CAMBODIAN PM LAUDS US-CAMBODIAN TIES; WILL VISIT

UNCLAS SECTION 01 OF 02 PHNOM PENH 000109

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EAP FO, EAP/MLS, EB/IFD/OMA

E.O. 12958: N/A
TAGS: PREL EFIN PHUM CB BM
SUBJECT: CAMBODIAN PM LAUDS US-CAMBODIAN TIES; WILL VISIT
BURMA IN MAY

REF: PHNOM PENH 42


1. (SBU) Summary. In a January 22 meeting with visiting
PDAS Stephens, PM Hun Sen praised improvements in
US-Cambodian ties over the past year. He spoke at length
about RGC reform efforts, saying that economic growth and
political development can move forward together. On
Cambodia's bilateral debt with the U.S., Hun Sen
characterized the two sides as being close to an agreement,
and urged further discussions. The PM informed Stephens that
he will visit Burma in May at Rangoon's invitation, and
promised to meet with the Ambassador at a future time to
discuss the visit. End Summary.

Cambodia's Economic Picture Rosy; Reform Efforts Less So
-------------- --------------


2. (SBU) PM Hun Sen thanked PDAS Stephens for visiting
Cambodia and agreed that bilateral relations on are an
upswing and greatly improved with the opening of the NEC.
The PM thanked the USG for all assistance provided,
particularly counterterrorism support, and stressed that CT
cooperation should remain strong over the long term. His
government, the PM continued, is committed to continuing
reforms to generate economic growth and a higher living
standard for the population. Growth estimates for 2006
remain preliminary but are likely to be approach 10 percent
once agricultural data are available and factored in. Hun
Sen said that Cambodia needs to continue double-digit growth
figures for the next five years, and acknowledged that
continued growth at that level will depend on RGC commitment
to reforms, especially combatting corruption. Elections for
commune councils in April 2007 and general elections in July
2008 are on track and will not be delayed, he added, although
the costs of managing elections are high. If another party
wins the election, the PM promised a smooth transition as the
only way to avoid the problems Cambodia's neighbors have
suffered, he quipped. Over the past 500 years of Cambodian
history, said Hun Sen, the country's instability centered on
the lack of an outlet for popular discontent or criticism of
the government. That is why his government is committed to
democracy and the freedoms it supports, as the Cambodian
people have suffered enough in recent times.


3. (SBU) PDAS Stephens thanked the PM for his overview of
the bilateral relationship and expressed appreciation for RGC
help on CT issues; she applauded the PM's recognition that
economic growth and political development can go
hand-in-hand, and economic growth does not have to precede
political development. She urged the PM to not be satisfied
with elections that simply meet the standard of previous
elections but to meet even greater expectations among the
Cambodian electorate and the international community. She
further urged the Cambodian government to conclude an
agreement on its bilateral debt with the United States. PDAS
Stephens encouraged the PM to consider the Millennium
Challenge Corporation (MCC) as a platform for future USG-RGC
cooperation, and stressed the importance of a strong
anti-corruption law and good governance program.


4. (SBU) On the debt issue, the PM responded that Cambodia
and the United States are "very close," but encouraged
further talks with the USG before concluding an agreement.
He said that the Ministry of Economics and Finance has
reported that the RGC and the USG have narrowed their
respective positions while Cambodia and Russia remain "far
away." Hun Sen mused that he must pay for the sins of his
predecessors by assuming the Lon Nol era debt, but
acknowledged that it is his government's responsibility -- as
are all debts incurred under previous Cambodian governments.
He noted that Cambodia has resolved its prior debts with many
countries and will try hard on the debt owed the USG.
Stephens underscored again that the RGC consider favorably
the pending draft agreement provided to the RGC, noting that
normalization of financial relations between the two
countries would reinforce the positive attitude towards
Cambodia among U.S. policymakers. The Ambassador reiterated
the favorable impression held by USG visitors to Cambodia
over the past year, and urged the RGC to take advantage of
this goodwill and resolve long-standing issues like the debt
to lay the basis for a stronger relationship in the future.


5. (SBU) On anti-corruption legislation, the PM stressed
that the RGC is not ignoring the draft law, but must wait for
legislative action on the draft penal and civil codes.
Despite the absence of legislation, the PM said his

PHNOM PENH 00000109 002 OF 002


government is trying to narrow the opportunities where
corruption may occur -- whether in the forestry, fisheries,
or business/commercial sectors. Ongoing reforms in each of
these sectors will minimize corruption, but the PM
underscored that fighting corruption can only be successfully
addressed over the long term through passage of legislation.
He added that good governance is the backbone of the
government's Rectangular Strategy for development. Stephens
agreed that addressing corruption goes beyond simple passage
of a law, and that what a country does on corruption early on
in its development can form the basis for continued strong
economic performance and mitigation of the plague of
corruption.


6. (SBU) The PM promised continued RGC support on regional
issues, and cited his government's backing of the
Japanese-sponsored human rights resolution on North Korea, as
well as for continuation of the Six-Party talks. PDAS
Stephens thanked the PM for his support on North Korea, and
urged RGC help on the situation in Burma. The PM informed
Stephens that Rangoon had invited him to visit Burma in May;
Hun Sen promised to follow up with the Ambassador regarding
the trip to Rangoon and ASEAN treatment of Burma. (Note:
While the RGC did back the North Korean human rights
resolution in the Third Committee, they voted against the
Burma resolution. End Note.)

Comment
--------------


7. (SBU) Despite the PM's insistence that his commitment
to reform remains as strong going into an election cycle as
it did at the beginning of his mandate in 2003, we (as well
as many others in the donor community) are unconvinced of RGC
reform efforts. Both the Bank and the IMF have noted a
slowing in RGC enthusiasm for reforms in public
administration; anti-corruption efforts have stalled and
there has been little RGC movement to stem land
confiscations. Some contacts within the RGC stress that the
international community must be patient; that following the
2008 elections, the PM will make personnel changes and there
will renewed focus on reform programs. Others say that such
reassurances precede every election, and that the RGC always
moves slowly on reforms that impinge on the CPP's hold on
power. We look forward to further discussions with the PM
regarding his trip to Burma, and would welcome Washington and
Embassy Rangoon suggestions as to how best the PM can promote
democratic progress during his visit. End Comment.


8. (U) PDAS Stephens cleared this message.
MUSSOMELI