Tackling Cambodia's coming crisis

Opposition leader Sam Rainsy, seen speaking to reporters in this file photo, says Cambodia isn’t prepared for the economic crisis. (Photo: AFP)

Wednesday, 03 December 2008
Written by George McLeod
The Phnom Penh Post

VETERAN POLITICIAN
Sam Rainsy is the leader of Cambodia’s largest opposition party. He was elected member of parliament for Siem Reap province in 1993 under the Funcinpec party and later became minister of finance. He was ejected from the party after losing a no-confidence vote in 1994 and in 1995 founded the Khmer Nation Party (KNP), which changed its name to the Sam Rainsy Party (SRP). The SRP received about 21 percent of the vote in the 2008 national elections.

Opposition leader Sam Rainsy speaks to the Post about what he would do to address the economic crisis and the threat that job losses, poverty and slower growth pose to the Kingdom

As a former finance minister, what would you do to address the financial crisis if you were in the same position now?
Even before the financial crisis, I would have done things differently. Regarding agriculture, I would protect ownership for farmers of the land they live on, I am against these megaprojects that are creating farms with tens of thousands of hectares.

This is nonsense. It makes farmers landless and turns them into labourers.

I don't think this is the right approach. We need to protect the land owned by farmers and provide them with the inputs they need to improve productivity....

The current government has granted 99-year leases for companies in what they call the agri-business - I think this approach is totally wrong.

Second, regarding non-agricultural sectors, we need to diversify.

There is the garment industry, which is the foundation of the economy. So we have to promote and encourage foreign direct investment in a more appropriate way by combatting corruption.
Investors are complaining about corruption and they are going to other countries.

So we have to attract legitimate investors ... but also high-quality investors with technical expertise, and that will diversify industries.

How seriously do you expect the crisis to affect Cambodia?
More, much more than the current government says. They maybe don't realise what is going on.

Are you saying that you don't believe the government's current growth forecasts?
I think we will see less investors with this crisis. We will be left with destitute farmers, and the country is less than self-sufficient.

And with a weak agricultural sector, you can't expect the country to grow.

But let's look at the three sectors driving the Cambodian economy: textiles, construction and tourism.

These sectors are going to be hurt by the economic crisis, and more severely than the current government can understand and realise.

They say that we can hold out, but they don't realise the implications of the current crisis.

Look at textiles. Competition will increase and profits will drop as people cut their spending worldwide.

And competition from countries like Vietnam and China will increase. We are facing tough times and already factories are closing.

Look at Tak Fat [garment company] in Hong Kong - they went bankrupt.

In Cambodia there is half capacity, and some people having trouble in Hong Kong are coming to Cambodia to hide - the shareholders being cheated and assets are being transferred. So this is just the tip of the iceberg.

Second, in terms of construction, many projects have been stopped or put on hold. Many big investors from Korea have moved out - look at the drop in property prices - this is an indication that the crisis is serious and will take a long time to heal. When these projects started construction a few months ago, they expected that their commercial centres would be rented - but now these prospects have to be revised. They can't continue at the same pace and projections have been revised down.

"I think that, on the whole, there will be a serious economic slowdown. People will lose their jobs, incomes will drop. "

We already know that tourism is being affected by the crisis - tourism is going down and the Thailand crisis is making it worse.

So, the three engines of the Cambodian economy are in trouble....

I think that, on the whole, there will be a serious economic slowdown. People will lose their jobs, incomes will drop, and because of monopolies, prices will remain high. In a recession, normally prices drop, but because of corruption and monopolies, prices will remain high....

Countries need to be prepared, but Cambodia's foundations are weak, we will suffer more than the government says.

Does the government deserve credit for the strong growth seen over the past few years?
The figures for economic growth are misleading.

The first thing to keep in mind is that the growth we have seen is not sustainable, it is rather artificial.

Second, it was not equitable - the quality of growth is poor.

The figures being put forward are misleading because the majority of people remain poor, and the growth has benefitted a small group of people.

Of course, there is a trickle-down effect, but is has been slow. If you go to the countryside, the vast majority remain poor ... these are the ingredients for instability...

What is happening is not sustainable - cutting the forests, overfishing and exploiting resources.

I could probably double the growth rate if I over-exploit the resources in a small period of time. But you jeopardise the prospects for the country.

What political implications would a deeper economic crisis have for Cambodia?
They would be very serious. As I told you, this growth is not sustainable and this will have social implications.

Public discontent will increase and people that have lost their land, lost their homes, lost their livelihoods - they become desperate....

You can crack down on it, but don't forget that the Khmer Rouge started in similar circumstances.

Now people are educated and they understand the cause of their misery.

What should the government be doing to prevent the crisis from seriously impacting the local economy?
First, the current budget is out of date - it needs to be updated. We need to meet with experts and other interested persons to set a strategy for the crisis - we should not keep this budget that was developed before the crisis unfolded - it is outdated. You have countries that are even better off than us that are implementing plans to support the economy, to protect jobs and increase spending in a responsible manner.

If the situation is as bad as you say, why hasn't that translated into stronger support for the opposition?
The situation has gotten worse since the election, but people are starting to feel the pinch. In terms of the election, there was massive electoral fraud. In countries like the US, the elections reflect the will of the people, and as a result, when a party wins the election, there is an outpouring of joy, but here, there was no celebration in Cambodia. The people remained sad and depressed ... the majority of the population has been deprived of their voting rights.