CAMBODIA'S EMERGING MINING SECTOR: FOREIGN

UNCLAS SECTION 01 OF 04 PHNOM PENH 000398 SENSITIVE SIPDIS STATE FOR EAP/MLS, OES--COVINGTON, EEB/ESC/IEC/ENR BANGKOK FOR REO--WALLER, FCS--BACHER, USAID/RDMA--PASCH AND BOWMAN E.O. 12958: N/A TAGS: EMIN PGOV SENV SOCI PHUM CB AS SUBJECT: CAMBODIA'S EMERGING MINING SECTOR: FOREIGN INVESTMENT AND ANCIENT CULTURE CLASH REF: A. PHNOM PENH 113 ¶B. 07 PHNOM PENH 1189 ¶C. 07 PHNOM PENH 1193 ¶1. (SBU) Summary: International interest in northeastern Cambodia's mining potential has increased sharply in recent years with a number of large, well-respected international firms joining smaller domestic and international companies in the search for gold and bauxite. While no major discoveries have yet been reported and some companies are downplaying expectations, both government officials and some other companies have predicted that discoveries are just around the corner and that the sector could potentially spawn "billions of dollars" in investment. Unregulated mining is opposed by some environmental groups, who worry about the effects of toxic chemicals and potential exploitation in some of Cambodia's extensive protected areas. Many representatives of the region's ethnic minority communities, which make up a majority of the population in the region, are fervently opposed, citing both conventional fears such as land disputes and environmental worries alongside culturally rooted concerns such as angering ancestors and inducing lightning strikes, fissures in the earth, or volcanic activity. In one case, residents seized drilling equipment and threatened to use violence if necessary to prevent further drilling. End Summary. Mondulkiri Province: Isolated and Pre-Modern -------------- ¶2. (U) Mondulkiri--the epicenter of Cambodia's nascent mining industry--is the country's largest but most sparsely populated province, with just 40,000 people in 14,000 square kilometers. Eighty percent of residents are ethnic minorities, with the majority being members of the Phnong ethnic group. With poor road networks, limited communication, and abundant natural resources, these communities lived largely independent of the rest of Cambodian society for decades. Ethnic minority members often have little formal education, many are illiterate and unfamiliar with a market economy, a scientific worldview, or political processes. Many do not speak Khmer, although increasing numbers of young people are learning the national language. Protection and veneration of spirit forests, burial grounds, and ancestors figures prominently in their animist beliefs. Mining Interest Surges -------------- ¶3. (U) Small-scale mining began to take off in Mondulkiri and other parts of northeastern Cambodia in the early 1980s as local families attempted to supplement their incomes with minerals (mostly gold) recovered using hand tools and basic methods such as panning. According to a provincial Ministry of Industry, Mines, and Energy (MIME) official in Mondulkiri, mining firms--particularly domestic companies and foreign firms from China, South Korea, and Vietnam--began small commercial operations in the area in 1989. ¶4. (SBU) Major international mining companies have begun exploring in Cambodia in the last two years. Oxiana, an Australian mining firm which runs the huge Sepon copper and gold mine in Laos, began exploring for gold in Mondulkiri in ¶2006. BHP Billiton, another Australian company, began explorations nearly a year ago on a 100,000 hectare concession in Mondulkiri. Representatives from both firms dismissed rumors and Cambodian government suggestions that they have found major, easily extractable deposits, instead insisting that they are seeing interesting results which warrant continued exploration, but no major discoveries yet. Two other Australian firms--Southern Gold and Indochine--are also exploring for mineral reserves in northeastern Cambodia, though these firms are much less well known and are perceived as secretive by many civil society observers. Southern Gold has made repeated predictions of a major discovery. Is Mining A Big Environmental Worry? -------------- ¶5. (SBU) Environmentalists are split over the relative danger of Cambodia's nascent mining sector. A 2004 study from Oxfam America and MIME warns that, if not properly conducted, gold mining can cause cyanide and mercury to leach PHNOM PENH 00000398 002 OF 004 into the environment, severely damaging human and environmental health. In addition, the creation of mining settlements in remote and forested areas contributes to deforestation and reduced wildlife as miners harvest trees to build shelters and support mine shafts, clear land for settlements, and hunt animals. Both Oxiana and BHP Billiton have taken pains to emphasize their social responsibility and commitment to environmental protection, but many environmental groups say that these companies' records in Cambodia are still unproven, and that other mining firms have not acted in environmentally responsible ways. In contrast, some environmental leaders argue that environmental activism in Cambodia is better spent on economic land concessions and other pressing issues, given that no major deposits have yet been found and mere exploration has little environmental impact. ¶6. (SBU) Environmental groups have also raised questions about mineral exploration and exploitation in some zones of protected areas. (Note: The Ministry of Environment reversed a 12-year-old ban in August 2006, and the December 2007 Protected Areas Law permits mining and other commercial activities in two of the four classification zones to be used in protected areas. See ref A. End Note.) Oxiana's concession includes a large swath of Phnom Prich Wildlife Sanctuary and BHP Billiton's territory includes Seima Biodiversity Conservation Area. Indochine's Memorandum of Understanding gives them the right to explore more than half of Virachey National Park, the site of a USD 5 million World Bank environmental project, as well as extensive additional area outside the park. ¶7. (SBU) However, prohibiting development in all of Cambodia's protected lands may not be realistic or desirable. A 1992 review by the UN's World Conservation Monitoring Center, found that Cambodia had a very high percentage of its territory designated as protected--26% of Cambodian territory compared to 16% in Thailand, 11% in the U.S., 10% in Indonesia, and 5% in Australia. And, much of Cambodia's "protected" land is severely degraded and not worth preserving. Seima Biodiversity Conservation Area in Mondulkiri is an example. According to Wildlife Conservation Society staffer Tom Evans, the government created the boundaries of the conservation area by simply following the boundaries of a failed logging concession. As a result, the concession includes large areas of little environmental value. Land Disputes, Lightning, Earthquakes and Angry Spirits are Top Community Concerns -------------- -------------- ¶8. (SBU) The sharp increase in mining interest and exploration has raised significant concerns among Mondulkiri residents. Affected communities and civil society members are concerned by the non-transparent manner in which mining concessions are awarded and their potential environmental and social effects. Far from being included in the licensing process, communities often don't know that concessions have been awarded until exploration or actual mining starts. ¶9. (SBU) The main interest of many minority residents of Mondulkiri is preserving their traditional way of life. A traditionally nomadic people practicing swidden (slash and burn) agriculture in the province's poor soils, they are ignorant of or frustrated by laws that limit their ability to farm where they choose. As a result, ethnic minority communities are experiencing increasing conflicts with local authorities over farming on state-owned, protected, or privately held land. Many ethnic minorities feel that government policy is unfair, restricting their rights to farm where they wish while offering insufficient protections against economic development by outsiders. As one ethnic Phnong NGO leader poignantly stated, "If local people do farming (on protected land),it's illegal. But when companies come to do mining (on protected land),it's development." To other observers, it seems as if the ethnic minorities want to have their cake and eat it, too--flouting the laws when it suits them, but asking for enforcement when the mining companies begin operations. ¶10. (SBU) In a visit by Econoff to Dak Dam village within the BHP Billiton exploration area, residents described their fear, distrust, and powerlessness in the face of mining. PHNOM PENH 00000398 003 OF 004 Already traumatized by past dealings with the notorious Wuzhishan logging concession, villagers told Econoff that they are completely opposed to mining--even exploratory drilling in non-sacred areas of their community. They fear being forced off their land if bauxite is discovered and that the mining could damage the environment or the health of villagers. They also believe that drilling will anger their ancestors whose spirits reside in the area, and may lead to earthquakes, lightning strikes, fissures in the earth, and volcanoes. In fact, the villagers blame one death on BHP Billiton--a local man who was killed by a lightning strike, which the community believes was caused by angry spirits. ¶11. (U) In a separate, well publicized example, in May 2007 residents of Bou Sra village in Mondulkiri hauled two heavy drilling machines away from a new granite mine. These Phnong villagers were angry about the unannounced mining of a sacred mountain they consider to be the birthplace of the Phnong people. They warned that if the miners came back, they would use violence to protect the area. Civil society leaders report that mining operations have not resumed since the drilling machines were seized one year ago. The government has not yet responded to their requests to cancel the mining concession. Local Government Has Little Role -------------- ¶12. (SBU) Sadly, the natural arbiter between the interests of the mining companies and the interests of the communities--local and provincial government--appears to be completely absent from mining regulation. National government officials issue mining licenses without consulting at the provincial or local level. BHP Billiton representative Dave McCracken reports that his company deals only with national authorities, often the Prime Minister himself. A team of four officials from the national MIME office--but no one at the provincial level--have been assigned to work full-time with BHP. ¶13. (SBU) Provincial and local leaders we met in Mondulkiri had little input into or information about the mining occurring in their province. Local NGO and government officials could not tell us how to contact area mines to secure permission for a visit. When we brought a commune councilor with us on an unannounced visit to a Vietnamese gold mine, we were turned away by a self-described Royal Cambodian Armed Forces soldier armed with an AK-47. (Note: The 2004 Oxfam/MIME study reports that military personnel frequently guard mining locations. End Note.) The commune councilor said that, although the mine was in his commune, he had never visited it, and did not know the name or nationality of the company running the mine, what they were mining for, or whether the mine was active. The provincial director of MIME said that environmental impact assessments (EIA) were conducted by an interministerial delegation from Phnom Penh, with provincial officials rarely invited along. The director was unclear about when an EIA was required and whether or not it was available to the public, and said that he had never seen one. Comment -------------- ¶14. (SBU) At this point, increasing interest in Cambodia's mining potential is more an indicator of underlying problems in society and government than an issue in itself. As is the case in hydropower development (ref B) and economic land concessions (ref C),the procedures and effective government representation that should allow communities to have a meaningful voice in development decisions that affect them directly are simply not present. Moreover, safeguards like environmental and social impact statements that should serve as a bulwark against inappropriate development are also missing. With a history of isolation, little understanding of political processes or a modern economy, and concerns ranging from those likely to generate some sympathy from mining companies and the government (i.e. the potential for land disputes and environmental damage) to those alien to a scientific worldview (i.e. increased lightning strikes and volcanic development),it is hard to imagine a community less equipped to be active participants in decisions about mining than Mondulkiri's ethnic minorities. If significant and extractable mineral deposits are discovered, and absent PHNOM PENH 00000398 004 OF 004 significant good governance reform, some Mondulkiri communities may become embroiled in localized and occasionally violent conflicts similar to land disputes taking place elsewhere in Cambodia. MUSSOMELI