Sunday, June 18, 2017

Legal Concepts - Sort of

Here is the short video clip of an accident that recently happened on a Phnom Penh street. It was picked apart and interpreted on an expat site with the majority saying the Khmer motorbike rider was at fault. I am putting this up here just for the individual viewer to draw their own conclusions although I will make a comment on a few facts.

Here is a still picture:

You will notice that the second is very close to the preceding SUV and there is a moto rider obviously trying to use the gap to get onto the other side of the street. There is no heavy traffic as in rush hour as the small SUV driver later claimed.

This video clearly shows that the small SUV is tailgaiting the larger SUV and speeding up unnecessarily. Rear-ending a preceding vehicle is always considered being at fault, by the way.

One has to bear in mind that Cambodian drivers and especially moto riders act very erratically in traffic. They might just turn this way or that way without using their turn signals, hand signals, or similar to indicate their intentions. When participating in Cambodian traffic this means that one has to be aware of this and act accordingly, e. g. with all caution, whether you are a pedestrian, bicycle or moto rider, or driving a car. In other words you have to take into account what the other participants might do at any moment and be ready to react instantly.

So what do you think given the circumstances and the country with its different culture? It should be quite clear, or is it?

Here is another examples how the law is interpreted and enforced in Cambodia.

The video is not too clear but the passing vehicle clips the car with the camera slightly and just keeps on driving. A classic hit-and-run accident. So the damaged vehicle is in pursuit to catch up with the offender. All of a sudden the window on the driver side of the fleeing Camry opens and a gun appears. A shot is fired and the pursuer gives up the chase and follows slowly. No one was hurt.

Amazingly, the police arrested the culprit in no time at all and, lo and behold, let him go. He happened to be the deputy police chief of a district with the rank of a lt. colonel and also the son of a high ranking official in the Interior Ministry, in charge of the police nation-wide. The district police chief even publicly said he was let go because of his father, a state secretary no less, who intervened. This state secretary even maintained his son had acted in self-defense as he was followed by a car (?????).

After a public outcry officialdom thought it expedient to do something so the offender was demoted to be a traffic policeman and fined a rather puny amount. Let's assume he will be back on his job with his old rank, maybe in another district, in not too distant a time. It never changes - it's been like this for decades.

Thursday, June 15, 2017

To Use or Not To Use the U. S. Dollar

Visitors to Cambodia know that about 80% of all trade and money transactions are conducted in U. S. dollars. Recently the governor of the National Bank, responsible for monetary policies in Cambodia, stated that the continuing use of the U.S. dollar is detrimental to the Cambodian economy. She mentioned as underlying cause the strengthening of the dollar against the Khmer Riel (KHR).

Now this is indeed the case. Officially the KHR is valued at KHR 4080, unofficially it is KHR 4000. Currency markets on the other hand haven't seen a strengthening in the past few months. The two world currencies, the dollar and the Euro, hover pretty much at the same level.

Now how the dollarization of the Cambodian economy is harmful is not really understandable. The major industries are garments/shoes, tourism, construction, and agriculture. The main markets for Cambodian-made garments are the U. S. and Europe. These markets pay in their own currencies, in other words, those capital inflows are not in KHR and will be credited to the manufacturers foreign exchange accounts. The majority of the products used in garments and shoes are imported, meaning they are paid in foreign exchange. Only the labor cost is in KHR; the minimum wage is set in U. S. dollars, so even if the dollar strengthens the manufacturers benefit from this as they exchange their foreign currency at the official rate. They get more Riels for their dollars or Euros. Prices are calculated and billed to foreign customers in dollars. No harm here for the manufacturers.

Tourism brings in foreign exchange, mostly dollars, as tourists usually exchange their home currency in dollars at home or they get it from an ATM here at the official rate. So in effect, any fluctuations tend to hurt the tourists but not the tourism trade in Cambodia. The hotels and restaurants pay in either dollars or riel, so it really doesn't matter to them either.

The situation is pretty much similar in the construction industry as most materials have to be imported, although the last few years have seen an increase in domestic production of cement and bricks. Iron in whatever shape or form is imported, as is gasoline, oil, etc.; only sand is dredged locally. Trucks and any other machinery used is also imported too. All these goods are paid in foreign currency, mostly dollars again. Builders calculate their prices in dollars as well and offer them to the market in dollars or riels, which is irrelevant to the consumer as they will use whatever is convenient for them.

The greatest benefit of the dollarization is for agricultural products that are exported, e. g. rice and rubber. We have the same effect here as in the garment industry. The big difference is that no foreign materials go into the production of their products excepting fertilizer and other chemicals used.

As long as Cambodia has no manufacturing base which would make its products truly made in Cambodia as opposed to being processed it doesn't really matter which currency is used. Almost all items for daily use are imported. Consequently, the trade balance is negative.

Let's not forget: the main reason investors open factories here is for the low labor cost, relative ease of conducting business with the government, and lax enforcement of international regulations.

And finally, the National Bank pegs the KHR to the dollar anyway. On what this is based I haven't fathomed yet - how many dollars are in circulation?  It seems that this discussion is rather moot at this point in time. So  except for national pride this issue is not really important. It remains a mystery what the opposition would gain from abolishing the dollar as an official tender as they recently promised if they were to win the next election.

Thursday, June 8, 2017

The Commune Elections 2017

After a hiatus of one year I now have a little more time as my business does not require my presence as much as before thanks to the invaluable help from my step-children. I will again post comments on the situation in Cambodia and Sihanoukville in particular so readers abroad who still come across this blog in a good number can find out a few things as observed by a foreigner. As I say in the description in right side panel this blog is unbiased.

Now to the subject above. This past weekend local or commune (Sangkat) elections were held. Each province is subdivided into communes for a total of 1645 for all of Cambodia, of which the Cambodian People's Party (CPP) won 1163 and the Cambodian Rescue Party (CNRP) garnered 482. The voter turnout was remarkable with nearly 90% or almost 7 million. The popular vote was 48% for the CPP and 46% for the CNRP. All results are still unofficial so please don't hold me to 100% accuracy.

There seems to be a discrepancy in the shares won vis-a-vis the popular vote but one has to understand that the communes are ruled by the commune chiefs who are elected directly. Depending on the size population of the commune a certain number of councilors is elected but the real power lies with the chief. The commune chief's direct mandate explains the discrepancy between the popular vote and the number of communes won by a party. People vote for persons and personalities in the commune elections, not for parties.

The communes do not collect any taxes directly but are allocated funds by the Finance Ministry. By what method is not quite clear. It is understood that the commune chiefs put in requests for infrastructure projects which are then approved (or not). Since transparency is not very pronounced in Cambodian politics, hard figures are hard to come by. However, the chief's position is important and vital to the community.

In order to understand this one must also look at the structure of the administration. There are 24 provinces (khaet), divided into districts (srok), then into communes (khum), and finally into villages (phum). The communes are called differently in Phnom Penh (khan), and the communes Sangkat. But as far as I know people in the provinces call their communes Sangkat too, only in official documents are the a. m. designations used.

One also needs to understand that governors and district chiefs are appointed by the Interior Ministry, or the governor respectively, which are, of course, firmly in the hands of the CPP. This system ensures the control of the finances stays with the governing party and anybody requesting funds better be a member of the same party.

What is noteworthy in this election is first the high voter turnout, that the opposition party increased their number of commune chiefs from 40 in 2012 to 482 this year; and secondly, according to neutral election monitors the close results in the popular vote. The CPP claims 51% whereas independent sources put it at 48% vs. the 46% for the opposition.

The Prime Minister had warned repeatedly during the campaign that a victory for the opposition would lead directly to civil war. Clearly those scare tactics did not work. It might impress the older generation that still has memories of the time before 1989 but the younger generation does not even know a whole lot about that part of Cambodia's history. After all more than 60% of the population is under 30.

Another surprising facet is the fact that the former leader of the opposition who has been banished into exile did not have any obvious impact, e. g. that the opposition would be weakened by a virtual leaderless party. From the results one might deduce that his role is now perceived as unimportant, possibly redundant as a driving force. It seems that the new president of the party Kem Sokha finally came out into his own. As it happens Sam Rainsy did not have much to offer other than blaming everything on the Vietnamese neighbor anyway.

If this trend continues chances are that the opposition will win in 2018 or at least come very close to it. Since the scare tactics obviously don't work the ruling CPP better come up with a few arguments in that campaign. A firm commitment to stamping out corruption, the introduction of a free health care system for the poor, an affordable health insurance for everyone, a viable retirement plan will resonate much more with the electorate than incessantly harping on having brought peace (which they didn't, the U. N. did), relative prosperity, and stability. Most of the accomplishments came about with foreign aid and loans and know-how rather than through their own initiative anyway. Let's see whether this was a wake-up call for the CPP.

Tuesday, February 23, 2016

Lost Sense of Reality

Today there was an article about Sam Rainsy in The Khmer Times. He warned that the government must finally introduce policies that would ensure the democratic process otherwise the donor nations would curtail or even cut all aid to Cambodia. That is a very dire and unnerving prediction.  The way he wrote this on his Facebook page read like he had concrete knowledge of such plans. Of course, his statement was formulated in such a way that only more educated people would understand the context. It
would certainly not raise a lot of interest in the majority of the population. Aid to Cambodia is an unknown, if not abstract, concept to them, I venture to say. He certainly has no concrete information from any government at all. The PM was in the U. S. for the U. S. – ASEAN meeting and even had a photo op with President Obama.  No announcement regarding aid was made there or in the aftermath. The call for civil liberties, democratic processes, etc. is common at the end of such meetings.

At the same time, and this was published even on the same day as his FB post was reported, the EU issued a statement that it would increase aid to Cambodia by roughly 50%. The EU, that is 27 countries, mind you. So what was the good gentleman thinking when he posted this on his facebook page? Was he just trying to remind people that he is still around and alive? Seeing the situation of Cambodia in terms of realpolitik there must this creeping feeling of futility and that he is being overtaken by events elsewhere and that Cambodia is on the farthest backburner of governments that would be able to exert but a token of influence. He is trying to overcome this, so it seems, by believing  his FB posts can sort of counter this.

Meanwhile the party’s vice president negotiates an entitlement program with the chief negotiator for the CPP, Sar Kheng. So one is trying to open up that much-cited culture of dialogue with a few bread crumbs strewn in for his own benefit while the other one is raising his finger in admonition warning of dire consequences for the people of Cambodia.  Are those two still on the same page, or is one pursuing his own agenda in the meantime? After all, he has to shoulder the brunt of the work. By all rights, he should be the president of the party, now shouldn’t he? In the past one had occasionally gotten the feeling  the Sam Rainsy is a little bit out of touch with what’s going on around him.  Thomas Fuller, the New York Times Correspondent for SE Asia for 10 years, is taking a new assignment and wrote a summary of what’s going on SE Asia. I was waiting to read something about Cambodia there too. Not one word – the main topic was Thailand and the military junta, Laos, Malaysia, and Myanmar were mentioned but not Cambodia . This seems to be symptomatic of Cambodia’s role on the world stage, it just doesn’t count for much. Perhaps, Sam Rainsy might realize this too eventually and instead of looking for support outside Cambodia he should mobilize forces within. And this can only be done if he is here on the ground. But then, prison is a pretty unsavory prospect.

Wednesday, February 10, 2016

Tourism Bust in Cambodia?

This is my personal assessment and prediction of sorts based on my 30 years in the international tourism business and on numbers published by the Ministry of Tourism and some other sources, e. g. The Travel Weekly , and most importantly based on numbers obtained from the booking portals.

There was a brief analysis posted on Facebook recently that in my opinion did not quite make the cut in verified facts.

Cambodian statistics are notoriously unreliable. Sometimes I get the impression it is like reading tea leaves. If you see how they collect numbers for the Sihanoukville market, in which I am an active participant, I suspect it is not much different for the other larger markets, Phnom Penh and Siem Reap.

In total there were about 4.5 million visitors; that includes both business travelers and tourists. The sector showed a healthy increase of 7% over 2014. This is an outstanding result anywhere in the world. Of course, Cambodia cannot expect to have increases as in the beginning of substantial tourist arrivals starting in 2004 or so, with increases of 17%. The old adage applies: low numbers large increases. Now these numbers all have to be taken with a grain of salt. A hefty 75% come from other Asian countries, most notably Vietnam and China. What is of interest to European/American-owned tourist businesses is the number of European and North American arrivals, namely approximately 750,000, with the U. S. leading with 192,000.

Looking at Sihanoukville, the MOT published 1.5 million visitors, of which 400,000 were foreigners, in other words, 1.1 million were Cambodians visiting the coastal city. A rough estimate published was 150,000 Western tourists for 2015. This figure was mentioned in an interview with the local tourism official. Again, how do they count the numbers? Hotels are required to file statistics with the tourism department but very few, if any at all, do.  As mentioned elsewhere there is an oversupply of accommodations available. features 179 properties. There is new construction of hotels going on everywhere in town. These can never be run economically in the foreseeable future with an average length of stay of 3.8 days. This figure is, of course, also somewhat misleading as local visitors usually stay only one night, and Asian tourists between two and four. Among the Western tourists the large segment of backpackers stays from 0 to 1 night in town in order to head off to the islands where they stay longer; there is no statistic on that. They are all counted as Sihanoukville tourists. Older tourists tend to just sample the islands for a couple of nights as they do not want to forgo the comforts of hotel rooms in town. And these people tend to stay longer, from 4 to 7 days. The number of people staying beyond that may be small but some spend the entire cold winter months here, albeit in rented condos if they stay at least 3 months which are usually rented only for that minimum period of time.

Cambodia and Sihanoukville in particular used to be an extension to a SE Asian trip, but that has changed over time. It has now become a destination in its own right, e. g. 3 days Phnom Penh, 4 days Siem Reap, and 4 days Sihanoukville, not counting those that visit the Cardamon mountains, Rattanakiri, etc., the largest booking portal in the world with about 750,000 hotels in their database and with a sophisticated software to steer potential guests to the hotel that meets their criteria, also have the most reliable statistics as far as bookings for Sihanoukville are concerned. They report an increase of 140% from November 2015 to the beginning of February 2016. the second largest for the SE Asian market shows a 17% increase in 2015 over 2014, and a 33% increase for the period November ’15 to Feb. ’16. That outweighs Agoda is probably proportionate to their market share. These facts contradict the common perception that there is a tourism bust in Sihanoukville or in Cambodia in general, because by extension what goes for Sihanoukville as a minor market would apply to the larger markets as well. The complaints about a slow high season are possibly coming from entrepreneurs that contributed to the oversupply of accommodations and gastronomical enterprises.

It is also evident that the age of visitors that stay in Sihanoukville has increased as have families with children during vacation times. The young back- and flashpackers go to the islands as prices in Sihanoukville have increased along with the standard of hotels there, making Sihanoukville more unattractive for this group. However, the islands may undergo at least a stagnation for a while as the adequate beach front land available for the sort of guesthouses now dotting the islands has become scarce, not to mention the evident environmental problems facing the islands already. The uncertain legal situation with soft titles makes development there only attractive for the more adventurous risk-takers.

Sihanoukville has taken a lot of flak online for being a dump with trash all over the place whether it is on Ochheuteal beach or along the streets. Things may be looking up as groups of garbage pickers have been spotted on occasion, and trash containers have been put up. Maybe the Tourist Department is now taking its role more seriously because it is a fact that during the past 8 years or so nothing much has really been done about the deplorable state of the beach in one of the most beautiful bays in Asia. One also has to wonder about the role of the hotel association within this framework. Surely, a lot of their work is done behind closed in sessions with the Tourist Department, but then again, nothing much could seen in terms of results. I worked with the Chamber of Commerce here with about the same results.

The internet is a bane and a boon for the tourist business at the same time. Reports of a crime wave are blown out of proportion mostly by the social media. Handbag snatching is encountered in every poor country in the world.  The same goes for corrupt cops shaking down hapless tourists. And it is true that it used to be popular destination, and to some degree still is, for sex tourists. Their presence, however, is mostly confined to certain parts of town. And yes, countries with such liberal visa requirements also attract the more dubious characters from the Western world. Naturally, retirees come here as their dollar stretches a little more here than in their home country, notwithstanding the current rise in its value against the Euro, the Australian dollar, and the Pound.

And for the outlook; what does it hold in store for the future of the tourist business in Cambodia, and Sihanoukville in particular, in view of terrorism, economic uncertainty, and tighter budgets due to currency factors?

One look at Thailand will show that terrorism scares people off for about 3 months after which time they start coming back simply for lack of alternate destinations. I have seen the same phenomenon in my past experience. Travelers coming to SE Asia is a clientele that usually does not go the Caribbean or Africa. Thailand reports healthy increases in tourist arrivals. Another aspect is that this terrorism and the underlying conflict is central more to the Middle East, Europe and the North Atlantic. Of course, a terrorist bomb on an airliner could hit anywhere. Apart from Malaysian Airlines, and the reasons for the disappearance are still unknown, no Arab or Asian airlines have been targeted. European security measures have become very strict and air travel is actually up despite those potential threats. It appears as though this is not a significant deterrent for people to travel to Asia.

European economies are wavering on the brink of stagnation, except for the German economic powerhouse. This uncertain future of the economy affects, regrettable as always, the lower segment of society, in other words, middle and upper middle class people have less to fear in this respect and will continue to travel. One should not forget that Europeans on the whole enjoy unparalleled vacation time – often 4 and more weeks of paid vacation time per year. Once November rolls around there people get so tired of the dreary and bleak weather they pack their bags and off they go to warmer climates. Of course, the Euro has lost significant value from a height of $1.35 to $1.08 right now, but facts contradict the overall effect of this devaluation. The price of oil has dropped to almost historic levels and this makes itself felt on people's pocketbooks, offsetting the lower parity. People travel just as much. Americans make up the majority of Western tourists. Their economy is humming along and they are not affected by a declining parity. The only problem with Americans is that they have very short paid vacations. This is why they really start to travel seriously once they are retired. One group severely affected are Russian tourists. The ruble is has lost more than 100% against the dollar. This was immediately felt last year and the beginning of this high season did not show any improvement. However, it seems that now that wide-ranging travel restrictions are in place there - Turkey, their most popular destination, is out, the Ukraine is out, government employees are not allowed to travel outside the country - Russians can only go to Asia. There is a slightly brighter outlook for Russian arrivals right now, but only time will tell.

So what would affect Cambodia? Some say it is a one-time destination because if you have seen Angkor Wat once, what else is there. Well, seasoned travelers will tell those people there is plenty more to see, especially in the northern provinces. I have no statistics on hand to show how many repeat visitors come to Cambodia but from personal experience it is around 5% - and that’s only Western tourists. Seeing as there was still substantial growth last year – even if the 7% might actually be only 6% (?) – I personally don’t see that the curve flatlines to 0% or even go below that. The Asian market is by no means exhausted yet and despite China’s problems there are still enough affluent Chinese people with enough disposable income to travel.

And, last but not least, the country continues to enjoy overall growth in all sectors, and is a very safe and politically stable country.  Travel advisories put out by embassies are mostly there to cover their own backsides. A coup like in Thailand will not happen here in the foreseeable future. Cambodia has arrived on the political world scene, notwithstanding Sam Rainsy’s efforts, as evidenced by the recent World Economic Summit in Davos, the upcoming ASEAN-U.S. meeting, and other meeting with world leaders. This enhances the current government’s stature and this always has ramifications beyond politics, e. g. the common perception of Cambodia among other countries’ consumers.