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08PHNOMPEN372 INVESTMENT, TEMPLE CONTROVERSY, DEBT, AND OVERLAPPING CLAIMS HEADLINE BUSINESS DELEGATION MEETINGS

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“152508”,”5/6/2008 7:43″,”08PHNOMPENH372″,

“Embassy Phnom Penh”,

“UNCLASSIFIED//FOR OFFICIAL USE ONLY”,””,

“VZCZCXRO6074

PP RUEHCHI RUEHDT RUEHHM RUEHNH

DE RUEHPF #0372/01 1270743

ZNR UUUUU ZZH

P 060743Z MAY 08

FM AMEMBASSY PHNOM PENH

TO RUEHC/SECSTATE WASHINGTON DC PRIORITY

INFO RUCNASE/ASEAN MEMBER COLLECTIVE PRIORITY

RUEHFR/AMEMBASSY PARIS PRIORITY 0604

RUEHCHI/AMCONSUL CHIANG MAI PRIORITY 0056

RUEHHM/AMCONSUL HO CHI MINH PRIORITY 0139

RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY

RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY 0769”,

“UNCLAS SECTION 01 OF 03 PHNOM PENH 000372

 

SENSITIVE

SIPDIS

 

STATE FOR EAP/MLS, EAP/PD, IO, EEB/IFD/OMA–FREUDENWALD,

STATE PLEASE PASS TO USTR–BISBEE

BANGKOK FOR FCS AND ECON

HO CHI MINH CITY FOR FCS

PARIS FOR UNESCO AMBASSADOR OLIVER

TREASURY FOR CHUN

 

E.O. 12958: N/A

TAGS: EINV, PREL, EPET, PGOV, ENRG, CB, TH

SUBJECT: CAMBODIA: INVESTMENT, TEMPLE CONTROVERSY, DEBT,

AND OVERLAPPING CLAIMS HEADLINE BUSINESS DELEGATION MEETINGS

 

PHNOM PENH 00000372 001.2 OF 003

 

SENSITIVE BUT UNCLASSIFIED. NOT FOR DISSEMINATION ON THE

INTERNET.

 

1. (SBU) SUMMARY: Riding on a wave of increased U.S.

investor interest in Cambodia, 17 corporate leaders

representing nine major companies visited Cambodia May 1-3 as

part of a U.S.-ASEAN Business Council delegation. Prime

Minister Hun Sen used his two-hour-long meeting with the

group to press for progress on two high-priority foreign

policy issues: the pending inscription of the Preah Vihear

temple on the UNESCO World Heritage list and Cambodia\’s

bilateral debt with the U.S. Delegation members and the

embassy believe that successful resolution of the Preah

Vihear issue could open the door to a resolution of the

overlapping claims area in the Gulf of Thailand. End Summary.

 

Preah Vihear Dominates Meeting with PM Hun Sen

——————————————— –

 

2. (SBU) Opening the meeting with the Prime Minister,

US-ASEAN Business Council (US-ABC) President Matt Daley noted

how pleased he was to have a larger number of businesses

joining each successive business mission to Cambodia.

Boeing SE Asia President and former U.S. Ambassador to

Thailand Skip Boyce remarked on the impressive economic

growth he had witnessed in Cambodia over the past ten years,

while Boeing Asia Sales Director Chris Flint invited the PM

to discuss separately ways that Boeing could contribute to

civil aviation development in Cambodia. Liam Benham, Ford

VP, noted that his company was operating the first car

manufacturing facility in Cambodia–a plant modifying pick up

trucks for use as U.S. military ambulances in Iraq. As an

aside, Daley mentioned that the business delegation had just

come from meetings in Thailand and relayed a message from

Thai Foreign Minister Noppadoh Pattama that Thailand does

not/not oppose the inscription of the Preah Vihear temple on

the UNESCO World Heritage list, but would like a joint

Thai-Cambodian management plan for a 4.7 square kilometer

area adjacent to the main temple. Daley mentioned that the

US-ABC took no position on the dispute.

 

3. (SBU) Focusing his attention on Preah Vihear, the PM

asserted that \”In Preah Vihear, there are no overlapping

claims areas–only in the sea.\” (Comment: Clearly, to the

Cambodians, the 1962 ICJ decision awarded the 4.7 square

kilometer area to Cambodia and Cambodia currently occupies

this territory. Therefore, it is \”not overlapping\” and a

joint management plan is not politically or legally feasible.

End Comment.) The Thais are \”going one step forward and two

steps back\” on the Preah Vihear issue, Hun Sen said. He

recalled that he and Thai PM Samak had discussed Preah Vihear

in a side meeting during the March Greater Mekong Summit in

Laos. Hun Sen said he had emphasized that the proposed

inscription covered the main temple site (the area awarded to

Cambodia by the International Court of Justice)–implying

that because the proposal covers only Cambodian territory,

there is no need for a joint management plan.

 

4. (SBU) The Prime Minister painted himself as having the

moral high ground in the Preah Vihear dispute. He also

expressed frustration with recent statements from Thai

defense officials claiming that Cambodia had deployed troops

near Preah Vihear. He viewed these inaccurate assertions as

Thailand \”creating problems.\” Cambodia did not respond to

this provocation, instead waiting patiently until the Thai

government retracted the statement. Finally, Hun Sen urged a

swift resolution of the issue, saying that further delay

endangers the site, which is \”the heritage of humankind.\”

 

Hun Sen Reiterates \”Debt for Development\” Approach

——————————————— —–

 

5. (SBU) Hun Sen appealed for help from the US-ABC in

resolving its bilateral debt with the U.S. The debt is a

state legacy, the PM said, and Cambodia will repay it.

However, Cambodia would like flexibility in how it repays the

debt. Specifically, he requested that the U.S. consider that

the interest rate be set at 3% for the amount outstanding

 

PHNOM PENH 00000372 002.2 OF 003

 

since the original loans were made in the 1970s, with an

interest rate of 1% during the repayment period.

Furthermore, Cambodia would like the repaid monies to be used

for development, similar to the use of Vietnamese loan

payments for education programs there. He noted that he will

have a difficult time selling the Cambodian people on

repaying this debt, which was borrowed by the Lon Nol

government that deposed the still-revered former king,

Sihanouk, father of the sitting king, Sihamoni.

 

6. (SBU) The Ambassador stressed that all countries had to

repay their debts, even when the loans were taken out by a

different government. The bottom line for the U.S.

administration, he stated, is that Cambodia must agree to

debt repayment terms first, before the possibility of using

repaid funds for development could even be considered.

US-ABC staffer Frances Zwenig then noted that the business

council had been working with Congress to secure support for

a debt recycling deal for Cambodia which could be discussed

only after/after Cambodia agreed to terms with the Executive

Branch. Senators Kerry, McCain, Biden, Lugar, and Webb were

particularly receptive, she noted.

 

PM\’s \”Checkerboard\” Proposal for Overlapping Maritime Claims

——————————————— —————

 

7. (SBU) Speaking about the overlapping claims area (OCA) in

the Gulf of Thailand, the PM wanted to consider this issue

separately from the contentious Preah Vihear question–an

approach that Thailand accepted years ago, he said. The

Thais wanted to divide the OCA into strips running north to

south with Cambodia and Thailand sharing different

percentages of petroleum revenues in each strip. Hun Sen

suggested instead that the area be divided into a

checkerboard pattern with each country having sole control of

its assigned blocks. (Comment: The PM asserted that his

plan would be simpler than the shared profits and

decisionmaking suggested by Thailand, but we suspect that his

real motivation is to present a system likely to be closer to

a 50-50 split of petroleum revenues than other proposals

being discussed. End Comment.)

 

Food Prices Hurting Even Cambodia\’s Stable Economy

——————————————— —–

 

8. (U) Meeting with the delegation, World Bank economist

Stephane Guimbert said while many impediments to doing

business such as corruption remained largely unchanged, the

economy has grown at high annual rates because of investors\’

perceptions of increased political stability and investment

security. He added that the government is committed to

managing the macroeconomy well. Despite shocks in oil price,

weather, and the garment sector, the country still managed to

sustain double-digit growth and single-digit inflation.

However, the latest shock–in food prices–has broken this

string of successes, with inflation jumping to double digits

and economic growth likely to slow to single digits.

Guimbert suggested that the idea of a \”rice cartel\” proposed

more than a year ago by Prime Minister Hun Sen in response to

low rice prices, and raised again recently by Thai Prime

Minister Samak in response to high rice prices, may be useful

to help coordinate and stabilize rice prices.

 

Comment

——-

 

9. (SBU) While a few major U.S. companies have already begun

operations in the Cambodian market, this delegation reflects

the state of play more typical for American corporations:

having just a toehold or no presence at all in the Cambodian

market and just beginning to consider expanding into Cambodia

in a serious way. As the fourth business delegation to come

to Cambodia in just over a year, with no previous delegations

in the embassy\’s collective memory in the decades before,

this group also reflected the quickly growing investor

interest in Cambodia. Participants walked away impressed by

the availability and level of interest displayed by the

Cambodian officials, particularly during the two hour meeting

 

PHNOM PENH 00000372 003.2 OF 003

 

with Prime Minister Hun Sen, which Deputy Prime Minister Sok

An, Minister of Economics and Finance Keat Chhon, and other

senior officials also attended.

 

10. (SBU) The meetings also served as a reality check that

intense political debates lie behind some key economic

issues. On the Preah Vihear issue, it seems likely

that–despite Thai and Cambodian statements to the

contrary–the inscription of the temple is linked to

resolving the maritime claims dispute, at least in the minds

of senior Thai and Cambodian government leaders. Both sides

are looking at the issues from political, cultural, and

economic perspectives. It is in the interest of both

countries to find a way to settle these differences; the

challenge for the USG is to find a way to push both countries

towards an acceptable solution. Post agrees with the

observation by US-ABC reps Daley and Zwenig that inscribing

Preah Vihear on the UNESCO World Heritage list, if handled

correctly, actually could open opportunities for the two

countries to work more closely both on cultural issues and

the more lucrative issue of the overlapping claims in the

Gulf of Thailand. Perhaps the upcoming visit to Phnom Penh

by Thai MFA official Weerasak Futrakal to discuss Preah

Vihear will allow the two parties to find a way to move ahead

on this issue.

MUSSOMELI

Written by thaicables

July 16, 2011 at 6:09 am

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