Cash-strapped Cambodia eyes black gold

So why then are development experts wringing their hands? The list of developing nations ruined by the "resource curse" is a long one, many say.

Over the past 35 years, per capita incomes in countries with a dominant, nonrenewable resource grew two to three times slower than those of resource-deficient countries, according to one paper prepared by the Overseas Development Institute.

Many diplomats and NGOs in Phnom Penh worry that the oil and natural gas – which could start flowing as soon as 2009 – could reverse more than a decade of poverty alleviation and transform Cambodia into a full-scale kleptocracy.

Nigeria is the textbook case of what could go wrong, according to the UNDP.

It raked in more than $450 billion in oil money over the past 35 years, yet 60 percent of the population lives on less than $1 a day and the country is carrying a $30 billion debt.

It may be possible to head off such a dire fate, but only time will tell. Soy Sokha, economic adviser to Cabinet Minister Sok An, said: "It's too early to think about using the revenue for education or public health. We must go step by step."

But revenue planning, experts say, is exactly what's needed. If not properly managed, resource booms create inflation, which can drive down the value of foreign currency and reduce the competitiveness of other domestic products on world markets, experts say.

The phenomenon is so common it's even got a nickname: "Dutch disease," so named because that's what happened in the Netherlands when it discovered large reserves of natural gas in the North Sea in the 1960s.

Time and again, experts say, resource revenues have also eroded the links between government leaders and the people they serve. Since the government is no longer dependent on taxes to finance its operations, leaders start to feel they have no obligation to the people, according to the UNDP and World Bank. Violence often becomes the means of protecting the wealth of a small oil oligarchy.

Foreign economic advisers operating in Phnom Penh have long tried – with limited success – to convince the government to deal with the structural problems that predispose a country toward the resource "disease."

Here, corruption is a major problem and transparency is a constant challenge. The National Assembly and Senate have shown little ability to exercise effective oversight on budgetary matters. "Without a fundamental shift in the role of the state," the UNDP report warns, "it's unlikely Cambodia will realize its potential."

But the good news is that some developing nations have managed to avoid the "curse." Indonesia reduced its poverty rate by 86 percent and tripled its per capita income between 1975 and 1990, according to the UNDP.

But, says Chea Vannath, former president of the local Center for Social Development, if action isn't taken soon, the results are only too predictable: "The poor will become poorer and the rich will become richer."

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