Can Cambodia Avoid The Resource Curse?

Rim Sokvy | 28 August 2021 |
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After the discovery of oil in Cambodia’s water territory by  Chevron, the US-based company, Cambodia could become one of the major petroleum exporting-countries as there are approximately 400 million barrels of oil reserve in Cambodia territory. However, due to the issue of revenue sharing, Chevron sold out Cambodia oil block toKris Energy, Singapore’s based Company in 2014 with the deal of $65 million. As the Kris Energy started its oil extraction in 2020 in Block A that covered an area of 3,083 square kilometers, Prime Minister Hun Sen applauded this as the milestone and achievement after leading the country for more than 30 years. Hun Sen also remarked that Cambodia oil is not a “curse”. It is a “blessing” for Cambodia. He furthered said, “Now we can start raising questions on how money from our oil resource will be spent. If this question is posed, I will say the money will be allocated mainly to the education and health sectors,” (Sao, 2020, para. 13).

Despite the assurance from Prime Minister Hun Sen, doubt remains, particularly regarding the accountability and the distribution of resources, whether the resource will help to diversify and strengthen the economy of this post-war country. Before envisaging whether Cambodia’s oil is a “curse” or a “blessing”, it is worth considering to the lesson about resource curses and resource blessing from other countries such as Venezuela and Norway.

How a blessing can become a curse 

Since 2001, there has been a lot of empirical evidence to support the prevalence of the resource curse in most resource rich countries with poor institution, particularly the countries in Africa and the Middle East. The natural resource can be the advantage to develop and boost economic development if the profit from it is well managed and allocated. However, it would be a curse that draws the country into conflict, corruption, poverty, and dictatorship. For instance, Nigeria is one of the largest oil producers in the world between 2015 and 2019, which produced 2.5 million barrels per day. However, a survey conducted in 2018-2019 by the National Bureau of Statistics  showed that around 86.9 million of the Nigerian populations live below the poverty line of $381 per year.

According to many studies, the natural resource has close relation with the regime, it helps to strengthen the regime. The authoritarian regime would be more durable, thus transition to democracy would be less likely to happen. The regime could get profit from selling/renting oil to finance the regime by building up military force and oppressing dissidents. The profits from oil also allow the government to sufficiently support themselves which helps to ease the citizens’ burden of paying tax. No tax means no representative that the government doesn’t feel the need to hold accountability and transparency to its citizens. Thus, it makes it easy for the oil’s profit to fall into the top officials ‘pocket. Those who are in power would feel the need to protect their interests which include money and power that they could use to strengthen their political influence.

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