ADB keeps Cambodia forecast at 1.5pc drop

Wednesday, 16 December 2009
Chun Sophal
The Phnom Penh Post

THE Asian Development Bank on Tuesday lifted its prediction of economic growth for developing Asia in 2009 and 2010, although the lender kept its Cambodia forecast unchanged at negative 1.5 percent for this year, the latest sign the Kingdom is faring worse than many of its neighbours in its bid to recover from the global downturn.

The ADB lifted its 2009 forecast for 45 developing Asian countries to an average 4.5 percent, up from 3.9 percent in September. In 2010, gross domestic product in the region was expected to hit 6.6 percent, a small improvement on the 6.4 percent forecast made in September.

“The prospects for much of the region look rosier than they did in September,” said Jong-Wha Lee, ADB’s chief economist. “Fiscal and monetary stimulus policies and a moderate improvement in the G-3 economies of Europe, Japan and the US helped East Asia and Southeast Asia in particular.”

By contrast, Cambodia was expected to see growth of just 3.5 percent next year.

“Cambodia’s economy was badly hit by a sharper-than-expected decline in garment exports, construction, and tourism,” the report said.

An International Monetary Fund report on December 9 showed that Cambodia had largely failed to benefit from external stimulus spending, as demand for the Kingdom’s garments in the US – the country’s largest export market – declined 23.1 percent in the first eight months compared to an 14.3 percent drop on average across all suppliers.

The government increased spending 28 percent this year on 2008 levels, according to the ADB.

October investment sees downward trend continue

Friday, 04 December 2009
Chun Sophal
The Phnom Penh Post

Analyst says monthly drop does not necessarily paint full picture

THE number of approved investment projects in Cambodia fell dramatically in October compared with the same month in 2008, according to figures from the Centre for the Development of Cambodia (CDC) released Thursday, as large projects failed to materialise following the economic downturn.

Only US$15.5 million in projects were approved in October, a 98 percent drop compared with the $869.8 million in projects given the green light during the same month in 2008.

According to the CDC’s statistics, four major “tourism” projects worth a total of $704 million provided the majority of last October’s approvals.

The first 10 months of the year has seen approvals totalling only $1.624 billion, a far cry from the $9.928 projects certified during the same period last year.

An official from the CDC, who spoke on condition of anonymity, said the drop in investment projects resulted from a lack of capital flow from foreign countries.

“Most investors borrow money from banks, and the downfall of big banks around the world has systematically affected the flow of capital into Cambodia,” said the official.

During October the Cambodian government gave the go-ahead to only two projects: a shoe factory and a lightweight manufacturing development.

Kang Chandararoth, president of the Cambodian Centre for Study and Development, said October’s downturn in investment into Cambodia was not necessarily cause for alarm.

“We cannot evaluate investment each month because it is meaningless in evaluating change in the direction of an economic structure. We should make the comparison on a quarterly or yearly basis,” he said.

Sam Rainsy Party lawmaker Son Chhay said there were underlying problems in attracting capital to the Kingdom beyond the global financial crisis, namely high electricity prices, inadequate human resources and bureaucracy.

Cambodia delays stock market plan: official

Nearly one third of Cambodia's population survive on only 50 US cents a day or less

Wednesday, December 02, 2009
AFP

PHNOM PENH — The global financial crisis has caused Cambodia to push back its plans to open a national stock exchange this year, officials said Wednesday.

Cambodia signed an agreement last year with representatives from South Korea's stock exchange, the Korea Exchange (KRX), Asia's fourth-largest bourse operator, to establish a stock market in 2009.

However government officials said Wednesday that the Southeast Asian nation was not ready to go ahead with the plans due to the world financial slowdown.

"We are not ready in terms of capital... amid the financial crisis situation," said Mey Vann, director of the industry and finance department at Cambodia's ministry of finance and economy.

The new date for launching the stock market had not been set, he said, but the country planned to start operations or trading in late 2010, he told AFP.

"A stock market is good for our economy. It helps collect money outside the banking system for the investment," Mey Vann said.

While still among one of the world's poorest countries, Cambodia has emerged from decades of conflict as one of the region's rising economies.

But after several years of double-digit growth fuelled mainly by tourism and garment exports, Cambodia was buffeted by last year's global economic downturn.

The International Monetary Fund in September predicted Cambodia's economy will contract 2.75 percent this year amid the slowdown.

By comparison the economy grew by 10.25 percent in 2007 and was projected at 6.5 percent in 2008, according to the IMF. Last year's figure is still to be fully established.

Cambodia remains a largely cash-only economy and a high degree of mistrust keeps many people hoarding their money at home instead of using banks.

Nearly one third of Cambodia's 14 million people survive on only 50 US cents a day or less.

Cambodia needs to be more than dressmaker to the world

Wednesday, 26 August 2009
By Anne-Laure Porée
OnlineOpinion.com.au

Defying the gloom descending on the tourism sector brought about by the global crisis, the capital’s airport recently launched a hopeful initiative: a new airline. Cambodia Angkor Air was launched to boost tourism between the capital and Siem Reap near the famed ruins of Angkor Wat. With tourist arrivals falling sharply since late last year, this may signal a triumph of hope over reality. If anything, the hopes and fears surrounding Cambodia’s tourist revenue and garment trade underline how the fortune of the country has become intertwined with the larger world.

Since peace came to Cambodia in the last years of the last century, the country has emerged as a poster child of globalisation in South-East Asia. In the middle of this decade, Cambodia enjoyed double digit growth and even hoisted itself up to 6th place in the rank of the fastest growing economies for the 1998-2007 period.

And now the country is experiencing the downside of dependence on the world. The sectors most affected by the crisis - tourism and garment export - are the ones that have seen the most development thanks to the integration of Cambodia into the global economy a decade ago, after peace was restored in the country.

At this time, the economy was opened to foreign investors, who poured money into the garment industry, taking advantage of supports granted to Cambodia such as the Most Favoured Nation (MFN) and the Generalised System of Preferences (GSP). This status provided access to the American market and it enabled other Asian investors - Chinese in particular - to get round their own quotas or the Least Developed Country status conferred upon them by the United Nations.

But the happy days are now threatened by the shrinking world market. Of the four major pillars of Cambodian economy - the garment industry, tourism, construction and agriculture - three are seriously impaired by the global crisis. With 70 per cent of Cambodia’s garment production going to the US, the declining American economy, choosey shoppers and stay-at-home tourists have led to job losses in Cambodia.

The figures released in late July by the Garment Manufacturers Association of Cambodia (GMAC) showed a worse than anticipated loss: exports dropped almost 30 per cent and one garment worker in six lost her job in the first six months of 2009. Most of these workers are women who transfer a substantial part of their earnings to their family living in rural areas in order to supplement farming-based incomes. In some villages, every family has one or several members working in the garment factories based in the Phnom Penh suburbs. Some go for unpaid leave or part time jobs, some enter prostitution, but most decide to go back to their village in order to work in the rice fields.

According to Van Sou Ieng, GMAC president, Cambodia is much more severely affected by the crisis than other Asian countries like Indonesia, Vietnam, Bangladesh or China because the industry sector in Cambodia is less competitive. “We need more time to produce than China or Vietnam,” he says. Though the government helps with profit tax exemptions or export charge reductions, there’s no miracle cure for Ieng.

Tourism - the second pillar of the economy - has suffered from the economic crisis, and the fallout from the swine flu. In Siem Reap, located next to the famed Angkor temples, a spot visited by more than 1 million tourists in 2008, the situation is described as “catastrophic” by hotel managers. The hotels’ occupancy rate has fallen 25 per cent compared to the same period in 2008. Several three- or four-star hotels have definitely closed their doors, and the mid-range hotels have been multiplying promotional offers for months.

The drop in western tourists’ arrivals (down 14 per cent during the four first months of 2009 according to the Minister of Tourism) has a direct impact on tourism generated incomes - foreigners spent US$1.6 billion in 2008. The Ministry of Economy and Finance expects a drop in tourism growth of 7 to 8 per cent this year.

The construction sector is also affected: many foreign investors have delayed, reduced or slowed their projects. The capital Phnom Penh started to change face in 2008 with the building of huge towers, business centres and shopping malls but activity slid in the second half of 2008, leaving workers without employment. Such trends have had significant consequences, particularly among the banking sector. The Acleda bank, which has the largest branch network in all provinces, reported a fall in profits in the second quarter of 2009 because of late payments and less lending. The Cambodians, who speculated on land as investment, are now facing difficulties because the prices of land and real estate have plunged and they can’t sell and get cash.

The hardest hit, of course, are the poorest of the poor who count each riel. For them, any drop in income, as well as any unexpected crisis, immediately results in cutting down the number of meals a day.

Agriculture, the fourth pillar of the Cambodian economy and the least exposed to global currents, could bolster the country’s 2009 growth, which is forecast at 2.1 per cent. The agricultural sector (with 4.3 per cent growth expected in 2009 depending on weather conditions) is essentially based on rice farming and fishing.

But the part of agriculture that has drawn foreign interest proves to be a mixed blessing.

In northeastern Mondolkiri province, plans by a French company to set up a rubber plantation have created a conflict that symbolises the double edged sword of globalisation. For several months, Bunong, a Montagnards ethnic group, has been fighting against the project - as their farmland gets swallowed up by the rubber company that has an agreement with the Cambodian government. The company is expected to make huge profits, a part of which could return to the community via the salaries of the plantation workers and the development of a new city.

The crisis has forced the government to pay attention to those left behind by globalisation. “We thought that the private sector could solve every problem but we have to reconsider the role to be played by the State in order to palliate the deficiencies of the market,” says Hang Chuon Naron, Secretary General of the Ministry of Economy and Finance.

The crisis has also led the leader of political opposition Sam Rainsy, former Economy Minister, to call for injecting government funds into the economy and for pushing reforms, in particular against endemic corruption. But the government would rather let the storm blow over, waiting for growth to come back in developed countries, hopefully pulling the country out of its recession in the process.

In the meantime, some hopes turn to the mineral, oil and gas resources development. But the revenues from these productions will be mainly derived from exports of raw materials with no local added value, whereas imports of manufactured goods will increase. Even after growth returns, Cambodia will still have to figure out how to hitch its industry to the global economy profitably rather than be a supplier of garments produced by cheap labour. Cambodia is beginning to learn the challenge of being part of an integrated world.

Report Warns of Greater Risk of Sexual Exploitation of Children

By Heda Bayron, VOA
Bangkok
13 August 2009

A new report by a global child rights group warns that the economic downturn increases the risk of sexual exploitation of children.

ECPAT International says the downturn raises a specter of increased child sexual exploitation as traffickers lure poor families with cash.

Carmen Madrinan is executive director of ECPAT International, which released its latest report in Bangkok Thursday.

"The report raises great concern that the current economic downturn, which is forecast to swell the ranks of the poor - those living on less than $2 a day … will push more children into vulnerable situations and increase the risk of trafficking and sexual exploitation," said Madrinan.

The report, which was supported by the British cosmetics retailer Body Shop, says as incomes fall, pressure increases for children to bring income for the family. That makes them vulnerable to risky forms of work.

ECPAT says more than a million children worldwide are trafficked for sexual purposes each year.

In Asia, the report highlights what it calls "alarming flows" of cross-border trafficking in South Asia, with India the main destination. It says as many as 7,000 Nepalese girls are trafficked to India for sexual exploitation every year.

The Greater Mekong region also is identified as a main hub for trafficking, with boys and girls from Cambodia, China's Yunnan province, Laos, Burma and Vietnam as well as ethnic minorities from northern Thailand brought to Thai cities.

But the report also noted that internal trafficking - when children are taken from rural areas to the cities - has become a growing trend.

Najat M'jid Maalla is the United Nations special rapporteur on the sale of children, child prostitution and child pornography. She says the demand for sex with children continues to grow because of social tolerance and indifference.

"We must adopt the mantra: 'A single child is one child too many,'" she said.

The report says global profit from the trafficking of people into forced commercial sex reaches nearly $28 billion a year, with almost half of that going to traffickers in industrialized countries.

Key Sectors Challenged by Downturn: UNDP

By Ros Sothea, VOA Khmer
Original report from Phnom Penh
10 July 2009

The world economic crisis is having a direct impact on four of Cambodia’s key economic drivers, which will need to become more competitive, according to a report released by UNDP this month.

Agriculture, construction, garments and tourism each face challenges from the economic downturn, and “Cambodia now needs to consolidate its progress, nurture its potential and sustain its growth,” the UNDP said in its report, “Cambodia Country Competitiveness: Driving Economic Growth and Poverty Reduction.”

“It is a unique opportunity right now,” Douglas Broaderick, the UNDP’s chief representative, told VOA Khmer. “Cambodia needs to get some of the things done that could set-up Cambodia to be stronger economically and to be able to help people in a much better way, in terms of competitiveness linked to economic growth.”

The agricultural sector, which generates a third of Cambodia’s GDP and employs more than half its workforce of 8 million people, suffers from low education in the rural work force, limited access to financing, poor roads and irrigation and limited market access, the report said.

The UNDP recommended the development of rural non-farm economies, such as roads, rural electrification, education and financial training, as well as better coordination between suppliers and manufacturers.

And while the cost of labor is a main motive for garment manufacturers to come into Cambodia, productivity remains lower than neighboring countries, the report said, citing as an example productivity that is three times lower than in Thailand.

The UNDP also recommended that the government re-examine its investment laws, to improve the manufacturing of textiles and garments, which comprised 12 percent of the GDP in 2007 and employed more than 360,000 people.

The sector lost 51,000 jobs between September 2008 and March 2009, as a global economic crisis, kindled by a US financial meltdown, spread. Around 70 factories have closed in that time.

The UNDP recommended training workers to begin producing goods higher in value, and to improve industrial relations.

Meanwhile, competitiveness in the tourism sector remains poor, ranking 112th of 130 countries at a recent World Economic Forum, due in part to high energy costs and expensive flights, as well as limited infrastructure and costs associated with corruption, the UNDP said.

Human resources in the sector remain low, and an uneven application of policies and rules plagues the sector.

“Rich cultural assets, such as Angkor Wat, give Cambodia a competitive advantage, but reliance on Angkor Wat as the primary tourist attraction cannot be sustained,” the report said.

The UNDP recommened relaxing tourist visa restrictions, exploring open sky policies and reducing the costs and improving the quality of tourism products.

In the construction sector, Cambodia has enjoyed an increase in both scale and value of projects, including high-rise apartment and office buildings currently under construction.

The country has the lowest wages for construction workers in Southeast Asia, but productivity is relatively low and there are shortages of labor to meet demands and of skilled workers, the report said.

Engineers and architects are overwhelmingly foreign, while electricians, welders, carpenters and other skilled workers are in short supply.

Added to these difficulties is the complicated constrution law, which means it takes an average 710 days for approval of construction permits—compared to 200 days in Vietnam and 150 days in Thailand.

Companies say they resort to paying bribes in order to shorten the time frame.

“The highly bureaucratic regulation of licensing in the construction sector may reduce its competitiveness,” the report said.

Cambodia is at the bottom 10 percent of countries in the World Bank’s corruption index, leading to a dearth of investment from the world’s largest industrialized countries, whose own national laws forbid participation in corrupt practices.

The UNDP recommended investments in vocational training, improvements to permit procedures and the strengthening and enforcement of building standards.

With the four key sectors flagging, costs remain high in information and communication technology, discouraging further investment.

Overall, the UNDP recommended putting more resources into education, as Cambodia lags behind its Southeast Asian neighbors, ranking lowest in the region.

Cheam Yiep, a Cambodian People’s Party lawmaker and head of the National Assembly’s finance commitee, said the UNDP’s analysis was “just partly true,” but he did not elaborate.

Still, the goverment will take the report’s findings under consideration, he said.

Economic downturn fuels human trafficking

Twelve more countries are on the US watch list this year for failing to combat trafficking, as the recession makes workers vulnerable to exploitation.

June 16, 2009
By Howard LaFranchi
Staff writer of The Christian Science Monitor

Washington - The economic downturn is adding a new dimension to the global problem of human trafficking – known as modern-day slavery – as workers desperate for income accept increasingly onerous conditions or fall prey to international cheap-labor rings.

The result, according to the State Department's annual Trafficking in Persons report, is an increase in the number of countries, primarily in the developing world, that are either overlooking rising incidents of trafficking and bondage, or are failing to enforce the laws they've passed to curb the problem.

The report, which covers 2008 but which is the Obama administration's first on the issue, places 52 countries and territories on the watch list of countries that are not doing enough to stem human trafficking, up from 40 countries last year.

"In a time of economic crisis, workers are more vulnerable … and persons under economic stress are more likely to fall prey to the wiles of traffickers," says Luis CdeBaca, director of the State Department's Office to Monitor and Combat Trafficking in Persons.

The uptick in countries on the US watch list reflects both the increased number of countries included in the ranking this year – up by 20 to a total of 173 countries – and the tighter standards passed by Congress last year for judging a country's performance.

But the economic crisis is clearly another factor, says Mr. CdeBaca. As economies have soured, more workers in sectors ranging from agriculture and fishing to construction and domestic services have fallen prey to employers who deny wages, claiming they are owed debts workers are unable to repay, or who use an employee's murky legal status to force them into bondage.

Traditionally, human trafficking has been associated with the international sex trade. And forced prostitution of women and children remains a major contributor to trafficking, but CdeBaca notes that the International Labor Organization this year estimates 12.3 million cases of human bondage worldwide, of which just over one-tenth, or 1.5 million, are thought to be cases of sexual servitude.

In more evidence that labor trafficking isn't getting enough attention from economically-strapped countries, the State Department notes that of the 2,983 convictions reported worldwide, only 104 were for trafficking in the labor sector.

One the bright side, the State Department showcases Nigeria, a country that this year moved up to the elite list of countries that fully comply with the minimum international standards for protecting trafficking victims. Highlighting Nigeria's "political will" to address the issue, CdeBaca says, "I can't talk about it enough" as an example for other countries.

Not so encouraging was Malaysia, which suffered a downgrade of its ranking over evidence of increased trafficking of Burmese refugees for servitude in the South Asian country. The downgrade reflects the findings of a US Senate Committee on Foreign Relations report earlier this year that exposed rampant exploitation and trafficking of Burmese migrants and refugees – often with the collaboration of Malaysian officials.

Domestic and international anti-slavery organizations have been crucial in highlighting cases and ending abusive practices, says the new US report – the ninth since human trafficking legislation was passed in 2000. One such organization is the Touch a Life Foundation, a Dallas-based organization working to rescue victims ranging from boys enslaved by fishermen on Ghana's Lake Volta to girls and women in sexual servitude in Cambodia.

Pam Cope, Touch a Life's cofounder, says the traditional acceptance of servitude in some cultures and lax enforcement of existing laws are contributing to human trafficking as much as the economic downturn.

"I don't really see it having so much to do with the poor economy. I just think human trafficking has become a huge money-making industry," she says, adding that too many countries fail to enforce the laws they have to stop it.

That's the case of Cambodia, she says, where authorities look the other way as visiting foreigners exploit locals for sex and other services. A different case is Ghana, she says, where her organization is working with local men to rescue small boys enslaved by fishermen and to educate tribal chiefs about the long-term impact of slavery on their communities.

"I'm hopeful with Ghana," she says, "because the people we're working with there are really taking this effort to end this slavery and making it their own."

Survey Finds Insecurity in Garment Sector

By Ros Sothea, VOA Khmer
Original report from Phnom Penh
01 June 2009

In a tiny market on the outskirts of Phnom Penh, 19-year-old Mech Ra stood on a recent day counting out her money to buy cheap fish she would have to use in multiple meals. The economic crisis meant her overtime wages have been cut for the past six months, and Mech Ra was doing the best she could with her $50 monthly salary.

“I can hardly survive on my own,” she told VOA Khhmer. “And I have no money to send back home.”

Mech Ra is not alone.

A recent survey by the Cambodian Garment Workers for a Living Wage Committee found that an average worker spends $72 per month, while earning around $79 in the same period, overtime included. Without overtime, the average worker earns $67 per month, the survey found.

“Without overtime, such as during economic downturns, a worker’s earnings are not sufficient to cover basic living expenses,” the committee said.

Choun Momthol, a spokesman for the group, said 70 percent of Cambodia’s factories have cut off overtime work, creating uncertainty in the sector.

“Now workers can’t survive, or they will run away, and thus the stability of the garment industry is not secured,” he said.

The garment sector has been hard hit by the global financial downturn.

Garment exports dropped 38 percent in the first quarter of 2009, a value of $280 million, according to the Ministry of Commerce.

Exports to the US alone fell 48 percent in that period, followed by a drop of 20 percent to Europe and 18 percent to Canada.

Investment in the sector has fallen 61 percent, and more than 60,000 workers have been laid off.

The Living Wage Committee called for wages of at least $93 per month, without overtime, “to ensure that workers can earn enough for a decent living.”

However, Oum Mean, undersecretary of state for the Ministry of Labor, denied the findings of the report and said a demand for higher salaries could be dangerous for the sector.

“It is not really correct to say it has become worse,” he said of workers’ living conditions. “If we make demands that are too high, sometimes they can’t accept this and that will become a disaster.”

The Living Wage Committee will send its study to the Ministry of Labor and companies to ask for salary increases at the end of 2009 or beginning of 2010, when it believes the economy will improve.

Economist Kang Chandararoth, president of the Cambodia Institute of Development Study, who conducted the research, said it would be difficult to ask for better wages at a time of economic crisis. But workers may benefit from the study as long as the economy grows.

Kanwarpreet Singh, a factory owner, said his company hasn’t reduced its orders since the crisis. He didn’t oppose the demand for higher wages, he said, but he would follow Cambodia’s labor law.

East Asian economies Under pressure

Apr 14th 2009
Economist.com

East Asia has been hard-hit by the global economic slowdown

EAST ASIA was once one of the world economy's brightest regions. Some even reckoned that “decoupling” might allow the region to ride out the storm that began in rich-country financial markets. But the global economic crisis is hitting the East Asia hard. The World Bank's forecasts for economic growth have been downgraded steeply. Excluding China, which will announce first quarter GDP figures later this week, the bank now expects developing countries in the region to grow by 1.2% in 2009, down from an estimate of 4.8% in 2008. Some economies will even contract this year. The bank predicts that the GDP of Malaysia and Cambodia will shrink by 1% and Thailand’s economy will shrivel by 2.7%.

This is a return to earth with an alarming bump. In 2007 Cambodia’s economy expanded by 10.2% and Malaysia’s by 6.3%. Other economies will grow, but at nothing like the pace of recent years. China's economy is likely to expand by 6.5% in 2009 compared with 13% in 2007. The Philippines will see growth of 1.9% this year, compared with 7.2% in 2007.

The World Bank points out that most countries in East Asia were relatively well placed to withstand the financial turmoil that has swept through developed countries. This is partly a result of learning the lessons of a financial crisis of 1997-98, which originated in the region. They have used the decade since then to build up reserves of foreign currency and strengthen external balances (which, in part, helped to finance the West’s spendthrift ways and hasten the crisis). They have also reduced government debt and strengthened bank regulation.

However, some of these changes were aided by a boost in exports, both within the region and to the rest of the world. But heightened integration with global markets through trade has exposed the region to the effects of the recession in rich countries. This has led to a dramatic fall in exports that has battered regional economies. In fact, the World Bank reckons that the effects of the crisis have been more severe in countries most open to trade and whose exports are concentrated in particular industries such as electronics, garments and textiles.

The drop-off in trade has been dramatic the world over, but parts of East Asia have felt the pain more than most. In January, Taiwan and the Philippines saw the value of exports plummet by over 40% compared with a year earlier. Electronics, which account for a quarter to two-thirds of exports from most of the larger economies in the region, have been hard hit.

Poorer countries in the region, whose export sectors are dominated by garments and commodities, have been hurt badly too. Cambodia, the country most dependent on garments, endured a 31% fall in exports in January compared with a year ago. As the World Bank puts it, the region, which prospered through exporting, is now suffering for the same reason.

The collapse in exports is leading to a jobs crisis, though this is not necessarily reflected in official figures. Less-developed countries in the region have a greater share of employment in the informal export sector. This makes it harder to obtain reliable data. But reports suggest huge job losses. In Cambodia 50,000 garment workers, 17% of the workforce in the industry, have been laid off since September. In Vietnam, 100,000 garment workers lost their jobs in January and February. And in China some 2.7m garment industry job may have gone.

Years of rapid growth have allowed the richer countries in the region the room to use monetary and fiscal policy to contain the crisis. Some countries, notably China, Malaysia and South Korea, have announced substantial stimulus packages, including big spending on infrastructure. However, Indonesia and the Philippines have to rely more on tax cuts than on public spending, partly because “shovel-ready” projects are lacking. Monetary policy has been eased in all the countries of the region.

Some good news exists. The bank's assessment is that China’s fiscal stimulus (amounting to spending worth around 12% of GDP spread over two years) is beginning to take effect. The bank predicts that the Chinese economy will bottom out by the middle of the year. The fortunes of other economies in the region are tied up with those of China. Many export parts and components that are then assembled in China for re-export. But the Chinese stimulus package cannot hope to fix the problem of contracting demand for the region's output in the rest of the world. The bank points out that a more complete bounce back from the economic crisis still depends on a broader worldwide recovery.

Local Banks at Risk, Top Institutes Warn

By Ros Sothea, VOA Khmer
Original report from Phnom Penh
18 March 2009

The World Bank and International Monetary Fund both warn that three of Cambodia’s nine largest banks are at risk of succumbing to the global financial crisis and a national recession.

Neither institution will name the banks in question, but both say new economic conditions in global finance have weakened Cambodia’s highly dollarized banking system.

Cambodia’s banks are at risk from a liquidity shortage, the slowdown of deposit growth and a rise in non-performing loans.

Since September 2008, shortly after the global financial crisis, bank deposit growth slowed significantly, turning negative, the report says, while large withdrawals have reportedly been made by firms concentrated in the property sector.

John Nelmes, IMF’s representative in Cambodia, told VOA Khmer in an interview Thursday that several of Cambodia’s banks are at risk. The banks are among the country’s nine largest, which together control nearly 90 percent of deposits.

“The risk in the banking system is now higher than previously,” Nelmes said. “The banking system is coming under increasing strain.”

The World Bank’s report shows similar concerns.

The report, received by VOA Khmer on Thursday, points out that growth in credit has been largely directed at consumption, working capital and real estate, but less at fixed investment.

“The rapid growth of credit for real estate development and construction represents even more risks,” the World Bank report says. “A fall in property prices could create problems for the involved banks, some of which already have high NPLs [non-performing loans].”

“The concentration of NPLs in two banks is also a major concern,” the report warns, without naming the banks.

“Our recent report indicated our general concern about non-performing loans in the financial sector,” Stephane Gimberk, senior economist expert of the World Bank, told VOA by email. “We feel it is critical for the central bank to deepen its efforts at bank supervision.”

Tal Nay Im, Director of the National Bank of Cambodia, agreed with the concern. But she claimed that the central bank has been paying much attention to all financial institutions. She said she was optimistic that Cambodia’s banks are in a good standing.

Some of Cambodia’s top banking executives say they remain in good shape.

Acleda CEO In Channy, ANZ Royal CEO Stephen Higgin and Canadia Bank Vice President Chhor Vann all claimed their banks were stable.

Downturn Creates Uptick in Small Loans

By Ros Sothea, VOA Khmer
Original report from Phnom Penh
17 March 2009

The economic downturn has expanded the demand for micro-financing, but experts warn that a shrinking economy, job losses, and factory closures will not be saved by small loans.

Micro-finance loans, ranging from $50 to $10,000 are vital for Cambodians wanting to start their own businesses. In recent months, with factories struggling under the downturn, the number of people venturing into these enterprises has risen.

“Due to the global financial crisis, a lot of garment and construction workers have lost their jobs,” Huot Eang, president of the Cambodia Association of Microfinance Institutions, said in a recent interview. “They lose their income, and then they have to look for another career. Now they need the capital from our institutions for their new jobs.”

About 50,000 workers from garment and construction sectors have lost their jobs due to the global crisis, according to a February report by the International Labor Organization. Fourteen garment factories closed in the last two months, as export revenue dropped from $200 million to $100 million dollars per month, according to government figures.

Those numbers add up to worries of recession, in an economy that was galloping ahead in recent years. The International Monetary Fund has warned that the Cambodian economy will contract half a percent in 2009, compared to its growth of 6.7 percent in 2008.

But in the face of declining figures, total lending of micro-finance institutions in 2008, as the global financial crisis emerged, was $438, million, up from $271 million the year before, according to the Cambodia Association of Microfinance Institutions.

The increase of small lending in the microfinance industry could be good for Cambodia’s economic growth and poverty reduction, as it connect rural households to the formal financial sector, Eric Sidgwick, senior economic expert of the Asian Development Bank, said in an email.

But other economic experts worry small loans will make little impact against the slowdown of in the country’s economy, especially while medium-sized loans from many large commercial banks are reportedly in decline.

“Loans from micro-financing are too small, compared to our economy’s resources,” Som Ganty, a financial expert at the Royal University of Law and Economy, said recently. “So no matter how much it is going to increase, it will not help as much on our economy as commercial loans.”

Ngy Tayi, undersecretary of state for the Ministry of Economy and Finance, agreed, but he said he was optimistic that small loans could prevent Cambodia’s economy from further decline.

Sacrava's Political Cartoon: Stimulus Package

Click on the cartoon to zoom in

Cartoon by Sacrava (on the web at http://sacrava.blogspot.com)

IMF: Cambodian economy set to contract sharply [-The IMF dares to contradict our good Dr. Hun Xen?]

PHNOM PENH, March 9 (Xinhua) -- The International Monetary Fund (IMF) has made its most gloomy economic outlook for Cambodia, or 4.25 percent of growth in 2009, English-language daily newspaper the Phnom Penh Post said on Monday.

IMF blamed Cambodia's increasing exposure to the global financial crisis and warned the contraction could be even worse.

The revision marked an obvious downturn from the body's December forecast of 4.75 percent for 2009.

The review followed the visit on Wednesday of an IMF mission from the organization's head office in the United States.

"Real GDP (gross domestic products) is now projected to fall by about (half a) percent in 2009. Given the rapidly evolving global situation, a larger-than-usual degree of uncertainty exists around this projection and risks remain titled to the down side. The outlook for 2010 is also highly uncertain," the paper quoted a statement of the mission as saying.

Meanwhile, the mission concluded that the economic environment would remain "extremely challenging" into next year.

Cambodian Prime Minister Hun Sen once vowed to maintain a 6 percent GDP growth rate in 2009, while the National Bank of Cambodia (NBC) predicted a 5 percent growth.

The World Bank was only confident of a 4.9 percent GDP growth rate for Cambodia in 2009, and the Asian Development Bank 4.7 percent, according to their press releases.

Official figures show that the GDP growth rates of the country respectively stood at 10.3 percent in 2004, 13.5 percent in 2005, 10.8 percent in 2006, 10.2 percent in 2007 and 7 percent in 2008.

Boom to bust in Cambodia [-Uh oh! Look like Dr Hun Xen and his CPP economists missed that one]

Mar 7, 2009
By Tim Sturrock
Asia Times (Hong Kong)

PHNOM PENH - Potential buyers at the entrance to the Grand Phnom Penh International City pass through a 29-meter-high, 42-meter-wide arched gateway topped with 18 life-size bronze stallions, only to arrive at a moonscape of bulldozed earth and ditches.

When the project was unveiled in 2006, it proposed 4,000 residential villas and apartments at a projected cost of US$500 million. The joint Cambodian and Indonesian developers' promotional material promised the convenience of a shopping center and an international school surrounded by the beauty of ponds and manicured lawns, as well as a golf course and driving range.

Of the 4,000 units in the original plans, only 21 villas will be ready by April, followed by around 100 more units by the end of the year, Grand Phnom Penh marketing director Nhem Sothea said. Only 138 units, including 44 shops, have so far been purchased.

The first phase was to include 500 units, and that goal is unlikely to be met, Nhem Sothea said. Most sales so far, with buyers paying $99,000 for 42-square-meter terraced houses or $138,000 for 92-square-meter townhouses, occurred before the global economic crisis hit late last year. No one has yet purchased any of the properties billed at over $750,000.

"The market is really bad," Nhem Sothea said at his on-site sales office. "The market is not really up to expectation. The future of the project depends on demand."

Grand Phnom Penh is just one of a half-dozen so-called "satellite cities" that property developers once promised would serve as suburban getaways for Phnom Penh's growing affluent and expatriate populations. But those plans, worth a combined $3.5 billion, were conjured when Cambodia's property market was booming; developers now say they may scale back or delay indefinitely their ambitions.

Banks have already restricted loans for real estate as economic growth has slowed and as property prices have dropped - in the city center by about 25% since last July, and in the outskirts by 30%. Cambodia's gross domestic product growth is projected to fall below 5% this year, a sharp decline from the heady double-digit expansion the economy averaged from 2004 to 2007.

The global crisis is taking a toll on Cambodia's main economic growth engines: garments, tourism and property. There were some indications of a property bubble even before the global economic and financial collapse. As local property prices soared, the National Bank of Cambodia (NBC) in mid-2008 restricted access to loans by doubling banks' foreign currency reserve requirement to 16% from 8%. The NBC also capped the amount of real estate loans banks could make at 15% of their portfolios.

The central bank in February repealed those restrictions in response to a rapid decline in the property market. An International Monetary Fund report last month said Cambodian banks and the NBC needed to improve management of risks and banking supervision to avoid failing loans, which it said appeared to be rising.

Bulls to bears

While developers insist that their projects remain viable and have secure financing, the assertions come against plunging demand and a short supply of lending to potential buyers. Sung Bonna, president of Bonna Realty, said that speculators a year ago were buying up real estate with hopes to sell it later to developers for a profit. "Now even in general property in the city center there is not so much demand."

He predicted that at the most, only 30% of satellite city units could be purchased by Cambodians and urged the government to make Cambodian real estate more appealing to overseas buyers. Foreigners are at present barred from buying condominium units in Cambodia.

Indications of a slowdown are ubiquitous. Along the city's Tonle Bassac riverside, billboards for the satellite city Diamond Island City, planned for nearby Koh Pich island, show a so-far nonexistent metropolis that looks as if it were rendered by utopian cubists or futurists.

When the Overseas Cambodia Investment Corporation (OCIC) unveiled Diamond Island City in 2006, during the days of Cambodia's go-go property boom, the plan included a hospital, restaurants, a shopping center, park and series of homes, some with personal swimming pools, that ranged in price from $280,000 to $1 million.

Investment in the Koh Pich project could drop by one-third to $800 million from $1.2 billion, said Touch Samnang, the project's manager and architect. That would likely entail trimming the number of units from 15,000 to 12,000, depending on demand, which he said has been affected by the global financial crisis. OCIC is still building bridges to the island, yet no units are under construction. Touch Samnang admitted pre-sales have not gone as well as anticipated.

Of the 168 units planned in the project's $28 million phase one known as "Elite Town", buyers have purchased only 40% after more than a month of sales, he said. That's a huge drop over the past few years, when units at other OCIC projects sold out in weeks. Elite Town will be delayed at least six months or until mid-2010, and the entire project could be finished in mid-2017, about 18 months behind schedule, he said.

Asia is only too familiar with the damage that can be wrought by a property collapse, seen in Thailand, South Korea and Indonesia during the 1997-98 Asian financial crisis. Stephen Higgins, chief executive officer at ANZ Royal Bank, the country's largest, said he did not anticipate the same problems that Bangkok and other Asian cities faced in 1997 when hundreds of buildings were left half-completed when financing dried up.

"Where Cambodia is fortunate is that a lot of these project haven't been constructed," he said in an interview, nor did most property-owners in Cambodia have mortgages so the market has some residual strength.

The problem now is that so many projects attempted to take advantage of the property boom at once. Higgins says the financial crisis has acted as a correction in some ways, possibly stopping all the projects from happening at once and flooding the market. "It will take a bit longer but that is not necessarily a bad thing," he said.

In northern Phnom Penh, the cranes are still swinging at Camko City, a $2 billion, 120-hectare satellite project that originally boasted plans for 6,000 units. The new economic situation may force a rethink, according to Kheng Ser, a marketing counselor for South Korean project developer World City.

He claims sales at Camko have been better than at rival developments, with 80% of the city's first phase 1,009 units of apartments, small villas and houses sold at prices of up to $330,000. According to Kheng Ser, the villas and houses will be completed this month and the tower blocks by the end of the year. However, designs are not complete on Camko's much larger phases two and three, he said.

Even the country's best-known tycoons are scaling back their property development plans. Sok Kong, president of Cambodian conglomerate Sokimex, said that he would delay plans on a 218-hectare satellite city to be called Beong Chhouk Township, though he said a land dispute was the main reason for the delay.

"We drew the master [plan] a while ago," he said by telephone. "I have to delay three or four years." He said he wants to focus his financial resources on his $1 billion Bokor Mountain development in Kampot and another hotel project on Phnom Penh's Chroy Changva peninsula.

Hard-hit Koreans

Meanwhile, South Korean-financed projects have faced some of the heaviest cutbacks. The global economic crisis, which has hit South Korea particularly hard, has leveled original plans for a proposed $300 million, 953-unit Pharos Mekong satellite city on five hectares of the Chroy Changva peninsula, according to an e-mail from Kheang Piv, a marketing manager for the Korean-owned project developer BK Asia Pacific.

He wrote that after the global financial crisis began, Korean finance dried up and the company could not get the money it needed to move forward. The company planned to start construction in December, but pulled back in November, Kheang Piv said. "It is not the right time for us to sell such kind of luxurious, high-end apartments. Eventually, we decided to keep our project on hold till the desirable time," he wrote.

The International Finance Complex is perhaps the largest South Korean-backed real estate project in Cambodia to feel the financial pinch. Korean firm GS Construction & Engineering broke ground in June on the IFC's seven skyscraper mixed-use complex near the Tonle Bassac. But the entire development has now been postponed until at least 2010, and then only three of the original planned seven buildings will be built. The project, originally projected to cost $1 billion, has been winnowed down to around $500 million.

In September, Korean firm Booyoung Company shelved plans for a development on a more-than-100-hectare expanse of land near Russian Boulevard because of uncertainty in the market, according to Jong-seon Choi, general manager for Booyoung in Phnom Penh. "We stopped because of the financial crisis," he said. "It's very uncertain."

The economic situation has also stifled less ambitious projects. At the proposed 500-unit, five-hectare Dream Town near Phnom Penh International Airport, only 30 units have been sold and its 2012 completion date will likely not be met, said Kong Vannsophy, manager of the project's developer, Cambodia Priority Property Investment.

"If we rush and no people buy, we lose money," he said. "A lot of other projects are facing these conditions."

ANZ Royal Bank's Higgins said the risks have grown regarding demand for Phnom Penh's satellite cities because many are in remote areas. "You would have to expect that the downturn in the property market will have some impact in those projects," he said. "By definition you are setting up in a new area, whereas if you set up in Phnom Penh you know there is going to be demand for it."

He said ANZ will not likely loan money to borrowers seeking to purchase property in satellite city projects. "It's difficult to say. We should not have a big appetite for it. We want to see something built."

Tim Sturrock is a Phnom Penh-based journalist. He may be reached at timsturrock@gmail.com

Cambodian Economy To Contract 0.5% - IMF [-But, our Dr. Hun Xen said that Cambodia will not be impacted, was he wrong all along?]

Friday March 6th, 2009

PHNOM PENH (AFP)--Cambodia's economy will shrink by 0.5% this year, the International Monetary Fund said Friday, lowering its earlier prediction as the country is hit by the global financial crisis.

In a press statement the IMF said the poverty-stricken country wouldn't make the target set late last year of 4.8% growth in 2009.

"The global economic contraction and financial crisis are increasingly affecting Cambodia's economy," the statement said.

Cambodia has seen sharp declines in garment exports to the U.S. and Europe as well as fewer tourist visits, the financial institution said.

It added that there has been a rapid slowdown in construction and foreign investment as the country's economy is doused after enjoying several years of double-digit growth.

The statement recommended that the Cambodian government help stimulate growth by allowing its budget deficit to rise to around 4.75% of gross domestic product - a significant increase from its 2% deficit last year.

Despite recent growth, underemployment, where someone's work earns only a meager return, remains high in Cambodia, one of the world's poorest countries.

Some 35% of the country's 14 million people live on less than $0.50 a day.

Port traffic down by as much as 30% this year [...but it's can't be due to economic downturn, Dr. Hun Xen said Cambodia is immune to economic crisis]

A freight ship docks at the Phnom Penh Port awaiting a consignment of cargo in this file photo. A global slowdown in trade has hit heavily Cambodia’s two main shipping terminals. (Photo: Bloomberg)

Thursday, 05 March 2009
Written by May Kunmakara and George Mcleod
The Phnom Penh Post

30% drop in throughput at Phnom Penh Port
Cambodia's second largest container port has been affected more heavily than Sihanoukville by the global economic crisis during the first two months of this year

Global downturn hits trade, with flagging construction imports accounting for the bulk of the losses since January

CARGO shipments at Cambodia's second-largest port have declined sharply in the first two months of the year as global trade slows, say port authorities, adding that hundreds of jobs have also been axed in the downturn.

The Phnom Penh International Autonomous Sea Port reports a 30 percent drop in throughput, largely due to falling imports of construction materials, officials told the Post Wednesday.

"The decline is caused by the global financial storm that started to hit at the end of last year. This affected not only our ports, but also others in the region," said Hei Bavy, director general of the Phnom Penh port.

He said that about 90 percent of goods crossing through the docks are construction materials. With many of the country's construction projects stopping or on hold, the port says shipments are in free fall.

"Developers are suspending their imports because they face the credit crunch," he said, adding that staff had been cut from 700 to 400.

"I do plan to cut more staff, but I have reduced salaries to prevent more layoffs," Hei Bavy said.

He added that the company is also instituting across-the-board cost cuts to prevent further job losses.

"This affected not only our ports, but also others in the region"

Port traffic is falling globally, with Asia bearing the brunt of the international trade slowdown. Singapore, the world's largest container port, said container traffic was down 20 percent, and Shanghai, the world's second biggest, down 19 percent, according to Bloomberg.

Cambodia's ports are reporting similar troubles, with officials blaming not only a slowdown in the construction sector, but flagging overseas garment sales as well.

The Finance Ministry in February reported a two-percent drop in garment exports at the beginning of the year.

Lou Kim Chhun, director general of Sihanoukville International Autonomous Port, told the Post Wednesday that he is waiting on figures for February, but that container shipments were down 20 percent due to the economic slowdown.

"The crisis has impacted our port revenue, which will hurt the government's tariff and tax income," Lou Kim Chhun earlier told Rasmey Kampuchea.

Hei Bavy said that the export of agricultural goods have been one bright spot for the Phnom Penh Port.

"Agricultural exports have been stable, but I expect the crisis to affect us for a long time," he said, adding that Cambodians should rely more on domestically produced goods.

"If our people stop using imported products, it will support local businesses. The crisis could drain our national wealth if people keep buying foreign goods."

Experts cast doubt on launching stock exchange market in Cambodia

PHNOM PENH, Feb. 13 (Xinhua) -- Experts have express their doubt and lack of confidence, as the Korea Exchange (KRX) plans to sign an official agreement with the Cambodian government next week to help launch the kingdom's proposed stock exchange market in December, national media said on Friday.

Some observers warned that the timing of the initiative could create problems as Cambodia faces reduced economic growth, increased unemployment and the threat of rising non-performing loans, said English-language daily newspaper the Phnom Penh Post.

"I think that currently, the environment is not good enough to proceed with the stock market in Cambodia," Kang Chandararot, economist and president of the Cambodia Institute for Development Study, told the newspaper.

Cambodia would risk losing investors' confidence, if it rushed prematurely into establishing an exchange, he said.

Nguon Meng Tech, director general of the Cambodia Chamber of Commerce, urged the government to postpone launching the exchange until 2012, saying that not enough Cambodian investors understood how a bourse worked.

"Most Cambodian business old hands have little knowledge about a stock exchange. So, how can they throw money at it?" he said.

Meanwhile, Minister of Finance and Economy Keat Chhon said on Thursday that "we will put our efforts into achieving a (December) target" although the government could not "set an official date for the establishment of the stock market."

"The global financial crisis, of course, impacts the stock market. But we won't abandon our plan to establish an exchange due to the crisis," he said.

KRX manager Inpyo Lee expected institutional investors and foreigners to be the main source of liquidity in the early stages of the Cambodian exchange.

Although there had been no formal agreements signed, investment and retail banks had expressed interests as institutional investors, he said.

About 30 companies would be listed by the time the exchange was operating "normally," he said.

The stock exchange market was mulled and prepared years ago amid common prosperity and development of the country, but finally came into shape as the national economy slowed down right after 3 years of double-digit growth from 2005 to 2007.

The Cambodian economy was estimated to grow by only 7 percent in 2008 and the government is trying to maintain a 6 percent growth in 2009.

However, the International Monetary Fund (IMF) said that Cambodia's economy will come under intense pressure in 2009 as tourism, garments and construction take a hit from the global economic meltdown.

"Cambodia's exceptional growth performance is coming under increasing strain from the global economic crisis and weakening external demand", said an IMF report, adding that foreign direct investment will decline and foreign reserves could fall to about 1.9 billion U.S. dollars.

The report predicted 4.8 percent economic growth for Cambodia in 2009.

The World Bank has forecast 4.9 percent Gross Domestic Products (GDP) growth for Cambodia this year.

Economy Hitting Chicken Farms Hard

By Chun Sakada, VOA Khmer
Phnom Penh
22 January 2009

Chicken farmers in Kandal province have lost hundreds of thousands dollars this year, thanks to the high cost of purchasing and caring for fowl and the recent low cost of selling them.

At least 49 individual chicken farms in Damnak Ampil commune, Ang Snuol district, alone, have closed since October, when prices began to fall in the wake of the global economic crisis, said Noy Sy Nuon, chief of the commune.

Each farm raised between 3,000 to 4,000 chickens, and the cost of raising each, from the purchase of chicks, to food and vaccine, is around $4, he said. But each chicken was now only selling for about $1.50 or $2, he said, leading many of the farms into bankruptcy. For 49 farms, the loss amounted to around $686,000.

All of the farms had been purchased by former rice farmers who sold their land to invest in raising poultry, Noy Sy Nuon said.

“Commune authorities are very concerned about the people living in this commune, after their bankruptcy and the sell-off of their farmland,” he said. “In my commune, there are many more chicken farms than in other areas in the district.”

The heavy impact of the global financial downturn comes amid renewed worry of bird flu in Kandal province, where authorities have culled at least 450 birds.

Mok Vy, 40, a Damnak Ampil farmer, said she had sold farmland for $8,000 and purchased a chicken farm to improve her living conditions.

“But I failed completely and lost all $8,000 from the sale,” she said.

At least 15 chicken farms in her village closed the same way, she said.

Mon Yann, 63, chief of Damnak Ampil village, said he himself had lost $5,000 in a chicken farm. At least 20 other chicken farms in the village had gone bankrupt, he said.

The main reason of the bankruptcy in the chicken farms was the rise in costs of raising the chickens, which exceeded the income, said Saing Soy, 61.

“If we insist on continuing to raise chickens, we will lose our farmland, houses and sometimes loans,” he said.

Var Lay, a 41-year-old farmer, said she had wanted her chicken farm to support her family, to replace rice farming or work outside the village, but she had not been lucky.

Expert calls for Cambodian gov't to lower bank reserve rate

PHNOM PENH, Jan. 22 (Xinhua) -- The government must lower the reserve rate of banks so that financial institutions can loan more money and fuel the economy in the grips of a financial slowdown, national media reported on Thursday.

The National Bank of Cambodia, in an attempt to lower inflation and cool the lending market, began requiring in May 2008 that banks double their reserves from 8 to 16 percent of all their foreign currency.

"Inflation is coming down particularly in food and energy costs(since December 2008) and now the danger is the economy slowing down, so at some stage (the government) might relax some of its policies on credit squeezing," English-Khmer language newspaper the Cambodia Daily quoted John Brinsden, vice president of the Acleda Bank, as saying.

The reserve rate has significantly cut Acleda's ability to issue loans, he said, adding that outstanding loans at Acleda grew just 5 percent in the last six months of 2008 after the central bank doubled the reserve rate.

Prior to that, in the first six months of 2008, outstanding loans at Acleda grew 50 percent to more than 450 million U.S. dollars, he said.

"We just do not have the funds we would like (available)," he added.

The Cambodian economy enjoyed double-digit increase during the 2005-2007 period, but down to below 10 percent in 2008 and will further slide to around 5 percent in 2009, according to the forecasts by experts and international financial institutions.

Government Cuts Recruitment Amid Downturn

By Ros Sothea, VOA Khmer
Original report from Phnom Penh
07 January 2009

The government will reduce the number of new recruits for administration positions by 10 percent in 2009, citing budget concerns.

“If we have enough money to fulfill the demand, we don’t need to reform,” said Ngo Hongly, secretary-general for the Council of Minister’s administrative reform department. “We’ve thoroughly thought about the financial risk, and whether we have enough money for salaries and retirement.”

About 8,000 recruits will join the government, 1,000 less than the recent average, officials said.

Officials said the global economic downturn was driving some reforms.

“It’s true that we have to save up money, following slow economic growth, so that we can help ourselves when we face a crisis,” said Kim Phala, deputy director of the Ministry of Finance’s policy department.

Tens of thousands of students apply for government jobs each year, vying for monthly salaries between 100,000 riel, about $25, and 250,000 riel, or $50.

In a $1.5 billion budget, the current administration spent about $85 million a year on salaries for more than 200,000 employees in 2008, according to government figures. The total budget for 2009 will top $1.8 billion, but operations budgets will be restricted, officials said.

This lowered recruitment could mean rising unemployment rates, with jobs in the private sector also limited, according to Sok Sina, an independent economist.

“I believe that the employment condition in our country won’t be good in 2009,” Sok Sina said.

The International Labor Organization estimates around 275,000 Cambodians between the ages of 15 and 24 are seeking employment, with that number expected to grow, as 10,000 graduates each year leave higher education.

Cambodia has around 2,500 companies formally listed with the Ministry of Commerce, with a large number of them opening between 2007 and 2008, providing a source of jobs for young graduates.

Some of these private companies have begun to reduce the number of employees.

“Our company will not recruit more workers, but will reduce by 30 percent, as we face an economic crisis,” said Ly Seng Keang, general manager of business and construction at Benshermen Cambodia, which has 1,200 workers and has heavily recruited new employees over the past few years.

In Channy, chief executive officer of Acleda Bank, which has 6,000 employees, said the bank recruited 2,400 new staff members in both 2007 and 2008, but this year will only employ an additional 1,000.

“We cannot always employ more staff,” he said. “If we choose more than that, we won’t have any work to offer, as our new branches have declined from 22 last year to only 18 this year.”

Other companies say they don’t plan to hire any more staff for 2009 at all.