VZCZCXRO7615
PP RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHPF #0095/01 0221053
ZNR UUUUU ZZH
P 221053Z JAN 08
FM AMEMBASSY PHNOM PENH
TO RUEHC/SECSTATE WASHINGTON DC PRIORITY
INFO RUCNASE/ASEAN MEMBER COLLECTIVE PRIORITY
RHHMUNA/USCINCPAC HONOLULU HI//JC/J3/J4/J45/J5/FPA// PRIORITY
RUEHBS/USEU BRUSSELS PRIORITY
RUCNDT/USMISSION USUN NEW YORK PRIORITY 2263
RHHMUNS/COMSOCPAC HONOLULU HI//SOJ32 PRIORITY
UNCLAS SECTION 01 OF 07 PHNOM PENH 000095
SIPDIS
SENSITIVE
SIPDIS
STATE FOR D, P, EAP/MLS, DRL, S/WCI, AND DRL/ILCSR --
MITTELHAUSER, EEB/TPP/ABT -- CLEMENTS, EEB/IFD/OIA,
EEP/TPP/BTA, EEB/TPP/MTA, EEB/TPP/IPE, EEB/ESC/IEC -- KOPP,
STATE PLEASE PASS TO USTR -- FOR BISBEE AND WEISEL, AND
USAID
BANGKOK FOR USAID -- KISSINGER, FCS -- BACHER
HANOI FOR FCS -- NAY
HO CHI MINH CITY FOR FCS -- MARCHAK AND LE
GENEVA FOR USTR -- PALLGEIER
COMMERCE FOR ITA/OTEXA -- D'ANDREA, ITA/MAC -- MIKALIS
LABOR FOR ILAB -- LI
USAID FOR ANE
E.O. 12958: N/A
TAGS: EAID PGOV KJUS PHUM PTER KWMN PREL BM CB
SUBJECT: U.S.-CAMBODIA BILATERAL DIALOGUE STRENGTHENS TIES,
BROADENS RELATIONSHIP
REF: A. PHNOM PENH 41 SCENESETTER FOR DAS MARCIEL VISIT
B. 07 PHNOM PENH 1421 CAMBODIA: TIP INTERIM
ASSESSMENT REPORT
C. 07 PHNOM PENH 422 ECCC AND OSJI
1. (SBU) Summary: Deputy Assistant Secretary Scot Marciel
led U.S. participation in a successful senior-level
U.S.-Cambodia bilateral dialogue hosted by the Royal
Government of Cambodia Ministry of Foreign Affairs January
17. Both sides opened with statements of enthusiasm for
strengthening ties between the governments and citizens of
our two countries, and for broadening the bilateral
relationship to cover new areas of cooperation and
collaboration, such as Cambodia's status as a candidate
country with the Millennium Challenge Corporation (MCC). The
Ambassador, Deputy Chief of Mission, USAID Mission Director
and Defense Attache also represented the U.S. side of the
dialogue. Acting Minister of Foreign Affairs Ouch Borith
headed the Cambodian delegation made up of approximately 25
Secretaries of State and Office Directors from the Ministries
SIPDIS
of Foreign Affairs, Defense, Interior, Commerce, Economy and
Finance, and from the National Election Committee, Human
Rights Committee, National Petroleum Authority, and the
Extraordinary Chambers in the Courts of Cambodia (ECCC). The
topics discussed included Cambodia's prospects for meeting
MCC threshold goals; the Khmer Rouge Tribunal; human rights
issues, elections, trafficking in persons; mil-to-mil
relations and counter-terrorism cooperation; ASEAN and Burma;
and economic and trade issues, along with management of oil
and gas revenues. End Summary.
A Positive Stage Set for Bilateral Dialogue
-------------------------------------------
2. (SBU) On January 17, Deputy Assistant Secretary Scot
Marciel led U.S. participation in a successful senior-level
U.S.-Cambodia bilateral dialogue. In a short pre-meeting in
advance of the bilateral dialogue, Acting Minister of Foreign
Affairs Ouch Borith previewed major themes and his opening
remarks. Ouch Borith conveyed the best wishes of Foreign
Minister Hor Namhong, who was in Japan and therefore could
not chair the bilat. He noted such visits by U.S. officials,
and especially this first bilat, reflected the increasingly
good relationship between the U.S. and Cambodia. He extended
thanks from the people of Cambodia for the U.S.'s invaluable
bilateral assistance and looked forward to further
cooperation. Ouch Borith noted that approximately 25
Cambodian officials would participate in the bilat, which was
a sign of how the Cambodian side sees this as an important
opportunity for engagement. Ouch Borith referred to the
government's strategic plans and emphasized the importance
placed by the RGC on fighting corruption and reforming public
administration. Ouch Borith noted that the organic law
creating new bodies at the provincial and district levels has
just been passed. Marciel also noted increased
U.S.-Cambodian cooperation and shared interests. He noted
that there was a sense of positive momentum in Cambodia which
had an impact on how Cambodia is viewed, including by the
business community.
Cambodia Shows Interest in the MCC
----------------------------------
3. (SBU) Acting Minister of Foreign Affairs Ouch Borith
stated that Cambodia is "very interested" in the MCC. He
stated that MCC eligibility requirements are consistent with
the RGC National Development Strategy, a plan outlining
policies and strategies for development including growth,
employment, equity, and efficiency that will lead to
reductions in poverty, economic development, transfer of
power from the central government to the grassroots level,
improvements in health to reduce child and maternal mortality
rates, and combat disease. Marciel stated that this year
Cambodia met four out of 17 policy indicators needed to make
PHNOM PENH 00000095 002 OF 007
Cambodia MCC-eligible. The Ambassador added that most of
Cambodia's scores for the remaining unmet indicators are
close to meeting MCC criteria and that, with focused effort,
Cambodia has the potential to achieve MCC goals over the
course of the next several years.
Integrity of KRT Shapes U.S., World View of Cambodia
--------------------------------------------- -------
4. (SBU) ECCC Director of Administration Sean Visoth
detailed the many successes of the ECCC to date including the
adoption of the Court's Internal Rules, and arrests,
detention and ongoing prosecution of five Khmer Rouge
leaders. He stated that the ECCC is small compared to other
tribunals with 200 national staff and 100 international staff
and that the Cambodian side of the budget is low -- around
USD 20 million per year. However, the Cambodian side of the
ECCC will run out of funds at the end of March 2008. Sean
Visoth acknowledged there have been allegations of corruption
through salary kickbacks that have damaged the public image
of the ECCC (Ref C). He stated that no kind of corruption or
extortion will be allowed at the ECCC and that he will take
action against those who engage in corrupt activities at the
Court. Marciel reiterated previous embassy statements that
the U.S. has a significant interest in the conduct of the KRT
and believes that the KRT is important for Cambodia. For the
next several years, world views of Cambodia will be shaped by
the KRT. Marciel stated that the ability of the U.S. to
support the ECCC -- through U.S. congressional appropriation
-- would depend on the independence of the Court and whether
the Court can meet international standards of justice. Both
Marciel and the Ambassador reiterated U.S. support for the
UNSYG appointment of a special advisor to the ECCC. Sean
Visoth responded that Deputy Prime Minister Sok An had
received, via the MFA, a letter from the UN regarding the
Special Advisor. Talks are taking place in New York and in
Phnom Penh, the results of which the RGC will share with the
U.S. The Ambassador suggested that, given the timing, it
might be helpful for the RGC to invite a senior official from
the UN to Phnom Penh to facilitate direct communication.
Sean Visoth replied that the RGC wanted such a visit to be
fruitful.
Human Rights: Mob Violence Down But What About Labor
Killings, Land, and Tim Sakhorn?
--------------------------------------------- -----
5. (SBU) Director General of the Cambodian Human Rights
Committee Om Yin Tieng stated that there are four government
human rights institutions including the human rights
committees of the National Assembly, the Senate, and the RGC
Human Rights Committee, of which he is director general, and
an institution made up of 50 human rights NGOs that advise
the government (Note: It is not clear if Om Yin Tieng was
referring to the Cambodian Human Rights Action Committee, an
NGO umbrella organization made up of 22 human rights NGOs, or
to a planned national human rights committee that has not yet
been established. End note.) Om Yin Tieng claimed RGC
success in decreasing the incidence of mob killings and
vigilante justice over the past two years: five cases in
2006 and four in 2007 (Note: NGOs reported to the embassy six
cases in 2006 and five in 2007. End note.) Marciel stated
that NGOs in Washington have raised concerns about unsolved
killings of labor activists (Note: FTUWKC leader Hy Vuthy in
February 2007, and FTUWKC leader Chea Vichea and FTU leader
Ros Sovannareth in 2004. End note.), Cambodians being forced
off their land, sometimes violently, and the recent
deportation of Khmer Kampuchea Krom monk Tim Sakhorn. Om Yin
Tieng stated that RGC investigations into the labor killings
indicated that they were not political killings, and that he
would provide to the embassy complete reports on the RGC
investigations. On land disputes, he stated that of all
eviction cases in which persons were not renters and were
therefore "eligible for compensation", the RGC had provided
PHNOM PENH 00000095 003 OF 007
"resolution or compensation" to the persons removed from land
in the form of cash compensation or resettlement site
relocation. He stated that if the embassy has specific
questions on particular cases, he will provide detailed
information on those cases. He also stated willingness to
provide the results of a government investigation into the
disappearance and deportation of Tim Sakhorn. Marciel
encouraged the RGC to make progress on Cambodia's human
rights issues, and the rule of law as it relates to human
rights; such efforts would help the U.S. fully expand
cooperation with Cambodia.
Peaceful, Well-Organized Elections
----------------------------------
6. (SBU) Secretary General of the National Election
Committee (NEC) Tep Nytha provided general statistics on the
April 2007 commune council election, October 2007 voter
registration, and the voter deletion lists (form 1025) in the
runup to the 2008 national election. He also sought funds
for the NEC budget (Ref A). On the voter deletion lists, Tep
Nytha said the current NEC list included 580,000 names. He
said the NEC seeks to strengthen cooperation with the RGC to
ensure social order that will provide favorable conditions
for all parties to participate in the election process; to
gain participation by party agents, NGOs, and IOs to monitor
the election process for transparency; to increase public
education and awareness of the election process; to
strengthen the capacity of election authorities; and to
improve the technical capability of the NEC. Marciel
congratulated Cambodia on its peaceful, well-organized
commune council elections last April while expressing concern
that legitimate voters are not disenfranchised through NEC's
"clean up" process.
Strong RGC Commitment on TIP
----------------------------
7. (SBU) Speaking on behalf of Ministry of Interior Deputy
Commissioner General Neth Savoeun, Director for International
Relations of the Ministry of Interior (MOI) Police General
Por Phak described recent RGC efforts demonstrating an
increased commitment to combat TIP. He provided statistics
on TIP arrests, and information about the structure of the
National Task Force (Ref B). Por Phak made note of the recent
National Assembly passage of a comprehensive TIP law,
acknowledging the next challenge -- for which the RGC is
already making preparations -- is dissemination of the law.
The Ambassador stated that Cambodia has made commendable
progress since it was on Tier 3 in 2005, and that the U.S.
will continue to watch Cambodia's TIP progress closely. He
applauded the fact that, unlike some other countries,
Cambodia has never denied that it has a TIP problem. Ouch
Borith reiterated the RGC's strong commitment to tackle TIP
and thanked the U.S. for assistance to combat TIP through
activities such as the USAID-funded C-TIP (Counter
Trafficking in Persons) program.
RGC Welcomes U.S. Military Presence
-----------------------------------
8. (SBU) Marciel took the lead on the mil-to-mil topic,
noting that he had been struck by the number of important
military-linked visits. He named PACOM Admiral Keating,
PACOM Admiral Willard, and Acting PM A/S Mull, as well as the
very successful November visit by the USS Essex. He said the
U.S. was pleased with the developing relationship, which was
important. He mentioned Cambodia's contribution to demining
in Sudan and its offer to volunteer elsewhere. He welcomed
Cambodia's signing up to GPOI and DRMS. He extended an
invitation for Cambodia to participate in CARAT as an
observer. Ministry of Defense Secretary of State Neang Phat
agreed that the relationship has improved in the last few
years, and specifically noted military/humanitarian
PHNOM PENH 00000095 004 OF 007
coopration. He recalled the 2006 PACOM assessment as being
the first step in the evolving relationship. He said the
ship visits prove to the Cambodian people, as well as the
RGC, that cooperation is strong. He also noted Cambodia's
contribution to peacekeeping and the U.S.-Cambodia work on
building up a counter-terrorism unit.
Cambodia Urges Greater U.S. Involvement in ASEAN
--------------------------------------------- ---
9. (SBU) MFA Secretary of State Kao Kim Hourn opened
discussion on ASEAN by referring to Cambodia's eagerness for
a U.S.-ASEAN summit, and stated that Cambodia looks forward
to participation in the next U.S.-ASEAN dialogue to be held
in Singapore in May. Kao Kim Hourn reiterated support for a
U.S. Ambassador for ASEAN Affairs, noting Cambodia's own
growing role in ASEAN, exemplified by the fact it would soon
ratify the ASEAN Charter. He requested U.S. consideration to
accession to the Treaty of Amity and Cooperation in Southeast
Asia. He noted Cambodia supported ASEAN's request that the
U.S. and other P-5 nations accede to the Southeast Asian
Nuclear Weapons Free Zone (SEANWFZ) treaty, stating that
China was positively considering accession. He praised U.S.
participation in the Asean Regional Forum (ARF) -- the only
security forum in the Asia region -- noting Cambodia's
support for continued U.S. involvement. Marciel commended
Cambodia's growing role in ASEAN. He noted U.S. pleasure
with our enhanced partnership with ASEAN through the funding
of its secretariat, training opportunities, and promotion of
ASEAN economic integration. He reaffirmed the U.S. desire
for a U.S.-ASEAN summit but explained that it is hard
currently to imagine an acceptable formula.
Cambodia's Position on Burma
----------------------------
10. (SBU) Kao Kim Hourn confirmed that the topic of Burma
dominated the recent ASEAN summit in Singapore and stated
that ASEAN leaders have reiterated that there is a need for
Burma to continue working with the "good offices" of the UN
to open a dialogue with Aung San Suu Kyi and for the regime
to lift restrictions on ASSK; work for national
reconciliation; and transition to democracy. The RGC
believes the UN should play a humanitarian role in Burma. He
repeated Cambodia's position that sanctions will only serve
to hurt the people of Burma and that the Burmese government
"has resources" enabling the regime not to be hurt by
sanctions. Kao Kim Hourn stated that Cambodia supports the
designation of only one UN special envoy to Burma, not the
proposed appointment of a second East Asia summit special
envoy. Finally, he stated that the RGC would be open to a
visit to Cambodia by Senior General Than Shwe if the RGC
"thinks it will help". Marciel expressed appreciation for
Cambodia's efforts on the Burma situation. He also expressed
disappointment that the Burmese government has failed to make
positive developments over the past few months and that the
regime continues to drive downward the economy, and health
and education standards. Marciel reiterated U.S. support for
UN Special Envoy Gambari's initiatives.
U.S.-Cambodia Ties Exemplified By Solid Trade Relationship
--------------------------------------------- --------------
11. (SBU) Ministry of Commerce Director General Sok Sopeak
highlighted growth in the bilateral trade relationship: the
volume of U.S.-Cambodia trade has increased steadily over the
past 15 years from USD 16 million in 1993 to USD 857 million
in 2000 to USD 2.2 billion in 2006. (Comment: Due to
differences in measurement techniques, these statistics may
differ from U.S. figures, nonetheless, U.S. investment seems
to be on the rise. End comment.) U.S. investment in
Cambodia has increased from USD 333 million in 2004 to USD
830 million in 2005 to USD 4.341 billion in 2006. While
U.S.-Cambodia trade remains solid, Sok Sopeak compared
PHNOM PENH 00000095 005 OF 007
Cambodian export growth -- mostly exports of garments -- of
20 percent from 2005 to 2006 to a slowed 10 percent from 2006
to 2007. Cambodia worries about a continued slowdown due to
the impending expiration of U.S. safeguards on Chinese
textiles, and Vietnam's increasing competitiveness since
becoming a WTO member last year.
12. (SBU) Sok Sopeak repeated past RGC requests that the
U.S. decrease duties on Cambodian exports to the U.S. and
specifically urged passage of pending legislation (New
Partnership for Development Act in the House and the TRADE
Act in the Senate) that would do so. Cambodian exports make
up only 0.1 percent of total U.S. imports but duties levied
total approximately USD 150 million to 180 million per year
-- similar to what is paid by the French on a much larger
volume of goods, Sok Sopeak said. In response to
encouragement from Marciel to diversify its exports, Sok
Sopeak stated that Cambodia is trying to find ways to
diversify its industrial base beyond the garment sector.
However, that will take time and for now garments remain
critical for Cambodia's economy.
13. (SBU) Sok Sopeak continued with his message of trade
cooperation hailing the U.S.-Cambodia Trade and Investment
Framework Agreement (TIFA) signed in July 2006 as a milestone
for Cambodia. Sok Sopeak noted Cambodia's accomplishments
since the TIFA signing: passage and implementation of
legislation required under Cambodia's WTO accession
agreement; drafting of 12 laws and 10 regulations or
subdecrees to liberalize and facilitate trade; training for
trade and investment capacity building; and working to
harmonize donor assistance via a mechanism called the Trade
SWAp (Sector Wide Approach). Sok Sopeak encouraged USAID to
support its efforts via the Trade SWAp and highlighted
specifically the need to develop Cambodia's human resources.
Sok Sopeak also highlighted continuing Cambodian engagement
on the Doha round negotiations saying that Commerce Minister
Cham Prasidh would lead a Cambodian delegation to next
month's WTO meeting in Lesotho and, at the encouragement of
USTR, would urge LDCs to support efforts to break the
deadlock currently stalling the round.
14. (SBU) Marciel congratulated Cambodia on its ambitious
trade program stating that this is why Cambodia's economy has
been growing. He restated U.S. delight with the proceedings
at the two TIFA rounds in Cambodia last year, and expressed
appreciation for the RGC's seriousness and openness on
matters of trade and investment. He stated that Cambodia's
economy may continue to build its own momentum, and that more
exports to the U.S. may come with increasing growth. Marciel
emphasized that U.S. companies will invest where environments
are stable. Cambodia's progress in the areas of economic
growth, elections, the KRT, and anti-corruption would add to
positive perceptions of Cambodia and may eventually attract
the interest of more investors.
Expectations for Future Oil and Gas Production
--------------------------------------------- -
13. (SBU) Reiterating Marciel's bilateral dialogue opening
statement, Cambodian National Petroleum Authority Director
General Te Doung Dara stated his impression that the U.S.
wants to see a successful and strong Cambodia, and that
perhaps this is the right time for the U.S. to provide more
assistance to Cambodia. On oil and gas, he stated that if
everything is agreed upon regarding the fiscal terms of
extracting oil and gas, petroleum revenues are expected to
come online in 2010 or 2011. In the meantime, Cambodia needs
to tackle legal, technical, financial and transparency
issues. He acknowledged that the Extractive Industries
Transparency Initiative is one tool in approaching the issue
of resource and revenue management and that, to address the
issue, Cambodia will choose the best mode for Cambodians.
Cambodia is still working out the commercial terms of
PHNOM PENH 00000095 006 OF 007
agreements with CNPA and Chevron through the Ministry of
Economy and Finance. He reiterated RGC awareness that oil
and gas commercial agreements require a "win-win" framework
permitting both business viability and a "good government
take". Te Doung Dara stated that some of the RGC targets for
the oil and gas industry are: efficiency in oil and gas
production; boosting economic growth; domestic energy
security; and environmental protection. Investing in its
people is a high Cambodian priority, he said, quipping that
Cambodia wanted to turn the "black gold into the gold of
human resource." Marciel praised Cambodia for giving thought
to both the positives -- revenues -- that oil production will
bring Cambodia and the negatives -- difficulties in managing
the revenues. He restated that U.S. interest lies in
ensuring that Cambodia gains resources from oil and uses it
effectively to help the Cambodian people.
Economic Roundup
----------------
14. (SBU) Ministry of Economy and Finance Secretary General
Hang Chuon Naron provided an update on Cambodia's economic
position stating that the current figure of 9.6 percent for
Cambodia's 2007 growth is expected to be revised upwards.
Cambodia estimates the country's 2007 GDP at USD 8.4 billion
and per capita GDP at USD 586. The RGC expects its per
capita GDP to reach USD 1,000 by 2015, possibly higher
depending on oil and gas revenues. Hang Chuon Naron quoted a
recent World Bank statistic that Cambodia's poverty rate had
decreased from 35 percent in 2004 to 31 percent in 2007. He
stated that in 2007 several sectors of the economy
experienced growth: agriculture by 4 percent, tourism by 10
percent, garments by 10 percent, the financial sector by 22
percent, and construction by 4 percent (but slowing). He
stated that government revenue increased by 1.5 percent of
the GDP due to implementing public financial management. The
2007 government budget increased by 3.1 percent of GDP, while
the overall budget deficit decreased by 1.5 percent of GDP.
He quoted Prime Minister Hun Sen's recent remarks that the
cash in the RGC coffers is 200 times larger in 2008 than it
was prior to 2003 (both election years). Private sector
credit increased by 51.6 percent to about USD 1 billion.
15. (SBU) Hang Chuon Naron stated that one of the RGC's
economic objectives has been to stabilize its exchange rate
at a time of increased investment and capital inflow. In
2007 the National Bank of Cambodia accumulated international
reserves of about USD 600 million reaching a total of USD 1.8
billion, increased from USD 100 million in 1994 and USD 1
billion in 2006. Inflation was relatively low at 6 percent
despite increases in fuel prices over the year. Hang Chuon
Naron stated the country's economic health is partially a
response to improved economic management due to a public
finance management project piloted last year which will be
implemented gradually. The RGC is also looking to
computerize its budget by 2010. The RGC began tax reforms in
2007 that resulted in a widened tax base and increased tax
receipts of 45 percent.
16. (SBU) On oil and gas revenues, Hang Chuon Naron stated
that it would be problematic if the public sees an increase
in Cambodia's revenues but expenditures do not solve equity
issues. There was a need for improved social expenditures in
rural and poor areas, on programs that address poverty
problems, and investments in infrastructure. He stated that
the National Assembly had recently adopted a Law on Customs
and that the Customs Department is working on drafting
implementing regulations for the law. He stated that the
MOEF issued two of the implementing regulations in December,
with the final regulations already submitted to the MOEF.
The RGC has been working with the World Bank on customs
automation and they are currently finalizing a system
prototype that they plan to deploy in Sihanoukville as a
pilot site starting April 1.
PHNOM PENH 00000095 007 OF 007
Comment: Bilateral Dialogue Results
-----------------------------------
17. (SBU) Marciel initiated closing remarks for the
bilateral dialogue stating that he is pleased that the U.S.
and Cambodia are able to exchange views and find common
ground that will contribute to closer ties between our
countries and people. Cambodia has been an enthusiastic
partner on most of the topics of discussion, and leaves the
door open to explore more issues and areas of cooperation in
the future. The bilateral dialogue was successful in
engaging Cambodia on our most important bilateral issues.
MUSSOMELI