself for production, probably in 2011.


Te Duang Tara, director general of the Cambodian National Petroleum Authority (CNPA), disclosed that all of the licensed operators are in various stages of early exploration, which involves shooting 2D and more expensive 3D seismic surveys something required under terms of their exploration contacts with the CNPA.


He said none has yet taken the next more costly step of drilling a well, but a few of the operators are optimistic about doing so.


We're trying to make it happen, said Lateef Dada-Bashua, a Nigerian consultant for Polytec, a Hong Kong property development company that holds the exploration license for Block C.


He said because there are no drilling rigs, platforms or other equipment in Cambodian waters now, he will have to bring in equipment from elsewhere, which is not proving easy.


It's very expensive. No one will even give us a bid right now, Lateef said, explaining that the high oil prices are keeping the equipment busy.


It's a gamble, said an official of one of the oil exploration contractors, asking not to be identified. This whole situation with offshore oil in Cambodia is very new. No one is very prepared and no one knows what the government is going to do.

With oil prices up to $110 a barrel, just how much oil there may be continues to be the subject of much speculation, often inaccurate, Tara said at the conference held at the InterContinental hotel.


He offered this analysis: The oil is still in the ground. It is like the fish in the sea. We don't know if it is the big fish or the small fish. Does it have scales?  Before we can cook the fish we have to know what kind it is.


What kind of fish

One of the big questions raised was, what if the fish isn't oil, but is gas?

Cambodia is gas prone, Piyasvasti Amranand, Thailand's former Minister of Energy said in his speech. He elaborated later in an interview: It's too early to say, oil or gas, but from the people I am talking to, it's gas. The Gulf of Thailand has been producing mainly gas for nearly 30 years.


He said the geology is complex but that in the overlapping claims area the disputed areas on the border of Cambodia and Thailand it is mostly gas.


If it's oil, no problem. The oil companies will put in massive investment. Oil is fungible. You can export it. If it's gas, it's more complex. he said.


For gas, though, Cambodia would need to build a pipeline to transport it, Piyasvasti said, adding that Thailand already has a network of pipelines in the gulf and Cambodia could build a short link to connect to them.

He said Thailand is the only market that Cambodia will find for gas. Malaysia is too far and doesn't need gas; Vietnam has its own.


Tara acknowledged that there will be gas mixed with the oil, but he said that Cambodia is oil prone.

All I hear at this conference is oil, oil, oil, but it's gas, gas, gas, said an official of an oil and gas company interested in Thai waters as well as Cambodian territory.


Chevron's news 

There were no estimates coming from any of the companies working in the blocks as to how much oil or gas may lie beneath their waters.


David Moffat, Chevron's south Asia exploration manager, said Chevron has drilled 15 wells so far in its Block A and an analysis of the results indicates the oil is dispersed rather than concentrated in core deposits. He gave no estimate as to the amounts of oil.


Tara, however, told reporters that the government's current estimate is that Chevron's Block A alone contains 500 million barrels of reserves with a recovery rate of 15 or 20 percent. He didn't give any figures for the five other oil fields.

Border dispute

Perhaps the most optimistic news was that border negotiations are to resume soon with Thailand over the huge offshore Overlapping Claims Area, where oil and gas are known to lie beneath waters claimed by both Thailand and Cambodia.


Tara said negotiations on the boundary are expected to resume after Khmer New Year.


What you need is political good will, he said, adding that after the Thai Prime Minister's visit to Cambodia in February, such good will had been created.



Combodia Outlook Conference 2007:

Douglas Gardner, United Nations Resident Coordinator and UNDP Resident Representative
23 Feb 2007

"Cambodia must learn from other countries, use oil revenues effectively and avoid an oil curse." His Excellency Prime Minister Samdech Hun Sen at the Cambodia Economic Forum, 17 January 2006.

The likelihood of significant oil and gas revenues being generated off the coast ofCambodia beginning sometime in 2010 presents a truly unique opportunity to secure the country's long term growth, substantially reduce poverty, increase equity, and consolidate the country's hard won stability.

This opportunity is unique for several reasons.

First, because the oil and gas are offshore, no private land owner or group of land owners can claim to own it. As an offshore natural resource in Cambodian waters, it truly belongs to all Cambodian people.

Second, offshore oil and gas are newly discovered and relatively uncomplicated by recent history. As such, this oil and gas offer considerable flexibility and freedom for the Royal Government to improve the well being of the vast majority of the people.

Third, early indications are that the off shore oil and gas fields are likely to yield significant financial revenues for the Government, sufficient to substantially improve access to quality health and education, fuel rapid progress towards the Cambodian Millennium Development Goals, help secure the economy's long-term growth, and consolidate the country's long-term stability.

How much oil is there?

The amount of commercial reserves is still to be confirmed, but preliminary evidence is promising. The amount of offshore commercial reserves in Block A is currently being assessed by Chevron. Solid estimates should become available around mid-year. Very preliminary and tentative figures released last year suggested as much as 700 million barrels of oil in Block A alone.

At world oil prices averaging $60 per barrel, this level of commercial reserves could annually generate net new revenues to the government budget in the order of US$1.7 billion.
1 This latter amount represents some three times current ODA levels; nearly three times current budget revenues; and more than 50% of merchandise export revenues.

But even under more cautious price and reserve assumptions with only half of such revenues generated, this would still leave some US$0.85 billion to be disbursed annually into the government's general budgetary process. This in turn would contribute to a doubling of current budget revenues and expenditures, and allow for a near quadrupling of current expenditures on health and education, while still enabling significant growth in all other budget lines.

Blessing or Curse?

While expected oil and gas revenues present perhaps the single biggest emerging opportunity facing Cambodia, socio-economic research supported by UNDP in collaboration with SNEC and CNPA during 2005-2006 also strongly suggests that it may be the single biggest threat to the country's well-being and longer term stability.

These conclusions are also strongly reinforced by experiences in many other low income developing countries over the past forty years. More oil, gas and mineral rich developing countries than not have been negatively impacted by oil, gas and mineral revenue booms,  and some even destabilized.

In general, available research indicates that long term growth rates of oil and mineral rich developing countries have been 30% to 50% lower than growth rates for oil and mineral poor developing countries. Moreover, mineral rich countries have underperformed  mineral poor developing countries on a variety of other economic, social and political indicators.

Global Experience on the Resource Curse

A review of experiences by developing countries plagued by a resource curse over the past forty years reveals some of the main warning signs leading up to serious resource curse outcomes.

These include a sudden surge of foreign currency revenues generated from the extraction of non-renewable natural resources combined with:

    * lack of financial transparency;
    * weak financial governance;
    * fragmented and porous public finance systems;
    * weak and narrow tax base;
    * strong evidence of significant corruption;
    * a predatory state where officials maximize personal gains through misuse of public office;
    * weak macro-economic management capacity resulting in "Dutch Disease";
    * significant borrowing against oil reserves;

Ingredients to a Blessing

The minority of oil/gas/mineral rich countries that achieved an oil blessing also share common features.
9 These include an expected surge of oil revenues generated from extraction of non-renewable natural resources combined with:

    * advance planning to effectively govern, manage and invest the resulting financial flows;
    * a high degree of transparency;
    * a high degree of participation and meaningful decision making by the parliament or national assembly;
    * well developed and effective public sector institutions;
    * relatively low corruption with a functioning legal and judicial system;
    * a healthy civil society;
    * effective macroeconomic management capacity;
    * aversion to debt accumulation;
   * effective management and investment of the revenues to avoid over-valuation of the exchange rate and promote economic diversification;
    * a rate of investment expenditure that ensures inter-temporal efficiency and equity within the capacity limits of the state and absorption capacity of the country (typically back stopped by a well-designed and transparent natural resource fund);

Outlook Cambodia?

Clearly achieving an oil blessing for Cambodia will not be automatic. Fortunately international experience provides valuable guidance. Equally fortunate, Cambodia's constitution provides an effective road map towards achieving an oil blessing. The constitution instructs that a "precise plan" be devised by the state for managing such resources as oil and gas, and that such a plan be decided upon by the people through their voice in the National Assembly, Senate, Royal Government and Judiciary.

Such advance planning and broad participation of the people in the decision making process has proven to be an important ingredient to oil blessings in some of the more successful oil exporting countries.

Moreover, given the current institutional and development context of Cambodia, international experience would suggest that a number of important policy, legal and institutional safeguards will need to be put in place well in advance of oil revenue flows to ensure that Cambodia avoids an oil curse and enjoys an oil blessing. 

On the policy front: There is a need for clearly defined policy on how potentially substantial future oil and gas revenues will be governed and managed; transparent policies on how oil and gas concessions should be allocated to maximize benefits to the country as a whole; transparency on the various types and amounts of financial payments and financial flows generated by oil and gas licensing, exploration, development and extraction; and more generally, clear policies on the degree of transparency in the sector as a whole.

Offshore oil and gas are the patrimony of all the people of Cambodia, so better informing and broadening the public debate on future use of oil and gas revenues would appear essential.

In order to maximize both efficiency and benefits accruing to the country as a whole, the allocation of oil and gas concessions to foreign companies would best be done through a competitive bidding process.

In order to better inform public debate, the broad terms of Production Sharing Contracts outlining the various production sharing arrangements and various types of financial flows to the country should be made easily available to the general public (eg. gazetted or posted on a public website) to better inform public debate, related planning and effective decision making.

On the legal front: There is a need for a well designed petroleum law to govern the sector within the broader legal and institutional context of Cambodia based on a rational division of responsibilities within the state and between the state and the non-state sectors. There is also a need to ensure legal clarity and coherence with other laws (eg. on taxation, environment, etc.)

On the institutional front: Given the current stage of institutional development in Cambodia, there is a strong case to be made for putting in place a well-designed and transparent petroleum fund to minimizes the risk of Dutch Disease and other resource curse outcomes.

As is done in the most successful countries that have avoided the curse, financial flows generated by oil and gas could first be deposited in such a well designed transparent fund before being disbursed to and through the government budget process to finance planned investments within NSDP. Revenues from the fund to the budget would be disbursed at a rate that would enable efficient and effective investments within the limits of the country's still developing institutional and absorption capacities.

Such a petroleum fund based approach would also better help ensure inter-temporal efficiency and equity of related investment expenditures.

In general, a further strengthening of public financial systems and management will clearly be important to avoid a resource curse. RGC's ongoing efforts in Public Financial Management reform are even more critical in light of the potential for an oil and gas revenue surge beginning in 2010 and beyond.

There is also a need to ensure a rational division of institutional responsibilities and related capacities within the petroleum sector. The capacity of the Cambodian National Petroleum Authority (CNPA) needs strengthening in a wide range of technical areas, and the division of responsibilities with other government bodies may need further definition.  

Investing in Shared Prosperity and Long-term Stability: Advancing the CMDGs

Another potential challenge facing Cambodia is how to effectively allocate expenditures through the budgetary process and NSDP so as to minimize the risk of a resource curse and maximize the likelihood of a blessing. Preliminary findings from ongoing UNDP supported research in collaboration with SNEC, CNPA and the Overseas Development Institute (ODI) are illuminating.

These findings generated by quantitative simulations of the Cambodian economy under varying oil and gas scenarios strongly suggest that the most effective way for Cambodia to minimize the risk of Dutch Disease and other resource curse outcomes would be to invest a substantial share of future oil and gas revenues into rural development. Rural investments in human resource development through much improved basic education,training, and extension services as well as in rural infrastructure especially rural electrification, roads, and irrigation appear to generate the highest returns. These results are largely due to the existing low capital intensity in most of rural Cambodia.

Such rural based investments in human capital and infrastructure also appear to offer the greatest scope for economic diversification, generating jobs and incomes in the agricultural and manufacturing sectors, and sustaining healthy growth rates over the longterm.

Moreover, quantitative simulations also indicate strong positive impact on equity indicators, thereby further underpinning long-term social stability.

In sharp contrast, the risks of Dutch Disease, and loss of competitiveness in agriculture, manufacturing, and tourism will rise as increasing shares of future revenues accrue to urban areas. In this scenario, equity indicators deteriorate rapidly boding ill for long-term social stability and human well being. Similarly, this scenario also tends to further exacerbate already high land concentration and related inequalities.

Similarly, early simulations strongly suggest that striking a safe balance between consumption and investment expenditures will also prove critical. Dutch Disease effects increase sharply as increasing shares of new revenues are used for consumption. The impact is especially negative on private sector competitiveness and investment. Imports would also rise to unsustainable levels.

Fortunately, the Government's Rectangular Strategy and the National Strategic Development Plan (NSDP) both place heavy emphasis on rural development and

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