Cambodians must pay nearly 30 percent more for gasoline than Thais,

Vietnamese and Americans. Why?

Gasoline prices continue to rise in Cambodia, and a liter of regular grade in Phnom

Penh now costs a full dollar - 4,100 riel - at petrol stations owned by Caltex, Shell,

Total and Tela.

But if you buy that liter from a roadside seller near the Vietnamese border it costs

3,200 riel, and in Thailand it sells for 28.99 baht - 3,160 riel. That's about the

same as the 77 cents it cost in the United States this week.

In Phnom Penh it may cost a little less than $1 - but not much - from a roadside

seller. Sam Enh, 35, has sold gasoline on the same street corner since 1995, when

he bought petrol for 1,000 riel and sold it for 1,100 riel. Last week he was buying

his petrol from a Sokimex station near Monivong bridge, paying 3,900 riel per liter

and selling it for 4,000 riel. This week Sokimex is charging 4,000 riel.

Chou Touch, 47, has been selling gasoline for a year close to the Olympic Stadium.

She used to buy smuggled gasoline and sold it for 2,300 riel per liter, but now she

has to buy from the gasoline stations. Last year she sold ten 30-liter cans of petrol

a day but now she is losing customers who say they can buy it cheaper elsewhere,

and she sells only two cans a day. By early June she was buying gasoline at 3,750

riel per liter and selling it for 3,800 riel. She is afraid she won't have rice to

eat because of how little money she is able to make.

"If the gasoline price keeps going higher, people will change to bicycles,"

Touch said. "In other countries the gasoline price is lower. Why not Cambodia?"

'Because of the taxes'

Sam Rainsy Party (SRP) National Assembly member Son Chhay said he knows why gasoline

is more expensive in Cambodia.

"The reason the price of gasoline in Cambodia is nearly double that of neighboring

countries is because of the taxes," Chhay said.

Sok Hach, director at the Economic Institute of Cambodia (EIC), said the government

tax on each liter of gasoline is 940 riel - which raises the retail price of regular

by 29.7 percent from 3,160 riel (what it sells for in Thailand) to 4,100 riel.

But the SRP's Chhay says only 20 to 25 percent of the gasoline in Cambodia is taxed

because the rest is smuggled or owned by government officials. He said the SRP is

trying to persuade the government to lower the tax on gasoline to 10 to 15 percent,

which would make petrol prices more comparable to Vietnam and Thailand - and that

would reduce smuggling.

Keo Sok Kheang, Director of Anti-Smuggling and Investigations, also pointed to the

disparate pricing as a motivation for smuggling.

"In Cambodia the price of gasoline is high and other countries near Cambodia

have a low price, so there is smuggling," Sok Kheang said. "We can't stop

smuggling, but we can reduce it."

According to the April 2006 report of the Cambodia Development Resource Institute

(CDRI), gasoline prices were 20 percent higher in March 2006 - at 3,750 riel per

liter - than March 2005.

A Ministry of Commerce official who refused to be named attributed the high price

of gasoline to the higher prices in the international market influenced by the crisis

in Iraq. He said the Cambodian government has charged the same tax on gasoline since

1993 - $343.96 tax per ton of imported gasoline and $140.47 per ton of imported diesel,

but it has always been a higher tax than in Thailand or Vietnam.

"The price of gasoline in Vietnam and Thailand has been cheap for a long time,"

he said. "They tax gasoline less than us. And it is still cheaper even though

they raise the price of gasoline. When the government is taxing gasoline more than

neighboring countries, it causes a lot of gasoline smuggling."

He said the increase in gasoline prices in Thailand and Vietnam had reduced the differential

with the higher price in Cambodia, and smuggling had declined.

In previous years about 5,000 tons of gasoline was smuggled into Cambodia from Vietnam

and 5,000 tons from Thailand every month. That had now dropped to 3,000 a month from

each country.

"Gasoline smuggling into Cambodia is decreasing because the price of gasoline

in Vietnam and Thailand is higher, the border police are making more arrests, and

some smugglers are getting lazy in their illegal work," he said.

The Ministry of Commerce official said he himself had smuggled gasoline into Cambodia

from Thailand and Vietnam as part of a study he was doing.

"Smuggling gasoline from Vietnam, we carried [30-liter] cans of gasoline by

hand," he said. "And smuggling gasoline from Thailand, we used vehicles.

In smuggling gasoline, smugglers have their leader give a sign. When the leaders

see Vietnamese police, they raise a red flag; and when they do not see Vietnamese

police, they raise a blue flag."

Tax 'not the reason'

However, Se So Khorn, an official for the Customs House of the Ministry of Economy

and Finance, said tax was not the reason for Cambodia's high gasoline prices.

He said the government is actually subsidizing the gasoline prices in Cambodia and

that they could be much higher. He said in other countries taxes are based on the

market price but in Cambodia the government bases its tax on the lowest customs value

on gasoline.

"Customs value $309 per ton; the market price may be double but the government

maintains this price," Khorn said. "Usually customs price is based on the

market value."

He attributed Cambodia's high fuel prices to a longer purchase chain.

"We import from Vietnam and Thailand so the price is higher. Vietnam imports

from producing countries but Cambodia imports from Vietnam. How can we sell as cheap

as other countries?"

He also said Cambodia did not have enough money to buy forward stocks of petroleum,

but had to buy day to day, paying a higher price.

"If we need 10 tons we cannot reserve 20 or 30 tons," Khorn said. "The

companies in Cambodia don't have enough money like in other countries."

Sothea, 30, has been a tuk-tuk driver in Phnom Penh for a year. Every day he spends

$3 to rent a tuk-tuk; he usually spends at least $2 on gasoline, and $1 for two meals.

He earns between $5 and $10 per day, the most profit he could make is $4. This is

the only money he has to support his wife, three small children and his mother-in-law

who live together 15 km outside of Phnom Penh. He also tries to help his mother and

sister who live in Prey Veng, 75 km from Phnom Penh.

Last year when he started his business he spent 3,600 riel per liter of gasoline

but now he has to spend 4,100 riel per liter.

"It's difficult this year because we pay for gasoline and it's expensive,"

Sothea said. "We get the same price from the customer so sometimes we explain

to them [about the higher petrol price] but they don't understand."

He has talked to other moto-taxi and tuk-tuk drivers about the higher price of gasoline.

"They say different things; sometimes they say its Iraq...I can't tell you more

because I live in my country, I don't want to get problems," Sothea said. "All

the people want to complain to the government but they are scared."

It is not only transportation that has been affected by the high cost of fuel. Industries

large and small are facing problems.

Heang Sophal, an ice producer in Kampong Chhnang, said he will stop his business

if the price of diesel keeps going higher. He started producing ice in 1993 when

diesel was around $200 a ton; now he has to pay $880 for one ton of diesel, which

he buys from Sokimex.

"The price of fuel is getting higher, and it affects my business a lot,"

Sophal said. "Now it is very hard to make a profit. At least two ice enterprises

in Kampong Chhnang province have closed their business and another two closed in

Pursat province because they could not afford fuel."

In 1993, Sophal's ice cost 3,000 riel but now it costs between 5,500 to 6,000 riel.

He says the higher price of fuel has forced him to raise the price of his ice.

"If I put my price too high, there would be no buyers," he said. "But

if I put my price too low, I will lose."

Sophal said some businesses were looking for other forms of fuel.

"Because of the rising price of fuel, now some entrepreneurs have started using

biomass such as burning wood, or rice husks mixed with fuel to make power. But their

businesses still do not go well because they do not have enough of such resources-wood

and rice husks."