Financial crisis puts country at high risk of unrest: EIU

Workers protest outside a Phnom Penh garment factory. Lack of trust in the government and a history of instability are among Cambodia’s weaknesses as it faces the fallout from the global financial crisis. (Photo by: Sovann Philong)

Monday, 23 March 2009
Written by Michael Fox
The Phnom Penh Post

A new report by the Economist Group says Cambodia is in among top five countries most at risk of instability from the worsening economic downturn

CAMBODIA is among the countries most at risk of suffering serious social unrest as the financial crisis threatens stability across the globe, a report has warned.

The report by the Economist Intelligence Unit (EIU) states that the economic upheaval and a "global pandemic of unrest" is set to disrupt economies and topple governments over the next two years.

The risk is classified as high or very high in 95 countries.

Cambodia was ranked fourth in terms of the threat posed, equal with Sudan and ahead of only Zimbabwe, Chad and the Democratic Republic of Congo.

It was ranked worse than war-torn Iraq and Afghanistan.

According to the report titled "Manning the Barricades", as people lose confidence in the ability of governments to restore stability, protests will become increasingly likely.

"A spate of incidents [across the globe] in recent months shows that the global economic downturn is already having political repercussions. This is being seen as a harbinger of worse to come."

The governments of Latvia and Iceland have already succumbed to the political fallout from the crisis.

The report's Political Instability Index was formulated using two indices: Underlying Vulnerability which took into account inequality, state strength and public trust in political institutions, while Economic Distress included levels of development, growth and unemployment.

Cambodia scored 7.9 out of 10 in Underlying Vulnerability and eight in Economic Distress, up from a total risk of six last year.

However, Cambodian economist Kang Chandararot said he was not as pessimistic about Cambodia's future as the EIU was, but acknowledged there would be an impact.

"They may engage in something illegal [due to] the increase in insecurity in our country, but not in the form of revolution or mass strikes.... I don't think that will happen," he said.

Kang Chandararot said the EIU did not know enough about the Cambodian economy. Unemployed people could return to the land if they are unable to find jobs in the main urban centres.

"Agriculture is the last resort of unemployed people ... we still have a lot of land for subsistence and agriculture," he said.

Public investment from foreign aid would help weather the crisis, provided the aid continued.

"The ... economic downturn is already having political repercussions."

Kang Chandararot said observations of the Cambodian Institute for Development Study over the last four years showed that a dollar in public investment would lead to two dollars in private investment, contributing to continued growth.

He could not put a figure on the number of Cambodian's who might lose their jobs as a result of the crisis.

However, the report said the figure could be as high as 50 million globally.
The Cambodian garment industry has already shed tens of thousands of jobs in the past six months.

In spite of Kang Chandararot's confidence, the report said the social impact of the crisis was too serious to ignore.

"[T]he threat of unrest is grave and the risk of complacency far outweighs any risk of exaggerating the dangers," it said.