VZCZCXRO1824
OO RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHPF #1940/01 3000735
ZNR UUUUU ZZH
O 270735Z OCT 06
FM AMEMBASSY PHNOM PENH
TO RUEHC/SECSTATE WASHDC IMMEDIATE 7520
INFO RUCNASE/ASEAN MEMBER COLLECTIVE
RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 02 PHNOM PENH 001940 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPARTMENT FOR EAP/MLS AND EB/ESC/IEC 
STATE PLEASE PASS OPIC FOR MICHELLE PEREIRA AND DAVID FRANTZ 
STATE PASS USAID FOR ANE 
COMMERCE FOR HONG-PHONG PHO 
 
E.O. 12958: N/A 
TAGS: EPET ENRG ECON EINV CB
SUBJECT: CAMBODIA: UPDATE ON PETROLEUM SECTOR 
 
REF: PHNOM PENH 1460 
 
¶1.  (U) Donor representatives met October 25 to review recent 
developments in efforts to help Cambodia learn to manage its 
oil revenue in a transparent manner that benefits the 
Cambodian people.  A focus of the discussion was on public 
outreach to increase awareness of the revenue windfall that 
is likely to accrue to the Cambodian people and to raise 
expectations that the revenue will be used for their benefit. 
 In this connection, Douglas Gardener (UNDP) noted that UNDP 
was able to insert a paragraph on the link between oil 
revenues and development outcomes (i.e.; schools, hospitals) 
into remarks delivered at the conference celebrating the 
fifteenth anniversary of the Paris Peace Accords, which was 
replayed on local television several times over the weekend. 
Participants also agreed on the need to meet with the private 
sector and NGOs to explain what the donors were doing; the 
private sector, and especially the garment industry, could be 
sabotaged by elevated wages in other sectors as the result of 
the "oil curse." 
 
¶2.  (SBU) IMF representative John Nelmes called attention to 
the growing competition between Cambodian National Petroleum 
Authority (CNPA) and the Ministry of Economy and Finance 
(MEF) over control of the tax revenue.  An IMF mission 
recently completed a draft schedule of taxation for oil that 
was internally consistent with the tax law.  However, the 
Council of Ministers (i.e., DPM Sok An and the CNPA) appeared 
to want the oil tax schedule to be a part of the Petroleum 
Law.  Nelmes said that the average government tax revenue 
would be about 70 percent, which was in line with regional 
standards. 
 
¶3.  (SBU) Another sign of this growing competition for 
control was the attendance of MEF Minister Keat Chhon as an 
observer at the October 16-17 conference on the Extractive 
Industries Transparency Initiative (EITI) in Oslo.  For 
health reasons, CNPA Director Te Doung Dara was unable to 
attend.  Robert Taliercio (World Bank) observed that 
currently the MEF appeared to be peripheral to the management 
of the petroleum sector, but that could change.  The World 
Bank would hold a workshop, essentially a primer on the oil 
sector, in December and would gauge interest from other 
ministries, including the MEF. 
 
¶4.  (SBU) ADB Deputy Head of Mission Purnima Rajapakse noted 
that there was not only competition among ministries for 
control of the oil revenue, but there were divisions within 
the Council of Ministers.  Rajapakse said that he had noted, 
and others agreed, that there are tensions between Te Doung 
Dara and DPM Sok An.  (We have previously reported 
factionalism within the CNPA; reftel.)  Rajapakse also quoted 
PM Hun Sen as telling donors and IFIs that Sok An and the 
CNPA were "doing fine" on the upstream part of the equation 
and thus there was no need for donor/IFI involvement in 
upstream issues. 
 
¶5.  (SBU) On Cambodia's position regarding the Extractive 
Industries Transparency Initiative (EITI), after much 
discussion attendees tended to agree with Taliercio's 
judgment that the Cambodian government (RGC) would eventually 
sign on to the EITI.  However, the crucial question would be 
the degree of transparency to which the RGC committed. 
 
¶6.  (U) Donors briefed on current projects underway.  Note 
this supplements information provided in reftel. 
 
AUSAID: 
 
-- Drafting Upstream Road Map; 
 
-- Preparing draft Petroleum Law; 
 
-- Preparing a short course for CNPA 
 
UNDP: 
 
-- Preparing an analysis of socio-economic implications of 
oil and gas, including outcomes under various scenarios, such 
as different levels of income and public expenditure;  UNDP 
also was sending two researchers to Duke University to learn 
cost-benefit analysis; 
 
ADB: 
 
-- Considering attaching an oil expert to ADB's local office 
 
PHNOM PENH 00001940  002 OF 002 
 
 
 
-- May be able to provide $2-3 million in technical 
assistance; 
 
Norwegian Petroleum Directorate (NPD): 
 
-- Assistance on understanding/writing contracts and laws; 
 
-- Has Assigned legal and contractual expert to work with 
CNPA 
MUSSOMELI