Gov’t Reply on ‘Social Funds’ Inadequate, SRP Says

In a detailed statement of its handling of oil, gas and mining payments from private firms received yesterday, the government an­swered opposition party questions but failed to clarify how much mon­ey it has accumulated to date.

The government’s response to the SRP questions, which were submitted last month, come amid rising public scrutiny of commissions and bonuses from large firms interested in Cambodia’s resources and which the government has said were lodged in so-called “social funds.”

The SRP said yesterday the an­swers provided were inadequate and that the government had failed to explain how it has managed state resources and the funds generated from the commercial interest in those resources.

In a June 9 letter to the National Assembly obtained yesterday, Cab­inet Minister Sok An responded to the questions submitted by SRP lawmaker Son Chhay, who asked for an official explanation of the government’s dealings with Australian mining giant BHP Billiton and the French oil company Total.

Mr Chhay asked the government to clarify how it managed the “social funds” generated from payments from the oil and mining in­dustries, and to explain how licenses are allocated to private companies and how much money the state had accumulated from extractive industry payments in total.

In his response, Mr Sok An said that the government had granted exploration licenses to a total of 23 oil and gas companies. But “some companies among the list have already withdrawn because our oil and gas resources are not compatible for doing business,” Mr Sok An wrote.

Mr Sok An added that companies do “not pay fees before receiving an [exploration] agreement.”

Once an exploration license has been agreed, however, the company will pay a signature bonus and make a contribution to the government’s “Social Development Fund,” both of which are in National Bank accounts. The social funds contribute toward the development of priority social sectors and will be jointly administrated with the companies, Mr Sok An wrote.

Mr Sok An added that the amounts paid to the government by the firms “depend on the capacity of the petroleum resource.”

Mr Chhay said yesterday that while it was beneficial to have a comprehensive list of names of all the companies operating in Cambodia, some of the most fundamental aspects of his questions still remained unanswered.

“What happened to the other money from the other companies?” Mr Chhay asked, adding that he would pursue avenues to obtain the government’s financial records and if necessary try and bring Mr Sok An to questioning in parliament.

“You cannot just answer that the money is in the National Bank and say don’t worry about it,” Mr Chhay said. “We do worry about it.”

“If the government is committed to transparency, please answer directly to the questions,” he added.

Payments, if any, made by most of the companies that appeared in Mr Sok An’s letter have not been made public.

Tith Sothea, spokesman for the press and quick reaction unit of the Council of Ministers, said Mr Sok An’s response was completely adequate.

“[Mr] Sok An’s answers are based on fact,” he said. “What kind of answer does he [Mr Son Chhay] want?”

Asked why the letter did not reveal the amount of money contained in the government’s funds, Mr Sothea said: “Excellency Sok An has answered enough. I will not comment any further on the matter.”

The government’s answers are over a month and a half over due. Under the Constitution, the government must respond to officially submitted questions within a week.

Both Total and BHP have made multi-million dollar payments to the government’s “social development fund” though BHP, which departed Cambodia last year, drew negative scrutiny to the government in April when it announced that the company was the target of an investigation by US authorities. News reports cited unnamed company officials saying the matter concerned payments to Cambodian officials.

The government announced in 2007 that BHP had paid $2.5 million in payments to the government, money that Minister of Water Resources Lim Kean Hor referred to at the time as “tea money.”

In April, Prime Minister Hun Sen said that Total had agreed to pay $28 million to the government in return for exploration rights to the offshore resource block know as Area 3, situated in disputed waters with Thailand known as the “Overlapping Claims Area.”

The following month, Mr Hun Sen tasked Mr Sok An, who is also in charge of oil exploration, as well as Finance Minister Keat Chhon with answering the SRP’s questions.

Of Total’s announced sum, $20 million went toward a signature bonus and the remaining $8 million went to contribute to a social development fund.

Mr Sok An’s letter stated that just $6 million of the Total payment would go toward the social development fund and the remaining $2 million would be given to the government’s border committee striving toward a resolution on ownership rights of the Overlapping Claims Area.

Though Mr Sok An did not specify how the money paid into the two accounts would be used, he assured in his letter that none of the payments made to the government would be “paid personally to a government official.”

“All payments for oil and gas must be binding in a petroleum contract and deposited in the government’s account,” Mr Sok An stated.

The questioning over the government’s record and policy on revenue transparency comes amid heightened scrutiny by non-governmental organizations of the revenues from natural resource extraction, which they say could help pull millions of Cambodians out of poverty.

Mining activities alone are now taking place in eight of Cambodia’s 23 provinces and offshore oil extraction by US oil giant Chevron is expected to start in 2012.

 

 

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