Country Director Setsuko Yamazaki's speech at petroleum policy consultation workshop

11 Jan 2013

Petroleum Policy Consultation Workshop

Keynote Remarks by Setsuko Yamazaki

UNDP Country Director

Phnom Penh, Cambodia

11 January 2013

His Excellency Ho Vichit, Vice Chairman of Cambodian National Petroleum Authority;

His Excellency Sok Khavan, Acting Director General, Cambodian National Petroleum Authority;

Excellencies, Ladies and Gentlemen,

This is my honor and privilege to open this important workshop on the draft National Petroleum Policy Framework. I would like to thank the Cambodian National Petroleum Authority (CNPA) to host this workshop to consult on the petroleum sector policy with all the key institutions concerned.

I recently arrived in Phnom Penh, and was struck by the potentials that the country holds for its future. Cambodia’s economy has been steadily growing over a decade, reduced the poverty ratio, and the country is on its way to become a Middle Income Country. The next five years will become a critical period to transform the country from an aid recipient country to a more self-sustaining economy. We are here today together to make an important first step towards a more diversified, prosperous, and independent economy that will bring an additional way to finance its development for the country and Cambodians.

We are pleased to have been able to give support to H.E. Ho Vichith, CNPA Vice-Chairman and his officials to initiate and help develop Cambodia’s first ever oil and gas policy, which is to be based on the principles of sustainable, responsible and accountable development and international best practice, taking into account the experiences and learning of nations across the globe. The active contribution of Columbia University’s Professor Jenik Radon, one of the world’s leading oil and gas public sector experts, has been highly valuable for us in this initiative.

We also gratefully acknowledge the very positive collaboration with development partners, including Norway with its extensive oil and gas experiences, Australia, and the engagement with the private sector and civil society.
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Excellencies, Ladies and Gentlemen

The potential for revenues from the petroleum resources offers the Royal Government of Cambodia and its people a special opportunity to:

  1. Contribute to create a self-sustaining economy; Help Cambodia become a middle income county and accordingly independent from Official Development Aid (ODA) in the development of its economy and in building its human capital.
  2. Enable the government to invest in inclusive growth, significantly and positively transform peoples’ lives, by further accelerating poverty reduction and promoting sustainable economic growth, and
  3. Provide a means to consider a longer-term prosperity and social protection for the generations to come.

So we support and encourage the Royal Government of Cambodia and its people to take a sustainable, responsible and accountable approach to oil and gas development. This means ensuring institutionalizing the rule of law, in particular  by having the policies that govern the sector take into account and prioritize social, health and safety and  environmental  needs, all the while promoting economic development for all, especially education and training.  It also means having in place transparent and open mechanisms to manage revenues and ensuring that they contribute to increased employment, better health and education and further other development needs of the present and future generations of Cambodians.

Excellencies, Ladies and Gentlemen

We have examples before us of countries that have achieved sustained economic growth from resource wealth and channeled their new revenues into increased employment levels, education, health, and productive investments that multiple  the value of their natural resources for all of their citizens. And Cambodia, of course, stands to benefit from these countries’ experiences.  The rule of law and institutional checks and balances are the open secret to the successful nations’ experiences.

Malaysia, Cambodia’s ASEAN partner, for example, has been blessed with an abundance of natural resources, all of which have contributed to the country’s and its citizens” betterment. The oil and gas endowment has helped Malaysia to grow and diversify its economy, in part by providing a solid foundation for developing associated technologies and capital goods industries and developing the human capital it needed to sustain its economic growth and succeed in the competitive globalized world. Malaysia focused on fundamentals, the education of its people, the true and most valuable resource of a nation. Malaysia now ranks as one of the leading nations of the world.

Indonesia, besides Malaysia, has also been credited for its ability to manage its resource wealth and long-term economic development. With a per capita income of only $200 in 1974, Indonesia was one of the poorest countries in the world to enjoy the benefits of a rich natural endowment. Today, according to the World Bank, Indonesia is a successful emerging economy with a 17 fold increase in per capita income of $ 3,495 as of 2011.  Cambodia can and will with proper use of its natural resources join its neighbors as a proud and respected partner.

Excellencies, Ladies and Gentlemen

Future economic benefits for all Cambodians, including future generations not yet born, from oil and gas depend critically on (a) the quantity of the resource, (b) the economics of oil and gas production, (c) the policy and legal environment for production, (d) the negotiation of optimal agreements, (e) the protection of its environment and minimization of other related costs of oil and gas production, all in an open environment so that all Cambodians share in this development.
At this juncture, since the first announcement by Chevron Corporation in early 2005, the Royal Government of Cambodia now reconfirmed that Cambodia will see her first drop of oil in the near future. This is good news.

The upward trend of the price of oil over the medium term will certainly make oil production in Cambodia even more profitable.

And with the opening of today’s consultation workshop on petroleum policy, it is an encouraging sign that Cambodia will soon have its petroleum policy to govern its oil and gas sector for the benefit of Cambodians.  And hopefully thereafter the laws and regulations implementing this policy.

That takes me to the theme of today’s workshop.

It is not for me to state how the Royal Government of Cambodia should write its petroleum policy.  UNDP’s role is to bring international dimensions to your policy work based on the work we have undertaken throughout the world in recent years.  I would like to offer some observations, or guiding policy principles, if you will:

  1. Learn from international experiences and knowledge – Countries in the region and around the world face the same challenges as the Royal Government on the question of petroleum policy, in particular with regards to revenue management for present and future generations. Of course, the chosen policy approach must address Cambodian needs.  Nonetheless, the lessons learned from choices made by other governments and countries such as Malaysia and Indonesia are readily available for Cambodians to consider.
  2. Take a sustainable, responsible and accountable approach (economic, environmental and social) – In the work that UNDP has done on responsible mineral development, perhaps one message stands out.  The costs of non-sustainable approaches to resource development can be very high, and even negative.  Sadly, we see this in the news every week throughout the world and the same can be said about petroleum development. In making choices about petroleum policy, we urge the Royal Government to take into account social, environmental, health and economic factors in a balanced and equitable way.  In part, this can be achieved by engaging communities, civil society and other stakeholders – especially the people who may be directly affected and impacted– before and while proceeding with major oil and gas development projects.  The more engaged the community, the more rapid will be Cambodia’s growth and development.
  3. Be open and transparent – The general public should know how much  oil and gas revenues the government receives, from which sources and how they are saved and invested. We know from experience that the public craves knowledge and accordingly transparency which allows them to meaningfully support, contribute and participate in the management of the oil and gas wealth.   Ironically Afghanistan, a nation still torn by conflict, has now set the pace in this regard by making all mining agreements and its revenues publicly available so that its citizens understand the process and feel that they are an integral part of the process.
  4. Ensure institutional checks and balances - A number of ministries and agencies need to be part of the implementation of a petroleum policy.  We have so many stakeholders in this room. The burden is too great and the sector is too complex for any single agency to oversee the entire sector, especially in ensuring that environment, health and safety are fully prioritized and respected by the companies engaged in the development of this sector.  Specifically the environment ministry, for example, needs to have the right to cancel a license for serious violations.  Each ministry has its own responsibility and authority and checks and balances need to be strengthened.

In my home country, Japan, they have learned a lesson on checks and balances in a hard way when Japan encountered the nuclear power plant meltdown after the earthquake and tsunami in March 2011. The nuclear safety authority was under the Ministry of Industry which promotes nuclear energy industry and the checks and controls were not properly functioning.  The nuclear safety authority is now separated from the Ministry of Industry.

(5) Establish necessary funds - Resources funds ensure that compensation from that petroleum sector is saved until proper investments can be made, whether for schools, hospitals or infrastructure and ensure that future generations also participate in this special national endowment.  Resource funds are necessary for emergencies, for restoration of land used after operations are terminated or abandoned, and for social needs of the impacted people.  In short resource funds are the means for a prosperous and secure tomorrow for all.

As long as the oil and gas resources are in the ground, they are still permanent. As such, there is still a moment of opportunity. You, as the trustees of your nation, can ensure that the country’s oil and gas resources is a blessing, effectively enabling Cambodia to finance its development in a self-sustaining manner; and that most important of all, all present and future Cambodians can stake an equitable and productive claim in the potential revenues – while ensuring that the communities,  the environment, as well as health, are protected and in fact furthered.

I look forward to today’s fruitful discussion on the draft policy and reading the final draft policy in the coming weeks and ultimately the new laws that will give life to these policies.

Thank you