Friday, February 29, 2008

A Look at Corruption and How to Combat It

Transparency International (TI) released its latest report on the Global Corruption Barometer for the year 2007. Cambodia appears on place 162 out of 179, with several countries sharing the same place. As in past years it is again among the lowest-ranked countries in the world.

As usual, outcries of outrage from all quarters of the Cambodian Diaspora and other observers of the conditions in Cambodia accompanied the release of the report. The common people in Cambodia probably haven’t taken notice at all. Unfortunately, they have accepted corruption as a fact of life. They don’t like it, but they have come to live with it. In part they understand the reasons and the causes at least for those ‘petty’ bribes in commune offices or the shakedowns by the policeman on the corner.

When people hear figures of $320 to $500 million lost due to corruption they believe all this money disappears in government officials’ pockets. A detailed substantiation, however, has yet to be published. At the present time these figures are nothing but pure guesswork, plus it needs to be taken into account that this figure would include both the private and the public sector. This is not to say, though, that there is no substance to this claim, but concrete evidence needs to be presented to credibly make the case.

TI does noble work and nobody can or should level any criticism at the organization. TI’s work is objective and impartial and there is no reason at all to question the results as shown in their indices.

But people tend to just skim such reports without looking into the implications of why and how certain countries have such a low corruptions perception index (CPI). One needs to understand the causes and the contributing factors to corruption in order to combat it. Condemnation alone won’t remedy the situation. Berating a government for the endemic proportions of corruption is for all intents and purposes a disservice and won’t solve the problem. Quite the opposite might happen. The government feels attacked and only further digs into its foxhole defending its record, notwithstanding its apparent failures.

If it is any consolation, Cambodia is in the company of some very powerful, much larger, and economically more advanced countries, e.g. Russia or Argentina. Of course, this can be no justification for letting up on the fight against corruption. But this just goes to show, and a look at the world map demonstrates this more than aptly, that corruption is a disease afflicting all but a few countries in the world. Only 8 out of some 200 countries reach a CPI between 9.0 to 10.0, and a further 7 achieved a CPI between 8.0 and 9.0.

When comparing the ranks of individual countries and looking at their past record, it appears that the longer corruption persists in a society the harder it is to root it out. After all, it is easy income for the ones benefiting from it. A culture of corruption has developed on those societies. In the case of Cambodia, corruption has been part of the culture for centuries (David Chandler ‘A History of Cambodia’, John Tully ‘A Short History of Cambodia’).

But another look at the world-map will also reveal that greed is not the only driving force, the fundamental cause is poverty. But since greed is a significant factor, it is sad, though, to see that the poorest countries have the worst CPI, in other words, greed there is most pronounced.

When looking at corruption a distinction between the two basic types must be made – corruption born of greed, and corruption born of poverty.

Although corruption has been around for a long time, the means to pursue it became virtually non-existent during the Pol Pot era; money had been abolished. The subsequent Vietnamese-style Communist regime saw a resurgence on a limited scale. But with the big money rolling in after the 1993 elections, the people in power couldn’t resist the temptation to sideline a good chunk of it into their own pockets, and corruption took off big time.

A typical form involves the awarding of public works or purchase of equipment for public use. The person or persons in charge of procurement ask the supplier to over-bill the government by a certain amount, which is then paid back to the official in cash. If the supplier does not oblige the official(s) they will just turn to a competitor that will oblige.

Government officials also routinely form companies, which are owned by their wives, children, or other family members. With insider knowledge these companies then vie for lucrative government business deals. By the same token, the ‘connected’ businesses and people are the ones holding the best pieces of land, which they bought for next to nothing and are now selling off at huge profits.

Another form involves the awarding of a concession, a land lease, or the sale of a government enterprise. The applying company pays an outright bribe in cash to the official in exchange for favorable terms. The same system applies to government contract bidding processes.

Naturally, corrupt judges who will pass verdicts based on the amount of bribes are one of the most egregious and despicable part of corruption.

Quote from TI’s report:

Cambodians view the police and judiciary as more corrupt than other government and non-government agencies

The second form is the more understandable type caused by poverty.

Quoted from TI’s report:

More than half of Cambodian interactions with police and registry and permit services in 2007 resulted in bribes paid.

Government employees make about $65 - $85 on average per month. The example of a low-ranking policeman will make this abundantly clear. But he is interchangeable with soldiers, nurses, postal workers, employees at the Sangkat, schoolteachers, etc.

He makes $40 a month, on which he needs to support his wife and 2 children. His rent for a typical, rather run-down Cambodian flat is already $45 a month. He also spends about $15 on gas for his moped per month. His food bill runs to about $50 a month. If someone falls ill they don’t go to a doctor, they go to the neighborhood nurse who can provide cheap medicine, or they turn to traditional, oftentimes Chinese, medicine. They buy new clothes only at the time of the Khmer New Year.

His duties vary. Mostly he is posted as traffic police. He shakes down mototup drivers for making wrong turns, or stops right-hand driven vehicles, which are officially banned, and for a little money just lets them go. He said he doesn’t ask for money but takes whatever they give him. His take is about $50 a month.

His wife also has a job. She leaves the house at daybreak to sell cosmetics at the local market, putting in a 12-hour day. She buys these from a supplier who smuggles them in from Thailand, often selling them with a mark-up of only 2-3%, ending up with about a $30 - $50 profit a month; in good months, it can even be $80-$100. She has developed a steady clientele of more well-to-do women. But out of that she needs to pay rent for her very small stall of $25 a month and electrical power of $5-$10 a month to the market operator.

Altogether, this family can barely make ends meet every month. There is nothing left over for savings, for family trips to the beach, for picnics. For fun they go to the riverside, or just stay home and watch TV.

If he didn’t have this extra ‘income’, they would be in dire straits indeed. They don’t have a comfortable life by any stretch in the first place. So given the circumstances he is more or less forced to take those bribes. Morally, he has no compunction about taking them either. Everybody else does it, and it has been a long-standing practice in Cambodia society. People grumble but they live with it.

So would the easiest and simplest solution be just to raise the salaries of all government employees to a level so they could support their families and live a halfway decent life? Yes and no. For a start, though, this would alleviate the most pressing problems the underpaid civil servants face. But it goes without saying that the culture of corruption must be eliminated by a vigorous educational campaign in Cambodian society parallel to the introduction of any reform, otherwise it will produce only a fraction of the intended goal. Before any such measure is to have any effect the creation of a legal framework and environment must precede it to form the foundation from which to work.

But how to pay for it? Currently the government spending equals about 13.9% of the GDP, or (2007) $1,127,000,000.

This breaks down into the following items:

Central administration: $957,932,000
Provincial administration: $169,460,000

According to the projected budget for 2008 wages will constitute

about 3.2% of the GDP or $265,600,000.

Many an observer will quickly point to a possible cut in defense expenditures. With about 6% in defense spending there may be room for some savings, but then, demobilizing a large number of soldiers will only add to the problems in other areas, as most of the de-mobbed soldiers won’t find work elsewhere.

Here are the numbers for the security sector:

Defense and Security: $123,739,000
(Defense Ministry: $ 78,171,000)
(Interior Ministry: $ 45,561,000)

There are no reliable sources on the number of public employees. An inquiry with the government remained unanswered. Sometimes the number of 166,000 civil servants is mentioned, but then there was a report for a pay hike for about 400,000 public workers. The 400,000 would be about 5.7% of the work force. This is a number one can find in countries with highly developed bureaucracies, as in the EU. It appears somewhat high for a country like Cambodia. The 166,000 may not include the military. So if we add 100,000 for the military, we will arrive at 266,000, which we will use in our estimates.

Using the figures above a public employee makes $998 a year on average, or $83 a month. (In comparison a bank teller can make about $200 - $300 a month, in some banks up to $500.)

An adequate take-home pay in order to support a family of 4 used to be $100 a month in the year 2002/3. But those times are long past. With the cost of living increased by an inflation rate of 4.4% through 2007, though personal experience would put this rate more in the vicinity of 10%, $150 - 200 a month would appear to be a reasonable number. Using an increase of roughly $100 or $1200 per year per employee, this would absorb a whopping $319,200,000 of the budget, or roughly 21% of a total national budget of only $1.5 billion. Together with the salaries/wages set forth in the budget already we are looking at $ 585 million. Clearly, this would need to be done in stages.

As it happens, the additional amount is equal to the estimate of money lost to corruption once mentioned by the U. S. Ambassador. If it only were that easy. It would be really naïve to believe that corruption could be eliminated overnight. But, nonetheless and ideally, if the high-level corruption could at minimum gradually be decreased this could largely pay for the overdue increase of public salaries and stop corruption at the lower levels of government.

Poor pay is an ideal breeding ground for corruption – not only in Cambodia. This is why ministerial employees are paid rather handsomely in developed countries. They must remain objective and neutral when it comes to managing other people’s, namely the taxpayer’s, money. By that logic, ministers and state secretaries, and the next level in the hierarchy are paid salaries commensurate with their responsibilities. In comparison, a president of a private enterprise managing about $100 million easily makes $200,000 to $300,000 in industrialized countries.

By that measure, ministers in Cambodia should also make this kind of money, perhaps adjusted according to purchasing power parity, which is roughly 3:1. With all the fringe benefits of their office, their income would then be more than adequate and ought to be an incentive to forgo all other temptations.

There are 31 ministries with 100 ministers and state secretaries in the Cambodian government, including the prime minister. If each earned $200,000 on average, that payroll would be $20 million altogether. Together with the overall government salaries, roughly $600 million will have to be doled out to government employees. That’s a frightening number.

However, if the whole range of measures are taken and enforced firmly, there is a presumption that donor nations will chip in considerably beyond the present $615 million they hand over per year in grants, foreign aid, and long-term loans. Combined with the funds available from the reduction and eventual elimination of corruption and further healthy growth of the economy and increased tax revenues it appears as a feasible undertaking.

With the projected oils revenues as a sort of collateral, persuading and convincing foreign governments will also be so much easier if they are approached with a feasible and practicable plan. But it all hinges on the government’s willingness to go forward with those drastic, in high circles very unpopular, measures.

These remedies are in brief:

· Ensure absolute independence of the judiciary.
· Pass the Anti-Corruption Law with adequate penalty provisions.
· Institute minimum qualifications for each level of government.
· Institute a fair and equitable pay scale according to responsibility.
· Pay normal wages and salaries for government employees, starting at a minimum of $150 a month to be annually adjusted according to the inflation index.
· Pay salaries to state secretaries and ministers comparable to Western salaries adjusted for purchasing power parity.
· Issue strict regulations for the use of discretionary funds by personnel with appropriate authority.
· Institute an Anti-Corruption Government Task Force to enforce, investigate and prosecute violations of the law.
· Abolish cash transactions in public offices, e.g. customs office, and cash payment of salaries.
· Abolish redundant advisory positions for ministers and state secretaries.
· Establish computerized accounting systems in all government offices.
· Establish computerized official documents locked into the accounting system.

Clearly, these remedies require the support of the current nomenclature, that is, the ministers, state secretaries, generals, and big businesspeople, which now all gain from corruption. Although Hun Sen is seen as the strongman in Cambodia, there are two rival factions in his party that are in a sort of Mexican standoff for power. They divided the ministries and staffed them accordingly. So one ministry might have a Hun Sen-loyal minister, but a Chea Sim-loyal state secretary, another one might be staffed the other way around. The powerful and very influential military is equally divided and nothing can be passed and enforced without their tacit consent.

Consequently, even if Hun Sen took the initiative to pass all these necessary measures he would still need the support of the other faction of his party. Conventional wisdom holds that Hun Sen himself really does have the desire and ambition to stop corruption, because his goal is to enter Cambodian history as the founding father of a new nation of prosperity and freedom.

But it remains doubtful whether he even has the support of his own faction for those reforms. This is the simple reason why the long-slumbering law on corruption is still mired in the committees. There is simply too much resistance from the people lining their own pockets.

Watchdog and human rights organizations always call on donor nations to put more pressure on the government to pass those reforms - to no avail so far. Although it is cynical, the donors have come to accept that foreign aid benefits the powers that be first, and the population second; they just can’t cut their foreign aid because that would enhance the plight of an already poverty-stricken people. So they continue to give in the hope that increased material well-being that comes with economic development will eventually lead to better living conditions and the observance and respect of and for human rights.

To paraphrase Barack Obama’s campaign slogan, ‘Yes, it can be done’, or another old saying, ‘Where there is a will, there is way.’

Tuesday, February 26, 2008

Is There an Alternative to Hun Sen?

The signs of an election campaign Cambodian style are beginning to show all over Cambodia, from pennants, bunting, little flags, to party symbols. Hardly a day goes by without some announcement or political statement by the protagonists. Speeches by politicians abound, albeit still without much of substance. Cleaning up the streets seems to be all the rage these days.

Hun Sen, the wiliest of them all, stole the show by persuading some higher-ranking opposition party members to join his party. He confirmed himself that he rewarded them with lucrative advisory positions in his government. He thus conveyed the impression to the population as a whole that the CPP must be the better party when even opposition party members defect the SRP and join the CPP. To the people on the street it is just normal you get a reward if you do something that’s good for somebody. After all, this is the country where you can obtain the title of Okhna from the King by donating $100,000 to the public coffers.

He cited his authority to hire these people as advisers in the face of an outcry by some other opposition politicians. It is rumored there are about 500 such advisers in total at a cost of $24 million per year, which undoubtedly would be a big drain of public funds, especially in the face of roughly half the national budget being financed by foreign aid.

No doubt, Hun Sen is a very controversial figure, berated and condemned by his opposition and most humanitarian organizations for his tolerance of corruption, presumed active participation in violations of basic human and civil rights, shady business dealings, and cronyism, among others. Certainly, his failures and shortcomings are abundant. Foreign governments and their diplomats express their misgivings and reservations in more guarded tones, couched in convoluted diplomatic language. But one has to hand to it to him; Hun Sen has learned how to play this game very adeptly.

But then, Cambodia has seen an economic growth unparalleled by any other country in S. E. Asia, a fact which underlines the donor nations’ contention that economic development and material well-being are the first step in a nation’s development and will automatically lead to better living conditions for everybody and the respect for human and civil rights. Additionally, donor nations no longer engage in ‘nation building’, as the U. S. president once called it. They assist but don’t really want to interfere directly or even meddle in another country’s affairs, especially a country without strategic and economic value. This hands-off policy has sometimes led to tragic consequences, as in Darfur, but those consequences are nowhere near reality in Cambodia, in spite of rampant land grabbing and forced evictions.

Hun Sen follows a time-honored Cambodian political tradition by playing off one power against the other. China has become the largest benefactor of Cambodia. Officials gleefully note that China is the best friend of Cambodia because it helps without any strings attached. Authoritarian China does not pay much heed to human rights either, so what right would they have to admonish other countries? If the West doesn’t want to lose its influence in part of SE Asia entirely they must play along, and play along they do. The donor nations have recognized that Cambodia needs Hun Sen more than it needs a regime change. They are aware of the detrimental consequences of a regime change to the country and its current stability, even if some see it as precarious.

Given the internal structure of the government and the fact that Cambodia is ruled by an oligarchy with Hun Sen at the helm, it is very doubtful there is any one person in Cambodia today that could replace him. He has shown great adroitness in handling and keeping in check both his opponents within his party and the military as well as conveying to the people as a whole that he is the best leader for Cambodia. The resistance any of the other contenders would meet would be too great to overcome. He would most likely be a failure once in office. Hun Sen has achieved progress on the economic front, established political stability, and personal freedom (although with limitations), with promises of more to come.

And the people are listening and they believe him. His message is the most credible one. There is no taste for political upheaval in the population. They just want to go about their lives and try to enjoy it as best as they can. 75% live in the countryside. They see what’s happening in Phnom Penh and the provincial capitals, and they believe and hope that these things will spill over to them sooner rather than later. Corruption is a fact of life for them. History has ingrained it into their minds. Outside the educated urban population, most don't even know the size and loss to the economy caused by it. To them the rich wield the power, and if it means they get richer because of that power, their stoicism accepts this also as a fact of life.

And all these people don’t really see any personality with substance that could lead the country better than Hun Sen on its path to prosperity and eventual more freedom. One runs on an anti-government platform and is seen as too weak by the majority – this includes the recently more affluent population in Phnom Penh. Another one runs on human rights and is dismissed as a non-starter. The royalists are in a shambles. Who else is there?

The Cambodian people also want continuity after the civil war and the turmoil of the past Communist regimes. Half the population is under 21 years of age. They did not experience that past. They have different things on their minds and are following in the footsteps of their Western counterparts in their materialism. With more economic development and wider-spread affluence, current idealistic thinking among the young urban population will wane, and they will be absorbed into the mainstream and become part of the establishment.

As unfortunate and sad as it may be to some, the answer is no. There is no alternative to Hun Sen. Discounting the years before 1993, Hun Sen has been prime minister for 15 years and will most likely continue to head the country for the next 5 years. The more progress he accomplishes in the coming years the longer he will be in power. In Europe there are no term limits and they have seen heads of state serving longer than 15 years, so Hun Sen’s reign is not unique.

Monday, February 25, 2008

Party Politics

Along with past publications on this blog, the following is one of the rare objective commentaries about politics in today's Cambodia.

By Kheang Un - Published in the Phnom Penh Post Feb. 25, 2008

In this regular analysis of Cambodian newspaper coverage leading up to the elections, Kheang Un looks at the CPP’s celebration of 7 January Day, the opposition parties’ responses, as well as campaign activities and the party views of Cambodia’s democracy.

Since 1979, the CPP has celebrated 7 January Day, the day when Cambodia was liberated from the tyrannical Khmer Rouge regime under which close to two million Cambodians were killed. The current celebration differs from those held under the People’s Republic of Kampuchea and the State of Cambodia.

Under the old regimes, people were reminded of the 7 January Day as their second birth and were asked to sacrifice their labor, resources and loved ones to fight to prevent the return of the Khmer Rouge. During this year’s celebration with no further Khmer Rouge threat and with electoral democracy established, the CPP appealed to the general public and participants in the celebration in a different way.

The CPP continues to remind the public that 7 January is the day of their second birth, reminding voters that the CPP saved Cambodians from Pol Pot’s killing. But now the CPP reminds voters that they have also helped to improve people’s livelihood through numerous development projects. Instead of appealing to the public to sacrifice for the country, representatives of the CPP offer gifts to attendees, a gesture indicating that the CPP continues to care for Cambodians, acts that their rhetoric asserts are different from the empty promises made by other political parties. Out of gratitude to the CPP, Cambodians should be obligated to cast their votes for the party. (Emphasis added.)

Opposition parties, particularly the SRP, portrayed 7 January, 1979 as the day of Cambodian subordination to the Vietnamese. This argument is aimed at overseas Cambodian communities more than domestic constituencies. Anti-Vietnamese and anti-CPP sentiments remain strong among overseas Cambodians. (Emphasis added.)

In the era of global interconnectedness, overseas Cambodians have become one of the pillars for financial and political support for opposition parties. They contribute financially to the resource scarce opposition parties. Politically, overseas Cambodian communities help raise awareness of opposition parties’ causes among the government and elected representatives in their new countries. By lobbying European and North American politicians, overseas Khmers have generated some political and moral support for opposition causes.

The SRP realizes that 7 January remains a major factor for the CPP’s electoral legitimacy, but it is certainly fading given Cambodia’s recent demographic change.

Approximately 70 percent of Cambodians were born after January 1979 and have no memory of Khmer Rouge atrocities. These peoples’ expectations are arguably higher than that of their parents’ generation who might agree with using the Khmer Rouge regime as a baseline of comparison to assess the country’s level of development.

SRP is instead looking for new issues that will resonate with younger voters. This helps to explain the SRP’s urban campaign for city clean-up projects. The SRP’s rubbish collection campaign in urban areas is an effort by the party to capitalize on its popularity among urban constituencies and particularly young voters.

The CPP is well aware of SRP’s strategy and strength among youth and urban voters. Two CPP strategies are noticeable in this regard. Responding to demographic change and mobility, the CPP has also increased its activities in Phnom Penh. Recently, the CPP leadership also focused on youth organizations and on strengthening its grassroots activities in urban areas.
This month’s news stories reported active CPP campaigns in Khan Meanchey and Reasey Keo where CPP party leaders recruited, met with, and donated gifts to new supporters. Such practices, which opposition parties and civil society organizations have characterized as vote buying, were previously employed in rural areas but not in urban centers.
This month the media also reported the alleged defection of senior Funcinpec members to the CPP, raising the possibility of the eventual disintegration of Funcinpec.

The fading fortune of Funcinpec reflects the nature of a weak party unable to institutionalize. It had been a personality-based political party tied to its former leader, Prince Norodom Ranariddh. While the party had declined steadily under Prince Ranariddh’s leadership, his expulsion has led the party to possible eventual disintegration.

The current Funcinpec leadership maintains that the party remains relevant and has vowed to increase its grassroots activities. The leadership has pointed to the CPP’s public support for a
CPP-Funcinpec coalition partnership, a commitment that was reiterated during the CPP’s January 2008 extraordinary congress.

Interestingly, given Funcinpec’s internal quarrels, Prime Minister Hun Sen stated that Funcinpec had to have at least one seat in the National Assembly if it wanted to remain a CPP coalition partner. Given its internal quarrels and continuing declining popularity, what benefits will a Funcinpec-CPP coalition be able to provide to its senior members? Fading hope within its leadership circle might help explain the rate of past defections and rumors of further defections.
Norodom Ranariddh remains unable to return to Cambodia. His appeal to the Supreme Court remains in limbo while his appeal for international intervention was met with silence.
Despite this setback, the prince continues his “mobile phone campaign,” outlining his vague, impossibly idealistic, policy platform promising rapid economic development, including universal availability of electricity and equitable distribution of resources. While accusing Sam Rainsy and Kem Sokha of selling out to the CPP, Prince Norodom Ranariddh continues to appeal to SRP and HRP to form a united front with NRP against the CPP.

Another important point raised in this month’s media coverage is the fact that the SRP is sending mixed messages. On the one hand, it continues to accuse the CPP of manipulating the electoral process and distorting the process of decentralization. On the other hand, Sam Rainsy made optimistic remarks concerning the direction of Cambodian democracy.

Sam Rainsy was reported to have stated that Cambodia’s democracy has reached a stage of maturity. This statement, Rainsy claimed, was based upon Prime Minister Hun Sen’s promise that there would be a peaceful transfer of power if the CPP lost the coming elections, and that the military would not intervene in political affairs.

Given the CPP’s superior organization, resources, and active and sustained grassroots organizations, and the constitutional requirement for a simple majority for government formation, it is widely believed that the CPP will win. (Emphasis added)

However, the SRP believes that some people voted for the CPP out of fear of political instability. They think that if they vote not out of fear but from their conscience, the SRP would fare much better in future elections, leading Cambodia toward a two party system dominated by the CPP and the SRP.

Therefore, Sam Rainsy’s remark could be read as an effort to send a comforting message to the public that they should not fear that a victory by the SRP means political instability, or possibly civil war, because the CPP would not concede to electoral defeat. Thus, his statement is a way to attract more votes.

If Sam Rainsy and the CPP sincerely believe that Cambodian democracy has reached maturity wherein the politics of give and take, and of possibility of exit and reentry are accepted by all players, then Cambodia has crossed a critical threshold of young democracy.

Kheang Un, is Assistant Director of the Center for Southeast Asian Studies, and an Adjunct Professor at the Department of Political Science, Northern Illinois University.

Kheang Un's observation about overseas Khmer is underlined by Internet publications, such as KI-Media, Khmer Intelligence, and Khmerization, which all offer anti-government, pro-SRP propaganda, offering a very skewed view of affairs. These forums do not reach any sizable number of Khmer in Cambodia itself. Their efforts are, therefore, largely lost on the 'real' Khmer. They are preaching to the choir. Khmer in Cambodia do not, in general, worry too much about whether or not this holiday is their second birth, or who did what to whom, as long as they see there is progress in their lives. And, Sam Rainsy's many comments notwithstanding, there is progress across the board. Much is left to be done, and many things are done very arbitrarily, but this can only be accomplished in a joint effort.

Friday, February 22, 2008

Cambodia - Thailand – Vietnam – Romania – Bulgaria -- A Comparison of 5 Economies

Part I - Introduction

Recent interviews by both Hun Sen and Sam Rainsy referred to the economic comparison between Cambodia and its neighbors. While Hun Sen limited himself to pointing out stability as the main incentive for foreign investors, Sam Rainsy in typical fashion lambasted the government for wasting time and comparing the better situation in both Thailand and Vietnam to Cambodia’s deplorable situation, and quite nonsensically and illogically, wanted to compare Cambodia to industrialized nations, indicating how far Cambodia lagged behind.

Here is a real comparison with hard facts using data from the CIA World Factbook. There are other publications available, especially from the World Bank, the IMF, and the ADB. Their research projects gather data from common sources so the compressed form of the CIA data was used.

Two former Communist countries, satellites of the former Soviet Union, were also used in this comparison to see what can be accomplished with the support from nations in an economic union, such as the EU. Both countries were impoverished, and to a certain extent still are, but after shedding their past are solidly on the way to full economic and political stability. Both joined the EU in January 2007.

Let us precede this, however, by a World Bank report on the state of the economy in Cambodia of November 2007.

This can be downloaded at

For the reader’s ease it is quoted here:

Begin quote

CambodiaCambodia’s economic performance continues to be solid. After three years of double-digit growth, the economy is expected to grow 9.5 percent in 2007, underpinned by strong exports, private investment, and consumption. From a sectoral point of view, growth continues to rely on apparel, tourism, agriculture, and construction.

In 2007, garment exports continue to expand (by an expected 17 percent) and tourist arrivals are estimated to grow 25 percent.The outlook for 2008 is positive, with growth projected to ease only slightly to 7.5 percent, and several factors should also help sustain rapid growth over the medium term. These include large foreign direct investment inflows (6 percent of GDP or more over the last 3 years), the possible exploitation of underground resources (oil, gas, and mining), sound macroeconomic management and progress in structural reforms, despite some uncertainty due to the national elections scheduled for July 2008.Cambodia’s narrow export base remains vulnerable to external developments however.

The garment sector faces renewed competition, including when ‘safeguard’ measures on China are lifted by the end of 2008. The exploitation of underground resources also needs to be managed cautiously from a transparency, fiscal, and macroeconomic point of view if Cambodia is to benefit fully from their potential.External developments have supported rapid growth and good macroeconomic performance in 2007.

The nominal exchange rate remained stable, and foreign reserves continue to grow, possibly reaching US$ 1.4 billion by the end of 2007, worth 2.3 months of imports of goods and services. Despite pressure from high world oil prices, the current account deficit (excluding transfers) fell to -7.2 percent in 2006 (from -9.4 percent in 2005) and is expected to stabilize at -7.5 percent in 2007.Broad money increased by 38 percent in 2006 and is projected to grow by 49 percent for 2007, reflecting rapid economic growth and an increasing demand on the financial sector. Inflation has been picking up from a low 2.8 percent in 2006 to a projected 6.0 percent in 2007, even though this has not yet triggered concerns about price instability.

The financial sector is growing: 23 commercial banks are operating with a total lending-to-deposit-ratio of 68 percent (up from 64 percent in 2005), and 17 micro-finance entities providing an estimated US$ 50 million of credits to micro and small businesses.Several important laws were passed in 2007, including laws on anti-money laundering, combating terrorist financing, the issuance and trading of non-government securities and on bankruptcy. Cambodia obtained its first sovereign debt rating from Moody’s and Standard & Poor’s (a B-plus, i.e. two notches lower than Vietnam).

There remain many issues nevertheless. Cambodian entrepreneurs still find it a challenge to access credit - the interest rate for a one-year term loan is above 15 percent. Issues such as concentration of the financial sector and the exposure of the main banks to a single sector (real estate) and, in some cases, a few large customers also require the central bank to step up its efforts to supervise the rapidly-growing banking sector.

The fiscal deficit before grants declined from 3.4 percent of GDP in 2005 to 2.5 percent in 2006, and is projected to further decrease to 1.5 percent in 2007. The joint IMF/WB debt sustainability assessment concluded that Cambodia had only a “moderate” risk of debt distress (against a high risk in the previous assessment). The ratio of total revenue to GDP grew from 10.3 percent in 2005 to 11.5 percent in 2006, with a projected increase to 11.8 percent in 2007 and 12 percent in 2008.

This increase owes mainly to the modernization of collection processes.Spending remains stable, at 13.7 percent of GDP in 2005, 14.0 in 2006, and a projected 13.3 and 14.9 in 2007 and 2008. Public investment remains low, while recurrent expenditures are slowly increasing in an attempt to adjust public wages to more effective level.

Despite good progress, Cambodia is still a highly aid-dependent economy with per capita aid of US$ 33 on average between 1999 and 2005. Foreign financing accounted for 33 percent of total spending in 2006. In June 2007, the first Cambodia Development Cooperation Forum was organized and, in a break from the Consultative Group meetings it replaces, it was chaired and fully prepared by the Government. An aggregate pledge of US$ 700 million was received from donors, targeting activities in line with the National Strategic Development Plan (NSDP) for 2006-2010.In July 2007, the World Bank approved a first Poverty Reduction and Growth Operation, which has been prepared jointly with a group of donors that are expected to co-finance it.

The first area of reform is public financial management, a reform area led by the Ministry of Economy and Finance (MEF) and involving some 13 donors, which has been instrumental in delivering some of the progress on the fiscal side.Budget execution is improving, pilots programs for budgeting have been introduced, procurement is being strengthened, and public financial management increasingly relies on the banking system.

Progress in this area is also underpinned by an innovative Merit-Based Pay Initiative in MEF. Second, in the area of private sector development, some progress is being made toward improving trade facilitation and investment promotion.The customs law and the law on concessions were passed in 2007. Electronic customs declaration through a Single Administration Document (SAD) will be piloted at the end of 2007 and rolled out in 2008. The new ASEAN Harmonized Tariff Nomenclature (AHTN) with 8,314 tariff lines and average un-weighted tariff of 14.3 percent was implemented in July.

There is also progress on land and natural resource management, such as rapid land titling and initial steps toward disclosure of economic land concessions, although substantial challenges remain.Cambodia has also made progress in social sectors in recent years.

The national poverty rate fell from 47 to 35 percent between 1994 and 2004. In education, the gross primary enrollment rate (124 percent) has risen faster than the low-income country average (104 percent) while the gap in adult literacy relative to other East Asian countries has fallen. But completionand literacy rates still remain low.

The infant mortality rate fell from 95 per 1,000 live births in 2000 to 66 in 2005. HIV prevalence also appears to have fallen remarkably. The notable lagging indicator is the maternal mortality ratio, which remains high and unchanged.

End quote

This flies squarely in the face of Sam Rainsy’s public remarks. It appears that if Sam Rainsy continues with his government-slamming and xenophobic rhetoric he will be considered as nothing more than a demagogue who doesn’t have his facts straight.

To make one thing clear, this blog is not anti-SRP or even anti-CPP, for that matter. These are just comments, assessments, sometimes explanations and interpretations – as objectively as possible.

All the information contained in this comparison is in the public domain and is available to anybody with some Internet knowledge. It is truly amazing that the political parties in Cambodia have not been able to formulate an economic program using the most fundamental data. They have access to officials in the World Bank, International Monetary Fund, and the Asian Development Bank. With their help they ought to be able to shape economic policy for the next 5 years.

Hopefully, they don’t think the population is too ignorant and wouldn’t understand anyway. There is a growing number of better-educated young people who would certainly appreciate more transparency in political programs, and who are a decisive factor in the next election. The parties must take the young generation seriously or it might come to haunt them, perhaps not next July but in 5 years time.

Social policies hinge on funding possibilities; these can only materialize with a sound economic policy, its consistent execution, and the resultant development. The tremendous growth rates of the past few years have been very promising signs and should encourage the government to take more drastic steps towards reforms of the social and judicial sector.To be continued.

Cambodia - Thailand – Vietnam – Romania – Bulgaria -- A Comparison of 5 Economies

Part II - Data

GDP (purchasing power parity)
$ 25.79 billion$ 222.5 billion$ 519.9 billion$ 86.73 billion$ 246.7 billion
GDP (official exchange rate):
$8.3 billion (2007 est.)$53.61 billion (2007 est.)$211.1 billion (2007 est.)$30.41 billion (2007 est.)$86.84 billion (2007 est.)
GDP - real growth rate:
9.1% (2007 est.)8.2% (2007 est.)4.3% (2007 est.)6.1% (2007 est.)5.9% (2007 est.)
GDP - per capita (PPP):
$1,800 (2007 est.)$2,600 (2007 est.)$8,000 (2007 est.)$11,800 (2007 est.)$11,100 (2007 est.)
GDP - composition by sector:
agriculture: 31%agriculture: 19.4%agriculture: 10.8%agriculture: 8.1%agriculture: 7.9%

industry: 26%industry: 42.3%industry: 45.3%industry: 31.3%industry: 35.6%

services: 43% (2007 est.)services: 38.3% (2007 est.)services: 43.8% (2007 est.)services: 60.7% (2007 est.)services: 56.5% (2007 est.)
Labor force:
7 million (2003 est.)45.73 million (2007 est.)37.12 million (2007 est.)3.44 million (2007 est.)9.35 million (2007 est.)
Labor force - by occupation:
agriculture: 75%agriculture: 56.8%agriculture: 49%agriculture: 8.5%agriculture: 31.6%

industry: NA%industry: 37%industry: 14%industry: 33.6%industry: 30.7%

services: NA% (2004 est.)services: 6.2% (July 2005)
services: 57.9% (2nd qtr. 2006 est.)services: 37.7% (2004)
Unemployment rate:
2.5% (2000 est.)4.2% (2007 est.)1.7% (2007 est.)8% (2007 est.)4.5% (2007 est.)
Population below poverty line:
35% (2004)19.5% (2004 est.)10% (2004 est.)14.1% (2003 est.)25% (2005 est.)
Inflation rate (consumer prices):
4.4% (2007 est.)8.1% (2007 est.)2% (2007 est.)7.8% (2007 est.)4.6% (2007 est.)
Investment (gross fixed):
20.3% of GDP (2007 est.)33% of GDP (2007 est.)27.4% of GDP (2007 est.)27.6% of GDP (2007 est.)26.9% of GDP (2007 est.)
revenues: $915.5 millionrevenues: $18.28 billionrevenues: $43.61 billionrevenues: $16.62 billionrevenues: $52.96 billion

expenditures: $1.101 billion (2007 est.)expenditures: $19.79 billion (2007 est.)expenditures: $48.18 billion (2007 est.)expenditures: $15.18 billion (2007 est.)expenditures: $56.85 billion (2007 est.)
Agriculture - products:
rice, rubber, corn, vegetables, cashews, tapiocapaddy rice, coffee, rubber, cotton, tea, pepper, soybeans, cashews, sugar cane, peanuts, bananas; poultry; fish, seafoodrice, cassava (tapioca), rubber, corn, sugarcane, coconuts, soybeansvegetables, fruits, tobacco, wine, wheat, barley, sunflowers, sugar beets; livestockwheat, corn, barley, sugar beets, sunflower seed, potatoes, grapes; eggs, sheep
tourism, garments, rice milling, fishing, wood and wood products, rubber, cement, gem mining, textilesfood processing, garments, shoes, machine-building; mining, coal, steel; cement, chemical fertilizer, glass, tires, oil, papertourism, textiles and garments, agricultural processing, beverages, tobacco, cement, light manufacturing such as jewelry and electric appliances, computers and parts, integrated circuits, furniture, plastics, automobiles and automotive parts; world's second-largest tungsten producer and third-largest tin producerelectricity, gas, water; food, beverages, tobacco; machinery and equipment, base metals, chemical products, coke, refined petroleum, nuclear fueltextiles and footwear, light machinery and auto assembly, mining, timber, construction materials, metallurgy, chemicals, food processing, petroleum refining
Industrial production growth rate:
12% (2007 est.)10.5% (2007 est.)4.6% (2007 est.)5.5% (2007 est.)8% (2007 est.)
Electricity - production:
134 million kWh (2005)51.33 billion kWh (2005)124.6 billion kWh (2005)45.7 billion kWh (2006)56.91 billion kWh (2005)
Electricity - consumption:
206.6 million kWh (2005)45.46 billion kWh (2005)117.7 billion kWh (2005)37.4 billion kWh (2006)48.17 billion kWh (2005)
Electricity - exports:
0 kWh (2005)0 kWh (2005)642 million kWh (2005)7.8 billion kWh (2006)5.224 billion kWh (2005)
Electricity - imports:
82 million kWh (2005)0 kWh (2005)4.419 billion kWh (2005)0 kWh (2006)2.321 billion kWh (2005)
Oil - production:
0 bbl/day (2005)375,000 bbl/day (2005 est.)310,900 bbl/day (2005 est.)3,661 bbl/day (2005 est.)122,700 bbl/day (2005 est.)
Oil - consumption:
3,700 bbl/day (2005 est.)254,000 bbl/day (2005 est.)929,000 bbl/day (2005 est.)108,000 bbl/day (2005 est.)236,000 bbl/day (2005 est.)
Oil - exports:
0 bbl/day (2004)399,200 bbl/day (2004)225,700 bbl/day (2004)51,000 bbl/day (2005 est.)92,510 bbl/day (2004)
Oil - imports:
3,585 bbl/day (2004)238,400 bbl/day (2004)893,400 bbl/day (2004)138,800 bbl/day (2004 est.)181,100 bbl/day (2004)
Oil - proved reserves:

600 million bbl (1 January 2006 est.)291 million bbl (1 January 2006 est.)15 million bbl (1 January 2006 est.)955.6 million bbl (1 January 2006 est.)
Natural gas - production:

3.836 billion cu m (2005 est.)22.73 billion cu m (2005 est.)407,000 cu m (2005 est.)11.22 billion cu m (2005 est.)
Natural gas - consumption:

3.836 billion cu m (2005 est.)31.23 billion cu m (2005 est.)5.179 billion cu m (2005 est.)17.46 billion cu m (2005 est.)
Natural gas - exports:

0 cu m (2005 est.)0 cu m (2005 est.)0 cu m (2005 est.)0 cu m (2005 est.)
Natural gas - imports:

0 cu m (2005)8.497 billion cu m (2005)5.179 billion cu m (2005)6.234 billion cu m (2005)
Natural gas - proved reserves:

184.7 billion cu m (1 January 2006 est.)400.7 billion cu m (1 January 2006 est.)5.703 billion cu m (1 January 2006 est.)96.41 billion cu m (1 January 2006 est.)
$4.1 billion f.o.b. (2007 est.)$49.91 billion f.o.b. (2007 est.)$143.1 billion f.o.b. (2007 est.)$19.77 billion f.o.b. (2007 est.)$39.62 billion f.o.b. (2007 est.)
Exports - commodities:
clothing, timber, rubber, rice, fish, tobacco, footwearcrude oil, marine products, rice, coffee, rubber, tea, garments, shoestextiles and footwear, fishery products, rice, rubber, jewelry, automobiles, computers and electrical appliancesclothing, footwear, iron and steel, machinery and equipment, fuelstextiles and footwear, metals and metal products, machinery and equipment, minerals and fuels, chemicals, agricultural products
Exports - partners:
US 53.3%, Hong Kong 15.2%, Germany 6.6%, UK 4.3% (2006)US 21.2%, Japan 12.3%, Australia 9.4%, China 5.7%, Germany 4.5% (2006)US 15%, Japan 12.7%, China 9%, Singapore 6.4%, Hong Kong 5.5%, Malaysia 5.1% (2006)Turkey 12%, Italy 10.4%, Germany 10%, Greece 8.2%, Belgium 6.8%, France 4.3% (2006)Italy 17.9%, Germany 15.7%, Turkey 7.7%, France 7.5%, Hungary 4.9%, UK 4.7% (2006)
$5.3 billion f.o.b. (2007 est.)$51.95 billion f.o.b. (2007 est.)$121.9 billion f.o.b. (2007 est.)$28.79 billion f.o.b. (2007 est.)$63.16 billion f.o.b. (2007 est.)
Imports - commodities:
petroleum products, cigarettes, gold, construction materials, machinery, motor vehicles, pharmaceutical productsmachinery and equipment, petroleum products, fertilizer, steel products, raw cotton, grain, cement, motorcyclescapital goods, intermediate goods and raw materials, consumer goods, fuelsmachinery and equipment; metals and ores; chemicals and plastics; fuels, minerals, and raw materialsmachinery and equipment, fuels and minerals, chemicals, textile and products, basic metals, agricultural products
Imports - partners:
Hong Kong 18.1%, China 17.5%, Thailand 13.9%, Taiwan 12.7%, Vietnam 9%, Singapore 5.3%, South Korea 4.9%, Japan 4.3% (2006)China 17.7%, Singapore 12.9%, Taiwan 11.5%, Japan 9.8%, South Korea 8.4%, Thailand 7.3%, Malaysia 4.2% (2006)Japan 20.1%, China 10.6%, US 6.7%, Malaysia 6.6%, UAE 5.6%, Singapore 4.5% (2006)Germany 15%, Italy 10.6%, Turkey 7.2%, Greece 6.3%, China 5%, France 4.9%, Romania 4.5% (2006)Germany 15.2%, Italy 14.5%, Russia 7.8%, France 6.5%, Turkey 4.9%, China 4.3% (2006)
Economic aid - recipient:
$698.2 million pledged in grants and concession loans for 2007 by international donors (2007)$1.905 billion in credits and grants pledged by the 2006 Consultative Group meeting in Hanoi (2005)$171.1 million (2005)$742 million (2005-06 est.)$914.3 million (2004)
Reserves of foreign exchange and gold:
$1.662 billion (31 December 2007 est.)$17.16 billion (31 December 2007 est.)$75 billion (31 December 2007 est.)$13.8 billion (31 December 2007 est.)$37.06 billion (31 December 2007 est.)
Debt - external:
$3.98 billion (31 December 2007 est.)$24.41 billion (31 December 2007 est.)$58.6 billion (30 June 2007)$29.29 billion (30 June 2007)$85.86 billion (31 December 2007 est.)
Stock of direct foreign investment - at home:

$26.27 billion (2006 est.)$69.06 billion (2006 est.)$20.86 billion (2006 est.)$40.69 billion (2006 est.)
Stock of direct foreign investment - abroad:

$5.605 billion (2006 est.)$345.8 million (2006 est.)$278 million (2006 est.)
Market value of publicly traded shares:

$139.6 billion (2006)$10.32 billion (2006)$32.78 billion (2006)

Cambodia - Thailand – Vietnam – Romania – Bulgaria -- A Comparison of 5 Economies

Part III - Annotations

It must be pointed out that the inclusion of Bulgaria and Romania has no real significance in the comparison, as the underlying conditions are vastly different. They were only included to obtain some kind of perspective as to how other formerly decrepit Communist economies have fared after the collapse of the Soviet Union.

The numbers practically speak for themselves. Cambodia is the smallest country of the three SE Asian nations here with only a little over 14 million people (latest estimate) versus the more than 85 million in Vietnam and 56 million in Thailand. Efforts to achieve progress in a smaller poor country are disproportionately more difficult due to the lack of adequate human resources.

Nevertheless, Cambodia has made great strides in the past 8 years or so reaching a per capita GDP of $1800 (it used to be in the $200 to $500 range before) compared to the $2600 in Vietnam. Given the disparate underlying conditions for development in both countries, this is a rather good result.

The agricultural sector is Cambodia is far greater than in both neighboring countries, almost one third of the GDP. Since subsistence farming makes up more 60% of that, this would clearly be one sector that needs the government’s close attention. It is obvious that most of these farms are family-run and have no employees.The transformation of the agricultural sector becomes even more imperative when seeing the 75% of the work force being employed there.

It is, therefore, somewhat difficult to really measure the labor force/industry ratio in Cambodia’s case where 75 % of the labor force contribute 31% to the GDP, versus 56.6% of the labor force contribute only a mere 8.7 % to the GDP in Vietnam, and 49% of the labor force contribute 10.8% to GDP in Thailand.These figures, of course, demonstrate the large concentration in all three countries in rural areas. Bulgaria as a smaller industrialized country shows a preponderance of the service sector, whereas in Romania the production forces appear to be evenly distributed.

Cambodia shows a 26% share of industry, which is mostly garment processing, a 43% share in the service industry, which is mostly the tourism and hospitality sectors, whilst Vietnam has a large industrial base almost equivalent with Thailand. Even the two semi-developed Southeastern European countries Bulgaria and Romania do not have such a high percentage of industry.

The unemployment rate of 2.5% in Cambodia appears to be very low. This would translate into 175,000 people without job, although it is known that only a very small portion of the about 300,000 school graduates entering the job market per year can find jobs. This figure obviously does not take into account that the subsistence farmers and their families, for all intents and purposes, are at least to some extent part of the unemployed work force. They are not reflected in that low figure. Similarly, the number in both Vietnam and Thailand seem rather low, especially in rural areas. The cause may be inaccurate record keeping capabilities in all three countries. Bulgaria and Romania with a functioning bureaucracy show more realistic numbers.

Similarly, the population below the poverty line appears somewhat low too. Lately, the poverty was drawn at $2/day income in Cambodia, which would make it roughly $60 a month. That may just be enough in the countryside to feed and clothe your family but in the cities this is barely sufficient to feed you, not to mention housing.

The inflation rate has been rising steadily because of exorbitant oil prices in all countries.The share of investment in Cambodia is still too low. Both Vietnam, which spends 33% and Thailand with 27.4% far outdo Cambodia in this very important sector.

Cambodia has fewer agricultural products in comparison to its similarly structured neighbors. By adequate education of farmers and implementing appropriate programs the country could greatly increase its rice production and become a seafood exporter.

Today Cambodia is basically a dual-industry economy, tourism and garments, which outweigh the rest by far. The natural rubber industry could be expanded considerably. There is bauxite for mining, which is virtually untapped. The fishing industry can be transformed into a substantial segment by using more modern methods and by tapping into the resources of the Tonle Sap, the Mekong River, and the coastal waters.

Though industrial growth rates have been impressive, the further development of existing industries and the establishment of more diverse industries in line with today’s world markets, such as light machinery, automobile parts, computer parts will be key to averting the dependence on the dual-industry structure.

As known, Cambodia has a long way to go in electrification. Most of the power plants are fossil fuel driven, polluting the environment. Alternative power sources need to be developed. The latter sector has created jobs on a large scale in other countries.

Oil is the scourge of today’s world. With increasing motorization and power needs, oil consumption will continue to rise in the foreseeable future. The oil reserves and exploitation due to begin in 2011 will alleviate the problem considerably, if handled for the benefit of the Cambodian people as a whole.

Cambodia will become an oil-exporting country, although small in comparison to other oil-producing nations. Nonetheless, oil will contribute substantially to the GDP. With the modernization of the natural rubber processing plants, rice, and seafood products, an enlarged export range will gradually transform the outlook and shape of the Cambodian economy.

Currently, the U. S. is the most important export-trading partner. In paraphrasing the saying, ‘If the U. S. sneezes, Cambodia will catch cold’, it is clear that this dependence must be abandoned completely. The EU constitutes a vast market for all Cambodian products. This needs to be cultivated. Both Bulgaria and Romania, as members of the EU, export most of their commodities to other EU nations. This is a clear advantage of a common market. ASEAN is aiming to emulate some aspects of the EU.

With the advent of oil exploitation and exportation the era as an economic aid recipient should come to an end.

Cambodia will establish a stock exchange in 2009. The shares of which companies are to be traded there remains to be decided. So far there is not one public company registered in Cambodia. Only foreign registered and traded companies make direct foreign investment there. The trading of their stock on the exchange won’t benefit the Cambodian economy at all. It is very doubtful whether the current larger Cambodian companies will go public which entails making public balance sheets, earnings, etc. Most observers don’t see this happening very soon. It can be assumed that the stock exchange will only be another vehicle for foreign speculators to earn non-taxable profits abroad.

Cambodia - Thailand – Vietnam – Romania – Bulgaria -- A Comparison of 5 Economies

Part IV


Going back to opposition leader Sam Rainsy’s negative remarks on the comparison of Cambodia to Thailand and Vietnam, one can see that overall the Cambodian economy has not done too badly, all things considered.

As mentioned before, the underlying conditions in Cambodia before 1993 were vastly different from the ones in Vietnam and Thailand.

Vietnam had won their war of unification in 1975 and received generous help from the Soviet Union and East Germany. Cambodia was plunged into something reminiscent of the Dark Ages with the annihilation of the elite, the destruction of the entire economy, abolishment of money, and a workable administration. During the time of the Vietnamese occupation in the 1980s, efforts at establishing an administration in the country were half-hearted at best and self-serving at worst, as Vietnam had to cope with its own problems caused by the same events in their economy as the Soviet Union. Both were faltering, which led to a gradual introduction of more liberal economic policies in both countries. They had no resources to aid a suffering country like Cambodia, and the aid that was forthcoming was symbolic at best. (See also John Tully, “A Short History of Cambodia”.)

Faltering economies occurred in all former Soviet satellite countries. But both Romania and Bulgaria had a stronger industrial base even in Communist times, so their economic rebirth would not begin at point zero, and, consequently could develop much faster. Additionally, these countries had the vast European market in their front yard. European businesses were eager to utilize the proximity of those production facilities. Average wages in those countries in the early 1990s rivaled those in Vietnam and China in attractiveness.

Thailand had a 30-year head start. Conventional wisdom holds that Cambodia would today be on a par with Thailand had it not undergone those tragic experiences of the Pol Pot terror and the subsequent ruinous Soviet-Vietnamese inspired Communist reign.

The turning point for Cambodia came with the elections in 1993 but no overnight miracles could be expected. This was going to be a long and arduous process, which would have failed without the foreign that started pouring in from mostly Japan, the U. S., France, and others.

The country’s leadership was under-educated with no experience in running a democratic, pluralistic country and a free-market economy. It was no wonder that they were overwhelmed with the task, and seeing those huge amounts of money pouring in, succumbed to the temptation of helping themselves to a good share of it. The base of the government was precarious. Each party focused on strengthening its own power base rather than on the development of the country. This ended abruptly in 1997 with the removal of Ranariddh as first prime minister. Unfortunately, this also led to an erosion of confidence of foreign investors, which was not to be restored until after the 2003 elections. The surge in foreign investment, mostly from China and South Korea, did not come until after 2003. The major growth in the Cambodian economy has occurred since then. So, in effect, the first 10 years of liberty were indeed wasted on internal struggles. But there is not one blameless party in that conflict, any finger pointing is counterproductive. Each party contributed its share to the instability, be it intransigence on positions, or simple hunger for power and personal wealth.

Endemic corruption is blamed for most of the woes of today’s Cambodia. Given that some $320 million a year is lost due to that, and since that has been going on for almost 15 years, this is a sizable amount that could have been invested in the development of the country. It is probably safe to say that approximately 20% of the national budget disappears in a black hole. Remedies or cures for this disease are not easy to find. This problem will remain the greatest obstacle to the further and more rapid development of Cambodia.

Of course, tax revenues must reflect the actual incomes earned. The majority of income earners in Cambodia does not pay any income tax. A rigorous tax reporting and collection system must be implemented.

There remains a wide field for programs to enlarge the base of the economy, and as a result, create the necessary jobs. Incomes need to be spread more evenly among all segments of the population, most significantly in rural areas where about 75% of the population lives.Cambodia needs to create programs for a number of existing industries in order to achieve better growth and stability, like tourism, natural rubber, cement, rice, tropical fruits, spices, as well as attract new industries to create a stronger base, e. g. computer parts, light machinery, automobile parts, tire production, cell phone production.

The wage structure in Cambodia, even if increased to a minimum wage of $150/month for factory workers, is still very competitive with Vietnam and China. All other SE Asian nations have higher averages wages already. By extending incentives to large international companies, e. g. rent-free land for 5 years, long-term leases thereafter at low rent, no taxes for the first 3 years, etc. these industries will certainly be interested in setting up production in Cambodia. These incentives would ideally be on a gliding scale tied to the number of jobs created. What the government would lose in tax revenues initially would be compensated by the creation of jobs.

But for this to happen, all parties must cease to play at politics and begin to formulate and execute policies.

Sunday, February 17, 2008

Hun Sen and Sam Rainsy on Stability in Cambodia

Comments on a report gleaned from the Radio Free Asia as published and translated by KI-Media

In connection with the report of increasing land price in Cambodia currently, several observers and Cambodian politicians point out that this is due to peaceful stability in Cambodia.Yesterday, Prime minister Hun Sen confirmed that political stability and social security constitute the importance leading to fast progress and to all sorts of development for Cambodia, he also compared (the current situation) with the land price during the various war time inside the country.

It is certainly true that stability is a prerequisite for a growing economy, which in turn will attract many investors from abroad. Cambodia itself does not have a broad capital basis. As a consequence, it needs foreign capital to come into the country.

Hun Sen said that people could reject the fact that land price increase in Cambodia is not on par with the rise of land prices in the world: “I talked in Takeo, one politician replied back that the land price increase is due to the price increase on the world market.”

Nothing could be further from the truth. Although real estate prices differ vastly from country to country, there is usually a trend in a region. But even a market such as the U. S. shows great disparities in the value of land. The land prices in Cambodia are currently driven by sheer speculation fueled in part by the large presence of South Korean and Chinese investors. In the end, a simple market mechanism will determine whether this rise in land prices is justified – supply and demand.

On his part, opposition leader Sam Rainsy is happy with the Cambodian people to receive such boon from this rise of land price, however, he also warned about other numerous negative impacts, including the social instability in the near future also.Sam Rainsy said: “Those who claim that the increase of land price is his achievement, is not right. Take a look at it, this is not a good achievement, it is a bad achievement instead. These bad achievements came from the fact that it allows crooks, international thieves aka the mafia, to bring in their dirty money to clean up by buying and selling lands. The money belonging to the mafia and the international thieves, they cannot buy goods anyway they want in the world, they must abide by the law. The money collected by corrupt Cambodians is the same also. I say that in our country, there is no stability when the number of poor farmers losing their lands is increasing, and currently, their children also have no jobs, no income. The youngsters now have no jobs and no income, and each year, about 300,000 Cambodians reach the job market, but they couldn’t find any job, and they still live in poverty.”

If this is what Sam Rainsy has to offer as an explanation he is no better than the current Prime Minister. While Hun Sen tends to oversimplify and cast everything in a favorable light to himself and the CPP, Sam Rainsy can only find fault with everything. According to him there is not one positive development in Cambodia. Leaders must be optimistic with a view to the future. Instead of haranguing the present government, he should offer solutions.

What about the construction jobs created because of that building boom? So all those South Korean developers are thieves? Real estate and job creation programs are two different issues. In his usual populist way he lumps everything together. Is this the way a true leader talks?

Displacement of people, high unemployment rates, and continuing poverty are in fact the breeding ground for civil unrest. This is the last thing Cambodia would need at this point. Only irresponsible politicians foment this unrest, pour oil into the fire by making inflammatory speeches and broadcasts. Sam Rainsy is either moving down a dangerous path or he lost sight of the real goal, namely, working for improving life in Cambodia. Cooperation and moderation are much better tools in accomplishing change.

Saturday, February 16, 2008

Sam Rainsy and Comparison of Progress

This is in addition to the recent article on who to vote for in the next election.

Comments on a report gleaned from Radio Free Asia as Published on KI-Media.

Opposition leader Sam Rainsy maintained that the yardstick that should be used to measure progress in Cambodia should be based on the comparison of the progress made in neighboring countries, as well as the progress made in other developed countries in the world.

It appears as if these remarks were made off the cuff without thinking too much about what is was really saying. It certainly does not make any sense comparing Cambodia to developed nations. The economic base for those countries is quite different from developing countries. This is like the proverbial apples and oranges. Somebody with a degree in economics and finance should know that you have several categories: developed, semi-developed, threshold, under-developed countries. How can you compare the first category to the lowest category? This is plain nonsense. Thailand is a semi-developed country and as such is not comparable. It can only serve as an example to be followed (although not in all aspects). Vietnam is one step above Cambodia in its development as a threshold country, but it may still be used as a yardstick because of its similar economic base.

Sam Rainsy said that he still maintained his previous stance in which he claimed that Cambodia cannot move towards real progress if it were to be compared with that of neighboring countries.

What does he mean by that? Comparison is an obstacle to progress?

Sam Rainsy said: “I am maintaining that the progress in neighboring countries is 10 times better than ours. In Thailand for example, people have work, and their salaries are 10 times more than us. They have 10-20 times more roads, schools, hospitals than us.

Thailand has had a head-start of about 30 to 35 years. It never had a colonial power in its country except for the period of the Japanese occupation during WWII. They have been close allies of the U. S. since and have received massive help from that country, especially during the Vietnam war time, perhaps as thanks for their help. Thailand did not have stone-age communism in its country for 4 year during which time the entire infrastructure was destroyed and the elite of the country eliminated. Thailand did not have a Communist regime under the aegis of another Communist country for 10 or 11 years. Thailand did not have a civil war for 10 years. What is he talking about?

As for Vietnam which was also a victim of a war where the US dropped so many bombs on, and it also sustained 30-40 years of war during the French colonial regime, it was destroyed much more than us, and even though it was a communist country, their leaders were responsible and they led their people to prosperity that is 2 to 3 times better than us.”

Though Vietnam is ahead of Cambodia because of Vietnam’s Doi Moi policy introduced in 1986/1987, it did not make real progress until the U. S. re-established diplomatic relations in 1997, which ushered in a time of renewed U. S. and European investment in Vietnam. Vietnam was and is seen as a better country for investment due to its large economic base and population of 85 million people, which constitute a formidable consumer base. It may be used as comparison, but then on the base of its similarly structured economy, and to see how they did it and possibly to be emulated by Cambodia. Their ‘responsible’ leaders repress their people much more than the much-vilified Hun Sen does. The existence of the Sam Rainsy Party is proof of at least a semblance of democracy, which the Vietnamese government most certainly won’t ever allow to happen.

Even though several authors wrote that Cambodia fell into Year Zero between 1975 and 1979, and that the country cannot be reconstructed as well as other countries during such short period of time, Sam Rainsy blamed on the corruption and the lack of responsibility of the current leaders still.

All historians agree that Cambodia was for all intents and purposes in the Year Zero in 1979. It is also agreed by economists that a redevelopment will take much longer than in a country that was not ravished and literally run into the ground by dystopian rulers. Although there is undoubtedly widespread corruption and a lack of responsibility on the part of the current party in power, there has also just as undoubtedly been progress, which he cannot deny. By the way, corruption is similarly widespread in neighboring Communist Vietnam and to a somewhat lesser extent in Thailand.

Sam Rainsy added: “Japan after World War II was heavily bombarded by the US, and even 2 atomic bombs were dropped and turned Japan into ashes, but in 1964 – 19 years after the end of the war in 1945 – with good and non corrupt leaders, Japan rose from the ashes and became an economic Superpower, and the Japanese had the highest living condition in Asia. But, in our country, 30 years after the Khmer Rouge – not just 19 years like in Japan – it has been 30 years already and the majority of the Cambodians are still living in poverty, some are getting even poorer because they lost their lands, their forests, their fishes, they are poor because of corruption, because of the inabilities and the lack of responsibility of our current leaders.”

This is the most ignorant observation somebody in Sam Rainsy’s position could make. Japan was an industrialized and powerful country before WWII.
But when Japan lay destroyed the U. S. undertook the rebuilding of the country in an almost unparalleled, massive endeavor, comparable to the one in Germany. Japan did not do this out of its own capability and without the Americans that ‘rise from the ashes’ would have taken much longer. Japan still had its elite and has a long tradition of higher education, an atmosphere conducive to creativity and ingenuity. Cambodia under Sihanouk in the 1960s was not even close to Japan in terms of education or overall development at that time. The last 30 years of Cambodia must separated into two periods – one before 1993 and one after 1993, or better 1997, because that is the year progress became tangible and really visible in Cambodia.

Hun Sen alluded to a politician, whom he declined to name, who allegedly used to cheat in the past. Hun Sen said that he can measure progress by comparing the start of his (political) journey to the current location where he is now standing.Hun Sen said: “There are some politicians who dare not talk about it. There is no need to compare to the Pol Pot regime, and the comparison must be made with developed countries instead. Oh Sir, now we must know where we came from, and how far we have walked to? But, they do not dare (talk about it?), if you are scared, make it clear that you are scared, you shouldn’t cheat while talking. Some other leaders said that there should not be any comparison to the Pol Pot era, if compared to the Pol pot era, the Pol Pot era was better and Pol Pot was right. But now you want to compare with developed countries. Now, let’s talk about Thailand, they never had wars, they just had a war in its southern region, and the minor coup d’état which took place, besides that they were always developing (their country), they never saw destruction, did they not? But for us, we destroyed all the way to the roots. Vietnam after the war ended also rebuilt its country while in Cambodia, the destruction was made all the way to the roots.”

It must be assumed that the translation is somewhat diffuse but obviously Hun Sen is making the same point as the writer above. It goes without saying that Hun Sen will not accept any responsibilities for his or his government’s failures and mistakes, and the widespread corruption (which he does on occasion acknowledge).

Nevertheless, Sam Rainsy, who used to say that the Cambodian people are getting poorer and poorer, called on the current government leaders to recognize their leadership mistakes rather than blaming the Khmer Rouge.Sam Rainsy said: “Our country is destroyed by the leaders who came after the Khmer Rouge regime, in the lat 10-20 years. Was it the Khmer Rouge who destroyed the forest (during the KR regime)? In fact, it was done by the leaders who came after the Khmer Rouge regime instead. Was it the Khmer Rouge who allowed the immigrants and the Vietnamese to catch all the fishes from the streams, lakes and rivers in our country? It was not the Khmer Rouge, it was those who came to replace them later on. Was it the Khmer Rouge who sold the state belongings, the people belongings to international thieves (Mafia), to the crooked companies which confiscated lands belonging to the people, and making them poor? The Khmer Rouge case dated from 30 years back, what I am talking about is the destruction of the nation in the past 10-20 years only. They shouldn’t blame the Khmer Rouge on everything that they did wrong. They should accept their own mistakes – mistakes which are caused by corruption, dictatorship, lack of capabilities.”

It is unfortunate that the current leaders in government were also the leaders in the Vietnamese-installed government in 1979 and 1985. Certainly a complete break with the past by having new and unburdened people form the government after 1993 would have given the Cambodia fresh impulses and been a complete renewal from the ground up. But those new faces were few and far between in 1993. Judging by Ranariddh’s political escapades, those impulses would have been somewhat erratic too. Sam Rainsy still has to prove his mettle as a statesman.

Nonetheless, the fact that is was the Vietnamese Communist government in Hanoi that virtually plundered the complete resources during the 10 years of their occupation must not be overlooked when apportioning blame.

The reference to the Vietnamese is again pandering at its worst and the constant repetition of this makes Sam Rainsy appear racist.He would do well by acting a little more aloof and more reflective at times. Perhaps he should get a media adviser.