Cambodia: Economic growth and what’s behind it

February 2, 2012
By Vong Chandara, 31-yr-old Designer
Translated from French

Based on forecast announced by Hun Sen, Cambodia’s GDP would increase from $830 in late 2010 to $1000 dollars in 2013 (1). According to him also, in the medium term, economic growth is expected to be at least around 6% per year. Moreover, according to government statistics, the percentage of people living on less than $ 1 a day (i.e. below the poverty level) was 25.8% in 2010, a dramatic drop in comparison to 2005 when the poverty level was at 45%.

In absolute terms, these numbers look very encouraging. However, beyond this spectacular statistical embellishment, Hun Sen seems to have deliberately forgotten to tell us under which conditions this extraordinary economic growth was and will be accomplished, nor did he tell us who really benefits from this daily growth.

Not being an economist and short of involvement on this matter by specialists in this field from the Cambodian intelligentsia, I will try to provide my analysis on the behind the scene of this spectacular growth based on my personal professional background as a car designer.

If one were to believe the statistics provided by Hun Sen’s regime, the majority of Cambodians have greatly benefited from this spectacular economic growth and they should see their standard of living increasing at a galloping pace in the coming years. However, one wonders what really takes place in the daily life of the Cambodian people?

To understand the reality of the daily life led by Cambodians, it is necessary to clearly define what are the key features of the so-called "Cambodian growth rate" established by the ruling regime which manage to cling to power for the past 30 years.

The baseline used for the current growth rate in Cambodia dates back to the early years, or even the early months of the Vietnamese occupation when senior officials of the Phnom Penh regime began to snap up real estate assets and properties or economic activities for which the strategic importance is critical to the process of forming a politically and economically dominant class that we see now. As highlighted in an article of the French magazine “l’Express,” everything can be bought in today’s Cambodia, starting from school diplomas to minister positions, as well as justice.

Progressive liberalization – which started between 1985 and 1988 – of the socialist-style economy introduced by the Vietnamese occupiers only sped up the process of taking over the country’s properties and wealth by the Cambodian ruling class. The possibility given to the Phnom Penh regime’s ruling class to take over all the country’s natural and economic resources was clearly "a form of reward" in exchange for their obedience to Hanoi’s policy vis-à-vis Cambodia. Not only were they unaware of the dramatic consequences of their subjugation to Hanoi, high dignitaries of the Phnom Penh regime even went on to show their grateful to the Communist Vietnamese leaders who had brought them to power. During private and official visits by Vietnamese officials, senior Cambodian leaders – including Hun Sen himself – never failed to bend themselves forward and backward to show their pathetic respect to the Vietnamese officials and their willingness to receive their political marching orders.

Today, the growth rate in Cambodia – based on wild capitalism and cronyism between politics and business, based on the squandering of the country's wealth and the excessive sale of public properties, of national education and even of justice – is clearly that of a discriminating regime that generates significant social inequalities. Cambodia’s growth for the past thirty years is accompanied by a growing polarization of Cambodian society: on one end, there is an extremely wealthy minority consisting of the ruling class and its cronies, and on the other end, there are farmers and poor people who are evicted by force from their land through the use violence, such were the fates of people living in Dey Krohorm, Boeung Kak, Borei Keila, Kratie province’s Snuol district, etc… In addition to the latter group, the working poor and the so-called "sex workers" constantly see their social and health conditions deteriorating on a daily basis.

Through this sorry state of the country’s affairs, a symbiosis is being formed between the ruling class and the business world in the form of marriage alliance or common financial interests. It is under this context that entire swathes of the country’s economic sectors were squandered or given out as concession to cronies of the regime. The cases of Sokimex, Phan Imex, Tela and TTY Co. Ltd. clearly illustrate this predatory collusion between politicians and businessmen. In addition to their political dependence towards Hanoi, the Cambodian ruling class also serves as Cambodia’s gateway for Vietnamese companies which now control important sectors of the economy, such as telecommunications (Viettel/Metfone), rubber plantations (Phu Rieng, VRG), tourism, fisheries, and banking/finance (MB, BIDV, Sacombank, Agribank).

In addition to this predatory capitalism which robs the people and the country's wealth, the Phnom Penh regime shows no well defined development policy. The few existing industrial jobs, in the textile sector in particular, come from foreign investments that are attracted by Cambodia’s cheap labor. In fact, Cambodian women working in this sector earn barely US$ 50 per month and they do not receive any protection measure whatsoever. As reported by the news media, many of these workers recently fainted on the job from toxic chemical poisoning. They live in crammed spaces and under precarious conditions. Even when they share their housing with roommates, they still struggle to pay their rent. Some of them are forced into debt just to send ten or twenty dollars home to their families living in the countryside. Many are caught in an endless debt spiral, and they get caught up in after-hour prostitution work to supplement their meager salary.

With the absence of a political will to set up a skilled workforce through manpower training in the textile sector that could lead to higher value added labor, these Cambodian workers will be condemned to performing unskilled manual labors. In general, there is no voluntary policy action taken to redefine the comparative advantages of Cambodia through education and training of the Cambodian youths in order to guide them to economic sectors where they could find job opportunities in the current global market. The depravation of the national education system is blatant: school teachers and university professors earn miserable wages, a factor that encourages them to the practice of corruption when they are systematically forcing students to pay to attend classes, to pass exams, etc... This practice, which is widespread nowadays, has the immediate consequence of excluding a large number of Cambodian youths from the education system and they are placed at the mercy of organized gangs whose sole purpose is to pervert their mind and push them to crime. Today, Cambodia has a population of 14 million, including the Vietnamese settlers which represent over 35% of the total population. 40% of Cambodia's population is under the age of 15, and the majority of these youths cannot afford school due to poverty. The consequence of the above factors leaves Cambodia with roughly 45% of its population illiterate.

In rural areas, the prospects for farmers are not much better than the situation of the working poor in urban areas or the youths. With the frenzy of land speculation, farmers were also evicted from their lands. Furthermore, no policy measures were set up to introduce real rural development at a time when the majority of Cambodians still earn their living from farming jobs. Not only do they remain entirely dependent on unpredicted weather conditions, they also suffer from the brunt of a competition unfairly orchestrated by Hanoi: Vietnamese growers flood Cambodian markets – including that of Phnom Penh and major provincial markets in Cambodia – with fruits and vegetables that are priced so cheap so as to kill off any competition from Cambodian farmers. In exchange for this dumping practice, Hanoi is committed to shell out financial aids to Vietnamese growers to offset their loss from these dumping measures in Cambodia. Hanoi’s aim is clearly to set up an economic strangulation of Cambodian farmers who would no longer be able to survive from their hard labor’s crops and they will eventually have to sell off their lands at whatever asking price to private companies, most likely to companies that serve as front end to Vietnamese banks established in Cambodia. Not only is Cambodia a victim of this dumping practice that is politically orchestrated by Hanoi, she is also threatened with another danger: fruits and vegetables imported from Vietnam and sold to Cambodians also contain very harmful chemicals that act as incubators of serious diseases, the effect of which only become apparent until several years later. Vietnamese produces imported to Cambodia are grown on farms that are exclusively reserved for that purpose. Witnesses have reported that they saw a young Vietnamese child of a gardener taking one of the fruits for export to Cambodia and he put in his mouth when his mother rushed over to snatch the fruit out his mouth and she immediately took him to hospital.

In addition to this danger, the sale of Cambodian rice is also the mercy of Vietnam which buys rice from Cambodian farmers at a cheap price and sells it on the international market at a much higher price. Vietnam makes huge profits from this transaction. This Vietnamese rice purchase in Cambodia is maintained by a well-oiled structure, and this monopoly of the rice trade is further reinforced since the start of the border dispute between Cambodia and Thailand. Dispossessed of their farmland, Cambodian farmers will find themselves thrown out into the streets where they are condemned to slavery at the mercy of Cambodia’s new riches.

Given this bleak situation that could turn dramatic, it is hard to conclude that Cambodians have actually benefited from the spectacular economic growth boasted by Hun Sen. Quite to the contrary, this growth has only generated and will generate more social inequalities and it will leave behind an unprecedented number of Cambodians because of the predatory nature of the growth rate established by the ruling class in Phnom Penh. The spectacular decline of the poverty rate in Cambodia is merely a statistical trick concocted by Hun Sen’s regime. On this issue, only the daily reality faced by the Cambodian people can disprove the regime’s cook up statistics. In fact, the Cambodian people are not only excluded from this growth but it is also threatened by public health hazard and Cambodians must avoid consuming Vietnamese produces in order to accomplish two goals: (1) to protect themselves in the upcoming decades due to health hazard caused by chemicals used in the Vietnamese produces, and (2) to help save the fate of Cambodian farmers who are subjected to a subtle elimination strategy initiated by Hanoi.