Cambodia’s discovery of oil has raised both hopes and concerns for the impoverished country, with many observers warning that the Kingdom could fall victim to the infamous “oil curse,” an affliction that often strikes resource-rich but underdeveloped nations.

Perhaps the most famous example of this phenomenon, and one that is referenced as a worst-case scenario for Cambodia, is the African nation Nigeria, where billions of dollars in oil revenue have simply disappeared.

Cambodia’s own struggle with rampant corruption – it is considered by many to be one of the most graft-prone countries in Asia – figured highly in an international oil and gas conference hosted by the Kingdom in March that drew hundreds of diplomats, government officials and development agencies.

During the meeting industry experts bluntly told Cambodia to “eradicate corruption” or risk losing out on potentially hundreds of millions of dollars in oil and gas revenues.

Luluk Sumiarso, director general of oil and gas for Indonesia’s Ministry of Energy and Mineral Resources, said that after the archipelago discovered oil, “we had to implement good governance. We had to eradicate corruption, or reduce the practice, in the government.”

He also urged Cambodia to sign the Extractive Industries Transparency Initiative (EITI), which requires governments and companies to disclose their financial records relating to oil, gas or mining deals.

Acknowledging the risks of sudden wealth

Since energy giant Chevron struck black gold more than three years ago off the country’s coast, Cambodian officials have acknowledged the potential pitfalls associated with this hydrocarbon windfall.

Prime Minister Hun Sen has repeatedly vowed that any oil wealth would be used to help raise Cambodia out of poverty, but has also downplayed potential revenues, saying it would be “premature” to begin estimating the size of the country’s hydrocarbon reserves.

Most recently, Hang Chuon Naron, secretary general of the Ministry of Economy and Finance, said that “oil can be a sunset or a sunrise” amid mounting concerns that the sector could overshadow Cambodia’s other key industries like agriculture or garments, a risk that is known as “Dutch Disease.”

One suggestion made at the March conference for managing Cambodia’s new-found oil wealth would be to channel the revenues into a special fund to be invested for the long-term benefit of future generations, as Norway and East Timor have done.

“Our fund is now $2 billion and we expect it to be $10 billion in a few years,” said East Timor’s secretary of state for natural resources, Manuel de Lemos, adding that the fund has strict accounting procedures.