Former Australian Ambassador John Holloway made this frank assessement on concluding his period in office.

This is an edited text of a diplomatic cable written on June 9 by Holloway, which was subsequently leaked to the Sydney Morning Herald. The report, stamped "Protected", is titled "Cambodia: The Government and the Khmer Rouge".

Summary

Drift in government, stagnation in the countryside, the army in disarray, the marginalization of Funcinpec and corruption everywhere favor the growth of an insurgency in Cambodia. The Khmer Rouge, backed by the Thais, have demonstrated their capacity to harass the Government. In the wet season they will try to expand their support using the issues of weak government, corruption, the Vietnamese, borders and lack of development. Unless the Government responds positively, the Khmer Rouge will, over time, become a threat to stability: While pressing for reform, Australia must be patient with a peace process that should be measured in decades not in months.

1. The rains are starting to fall in Cambodia as the Government has pushed the Khmer Rouge back to the lines existing in November 1993, when the Royal Government was formed. It has been a dry season typical of the years 1980-1990 with an ebb and flow of fighting in the provinces of Battambang, Banteay Meanchey and Siem Reap and occasional forays elsewhere. The results are the same as most years (except 1989 when the Khmer Rouge took Pailin): The Khmer Rouge controls or influences about 10 percent of the countryside and about 6 per cent of the population. But some Cambodians are comparing this year's fighting with the 1960s, when the Khmer Rouge began their inexorable march towards Phnom Penh. They say that the Khmer Rouge are again the only voice raised against an inefficient government, massive corruption, a hemorrhage of Khmer wealth caused by the influx of skilled Vietnamese, significant ingress on the borders caused by Thailand and Vietnam and a concentration of all development funds on the cities. As the situation worsens, the critics say, more and more people will listen to the message and will be ready to welcome the Khmer Rouge into government.

2. Historically, of course, there are considerable differences between the current situation and the '60s: the choices were more stark in Indo-China as the Vietnam War overflowed Vietnam's boundaries. The Khmer Rouge now is a much smaller movement (we assume a figure of 6-8,000 fighters, but with a financial capacity to hire mercenaries in numbers, as we have seen in recent fighting), but still well-disciplined, committed and not engaged in petty corruption (preferring a larger scale). But it would seem that the present situation remains favorable to growth in their support and fighting strength, particularly among the youth.

3. The strongest card in the Khmer Rouge deck is the continuing weak performance of the government and the Royal Army. The government legislative program continues to be held up by internal divisions. Important laws, such as those on investment, the council of magistrates, immigration and citizenship and the environment are not even before the National Assembly. Squabbling on their drafting within Funcinpec and the CPP, and between the parties, has demonstrated the inability of the co-prime ministers to exercise leadership, even when they are in the country.

[Holloway's comments critical of His Majesty King Norodom Sihanouk have been deleted out of a concern that officials in Phnom Penh might use the accusation of lese majeste to close down the Post, in spite of His Majesty's public statements opposing infringements on press freedom for this reason.]

4. The problem about letting the Cabinet set its own pace on legislation is that the country has no fat to burn while it waits for a new system of law and order, and the body politic is becoming restive. I was alarmed in a recent dialogue with about 100 students from different groups at the University of Phnom Penh to hear them espousing a return to government by the Khmer Rouge. Their line was that the Government, particularly Ranariddh, came to power promising to get rid of the Vietnamese, protect the borders, stop corruption and deliver development. Now, they said with considerable passion, there are more Vietnamese than ever (this is a fixation), the borders are being eroded by the Thais and the Vietnamese, the Government is riddled with corruption and there is no development in the countryside. They estimated that 60 per cent of the student body favored Khmer Rouge participation in government, either through new elections or by appointment by the king. They also estimated that 3 or 4 percent would wish for the Khmer Rouge to take over government in their own right. I realize that student views rarely reflect the wider political public, but I have heard similar opinions expressed by others whose families had suffered at the hands of the Khmer Rouge. It is necessary for outsiders to understand that, for most Cambodians, the Vietnamese are a far more traumatic issue than the Khmer Rouge. The constant evidence of their presence on the streets reminds people of the terror of the Vietnamese occupation. The fact that the Vietnamese government has co-operated in the peace process is lost on Cambodians surrounded by industrious Vietnamese.

5. But the towns are not where the main challenge from the Khmer Rouge is coming from. The countryside is a more serious problem, and the deplorable state of the army further exacerbates the situation. Rural villagers are mainly more scared of government forces than those of the Khmer Rouge. As government forces move through the countryside, unpaid and out of control looting and committing a wide range of crimes, the Khmer Rouge get more potential support. In other cables we have described the plight of army with its 2,000 generals, 10,000 colonels and its ordinary soldiers untrained and lowly paid, if ever. People join the army to use their uniforms and weapons as a meal ticket. At the time of the attacks on the Khmer Rouge strongholds of Anlong Veng and Pailin morale was high. The populace saw the new army as their deliverance from continued insurgency. The total rout of the army by the Khmer Rouge has brought it into fresh disrepute. The senior generals who had tried to make the new army into a focused power source, along Thai lines, are dispirited and appear to be leaning towards the Chea Sim wing of the CPP for protection from demobilization and financial support. None of the leaders of the army have any real feel for basic counter-insurgency tactics: strengthen the heartlands, make them impervious to the insurgents, marginalize the insurgency. They are behaving in the reverse fashion, loot the heartlands and stir up the insurgents where possible.

6. Out in the Cambodian countryside, where 80 per cent of Cambodians live, it is difficult to find any progress. Very little, if any, new money has percolated into the countryside, and the life of rural dwellers is as brutish as ever. The collapse of the monopolies, which at least delivered fertilizer, insecticide and rice seed to the communes, has meant that these things are just not getting into the countryside. German and Dutch donations of fertilizer, worth over US$5 million, sat in warehouses for the last two years because there is no distribution system and the private sector is not interested in a peasantry without any capacity to pay. The fertilizer has now hardened to the point where it can't be used and is having to be scrapped. There is no access to credit, and the rural dwellers remain bowed down with the unofficial tax system used in lieu of salaries by local officials and debts to money lenders. Most families I have spoken with in rural areas owe at least 60 sacks of rice, a debt from which they will never be free. Their health and education opportunities, and even access to potable water, are appalling. Very little aid, except from some of the most intrepid NGOs [non-government organizations], is found in rural areas. This is an environment in which the Khmer Rouge, an extremely rich organisation, thrives. If the situation continues in which the government mandate is not felt in the countryside, the Khmer Rouge fill the gap and the events of the late '60s and early '70s will be replicated.

7. A more recent political phenomenon is the collapse of Funcinpec outside Phnom Penh ...

8. Corruption at every level of society has again become a way of life in Cambodia. Every business deal must have a cut for the relevant minister (or Prime Minister) and every transaction involves a percentage for the relevant official in a situation where most government ministries are barely working (except for the Finance and Interior Ministries), Cambodian public servants on an average salary of $28 per month (an ordinary policeman or soldier receives $14 per month) are only motivated to attend their offices at all by the possibility of making some extra money. Where it is a matter of facilitation, Cambodians are more or less accepting. Where police, army or local officials take bribes or illegal imposts, however, there is high level of resentment building up. It is interesting that the Khmer Rouge appear to have eschewed a tactic of urban terrorism. They possibly believe that the corruption in government will eventually eat a way the government's support base in the cities. They believe themselves to be well on the way to winning over the students and possibly poor of the cities, but they would lose that with acts of urban terrorism. They know that they can never win the middle class, and in 1975 they just engaged in wholesale slaughter of that group (as they probably would again, despite their "business orientation".)

9. The Cambodian government must embark on a two-pronged attack on the Khmer Rouge insurgency, as political reconciliation is not an option with the Khmer Rouge, who have been instructed by Pol Pot to seek full power in their own right. First, the Cambodians must seek to have the Thais close the border. Only part of the problem is the Thai military support for the Khmer Rouge, as well as allowing them to seek safe haven. Thailand also provides continued sustenance for the Khmer Rouge. They live on food and medicine from Thailand, use Thai petrol and all other necessary supplies. It is not enough to stop military assistance and to ban the Khmer Rouge from Thai soil. They also must close the border to Thai traders. They claim, disingenuously, that the border is 600 km long and thus porous. But I have seen that on every trail that could carry a car or truck, there are Thai soldiers at checkpoints on the border. They allow the movement of Thai traders, but only allow certain Cambodians to pass and no foreigners because officially the border is closed. They could, if instructed by their Government, close the border to the illegal (it does not go through Cambodian Customs) trade.

10. Second, and this will only work well if the Thais will close the border, the Cambodian military must start to put pressure on the Khmer Rouge in areas outside their major zones. In a recent exercise in the embassy, we attempted to plot areas of Khmer Rouge influence. Apart from the two major zones around Anlong Veng and Pailin, there is a pattern of "leopard spots" across central and western Cambodia (it is interesting that the Khmer Rouge cannot find a foothold in the east, as they cannot use the Vietnamese border in the same way that they use the Thai border). From the Wilkinson kidnapping we have learned much about life within one of these leopard spots. We get a picture of the Khmer Rouge establishing themselves as a needed benefactor in the midst of dire poverty, but then quickly moving into a draconian pattern of warlordism: Taxing, punishing and conscripting. These "leopard spots" are containable and must be acted against unless they become a spreading virus in the province.

11. During the forthcoming wet season, while the government forces are marooned in their barracks playing cards, the Khmer Rouge will send out cadre on foot through the mud into remote villages to sit and talk with villagers and ascertain their needs. Sometimes these needs are for protection from government troops, in which case the Khmer Rouge cadre will return with weapons and mines to protect the villagers in return for a permanent placement of cadre in the village. Those villages will become "no go" villages for the Government (and the start of another "leopard spot"). Other villages might require seed rice or draught animals. The government provides no similar service (although the new Australian Agricultural Extension Project will hopefully go some of the way to meet this need), and government servants are unlikely to match the commitment of the Khmer Rouge. In this way, the Khmer Rouge would hope to extend their influence and gain fighters. A village might willingly exchange some of its young men in exchange for assistance: and the young men would happily accept the status which a uniform and a gun gives in Cambodia.

12. What can the Government do to recapture the initiative against the Khmer Rouge? First, it must try to speed up reconciliation within the coalition and persuade all sides that it is in their interests to make the coalition work, not just exist, the Chea Sim/Sar Kheng wing of the CPP must be engaged and brought out of its laager. It is not enough to deal with the Hun Sen wing. The government must reform the army, starting off with its structure and then addressing training, pay, equipment etc. It must also put money and effort into rural development (the Ministry of Rural Development is headed by an urbane Parisian Khmer doctor who rarely ventures outside Phnom Penh. The ministry has few funds and barely exists in Phnom Penh, let alone outside). It must engage donors in encouraging aid into the rural sector. More than half of Cambodia's budget comes from aid sources, but this is being encouraged by Cambodian bureaucrats and ministers to be channeled into projects in and around the capital. None of these things are beyond the capacity of the present Government, which contains many capable individuals. They only need to see the value of working for a common cause.

13. Australia is seen as something of a sounding board on Cambodia, not only by other countries but also by Cambodians. The world generally believes that Australia has a special feeling for developments here and watches our reactions closely on all matters. This makes it particularly important for Australia to continue to hold its nerve on Cambodia. We did this during the dark days before the elections and were vindicated. If we take a longer view of the peace process than the short time frame allowed by the media, some local politicians and some marginal donors like the British, Germans and Canadians, I believe we will again be vindicated.

14. The path of the peace process will continue to be rocky, but Australia has a very real role in keeping Cambodians and key donors on track. Every statement or reported remark by Senator Evans on Cambodia is reported in the local media and discussed by ministers. I have been interested to hear echoes of Minister [of International Cooperation and Pacific Affairs Gordon] Bilney's [recent] statements.. being fed back into the system (when it seemed nobody was listening). Secretary Costello's frank remarks to the Defense Minister about the need to reform the military before any country would be really interested in defense aid had a galvanizing effect on that minister, who said nobody had ever explained this to him. He used the statement to start a process, which is currently in full flight, of downgrading all ranks and reducing the number of generals, as well as other reforms. Cambodian ministers are often seeking our advice and we shoud ensure that messages from ministers are answered promptly and with a personal touch, Australian comments, both written and spoken (and the pressure to facilitate Senator Evans's recent visit cannot be underestimated), can be franker than with many other countries, and can be guaranteed to be influential. We should consider using this rare capacity we have to influence the peace process and not be too discouraged by the mess we see around us in Phnom Penh today.

15. Assistance to the military, particularly in the training area, could be extremely valuable in eventually clearing up one of the outstanding running sores of the region. Of course, the strategy for such assistance would have to be carefully planned and predicated on reform within the RCAF and be seen as part of an international effort. But it would be consistent with Australia's history. We provided considerable assistance to the then Malaya during the emergency (and since) and assisted in the Thai strategy to free the north-east of Thailand of the CPT [Communist Party of Thailand], and, of course, contributed in a major way in Vietnam. The Vietnam experience should not, as it has with the US, sour Australian willingness to assist a neighbor against an insurgent force.

16. In the civil aid area, our strategy will be enhanced by adding a poverty focus, particularly for rural areas. While we have already agreed to target malaria and polio, major scourges of the remote areas, and are doing some work with maternal health, and our agricultural research project will eventually have down stream benefits, our program could perhaps address the needs of the rural poor more directly. I would suggest opening another "window" for voluntary organization participation in the program, with project selection criteria being strictly tailored to rural poverty. A continuing stake by NGOs in Cambodia helps to maintain a high level of Australian community, and bipartisan political, approval of government policy on Cambodia.

17. In the above areas, and in the trade and economic fields, the cultural field and in many fields of endeavor, Australia has effectively maintained its objective of comprehensive engagement in Cambodia. It would be a shame to see us either "run out of puff" or lose our nerve here. The peace process in Cambodia will continue to be an important test for the region for many years to come. Australia should play its part.

The text of this cable was supplied courtesy of the Sydney Morning Herald.

John Holloway, now an advisor attached to the Foreign Ministry, declined to comment when approached by the Post.

We would like to stress that this cable has been published with the intention of enriching and furthering the debate about Cambodia's future. There is no intention to offend or cause damage or distress to any concerned party.