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.

Cambodge : la croissance économique et l’envers du décor

2 février 2012
Vong Chandara, 31 ans, designer

Selon les prévisions annoncées par Hun Sen, le PIB par tête devrait passer de 830 dollars US fin 2010 à 1 000 dollars US d’ici 2013 . A moyen terme, la croissance économique devrait se situer, selon lui, au moins aux alentours de 6% par an. De plus, selon les statistiques de son gouvernement, la part de la population vivant avec moins de 1 dollars par jour (appelé taux de pauvreté) est de 25,8% en 2010, représentant une baisse spectaculaire par rapport à 2005 (45%).

Dans l’absolu, ces chiffres semblent très encourageants. Mais au-delà de cet embellissement statistique spectaculaire, Hun Sen semble avoir délibérément oublié de dire dans quelles conditions cette extraordinaire croissance économique a été et va être réalisée, et de préciser à qui profite réellement cette croissance au quotidien.

N’étant pas économiste et faute d’intervention de spécialistes en la matière issus de l’intelligentsia khmère, j’essaierai d’analyser avec mon propre bagage professionnel en tant que designer automobile l’envers du décor de cette croissance si spectaculaire.

Si on se fie aux statistiques du gouvernement de Hun Sen, la majorité des Cambodgiens ont très largement bénéficié de cette croissance économique si spectaculaire et devraient voir leur niveau de vie augmenter de manière fulgurante dans les années à venir. Mais qu’en est-il dans la vie des Cambodgiens au quotidien ?

Pour bien comprendre la réalité de la vie des Cambodgiens au quotidien, il est nécessaire de bien cerner les principales caractéristiques du « régime de croissance cambodgienne » institué par le pouvoir en place depuis plus de 30 ans.

Strong growth in developing East Asia faces risks from global uncertainty and natural disasters

Press Release No:2012/160/EAP
Source: The World Bank

Singapore, November 22, 2011 — Growth is still strong in developing East Asia, but continues to moderate mainly due to weakening external demand, underscoring the need for governments to refocus on reforms to increase domestic demand and productivity, says the World Bank in its latest East Asia and Pacific Economic Update released today.

The report, issued biannually, projects that amid uncertainties in Europe and a global growth slowdown, real GDP in developing East Asia will increase by 8.2 percent in 2011 (4.7 percent excluding China) and by 7.8 percent in 2012. Domestic demand in middle-income countries was the largest contributor to growth in the region, although it is easing driven by the normalization of fiscal and monetary policy.

"Lower growth in Europe in the course of fiscal austerity and the banks?needs to increase capital coverage would affect East Asia. Less credit from European banks can also affect capital flows to East Asia, but high reserves and current account surpluses protect most countries in the region against the impact of possible renewed financial stress," said Bert Hofman, World Bank Chief Economist for the East Asia and Pacific Region.

Good Governance Could Grow Economy: Analyst

Sok Khemara, VOA Khmer
Washington, DC Wednesday, 29 December 2010

"Cambodian garment workers have low salaries, making it more attractive amid strong competition."

With strong recovery in garments and tourism, and strong growth in agriculture, the International Monetary Fund and government predict a growth rate of 6 percent to 7 percent next year.

But an independent analyst says Cambodia could see growth as high as 10 percent in coming years if governance is improved.

“If there is good reform on good governance, we will have powerful growth, more than 10 percent,” said Chan Sophal, director of the Cambodian Economic Association. “If we reform slowly, we’ll get growth of 6 percent to 7 percent a year.”

Shared wealth and the benefits of that growth will also depend on good governance, he said. Economic equity means that people receive a good base depending on their capacity, knowledge and resources.

Better governance will attract more foreign investment, create more jobs and reduce corruption, he said. More workers will be trained, and less land disputes will sow discontent.

Cambodia is located in a part of the world that is growing, attracting Chinese and Vietnamese investment along with the big markets of the US and EU for garments, he said. And while regional neighbors are growing out of garment production, that creates an opportunity for Cambodia to move into more of it, leading to more growth.

Cambodian garment workers have low salaries, making it more attractive amid strong competition, he said.

Chea Mony, president of the Free Trade Union of the Workers of the Kingdom of Cambodia, said more orders had been made in recent months and that some factories are now operating around the clock.

Swift Growth in Key Sectors Boosts Economy

The Cambodian textile export sector has seen a 21 percent increase over the last 10 months.

Sok Khemara, VOA Khmer

Washington, DC Thursday, 16 December 2010

“All of these sectors show that Cambodia’s economy has risen out from under the financial economic crisis the world went through in 2008 and 2009.”

Cambodian officials say the economy has now recovered from setbacks in the wake of the 2008 financial crisis, with key sectors growing much in past months.

The International Monetary Fund said it expects Cambodia’s economic growth rate to reach between 6 percent and 7 percent in 2011, a figure Cambodian officials concur with.

Growth will be based on the strengthening textile export sector, which increased 21 percent over the last 10 months; the tourism sector, which grew 15 percent; and agriculture export, up 5 percent.

“All of these sectors show that Cambodia’s economy has risen out from under the financial economic crisis the world went through in 2008 and 2009,” said Hang Chuon Naron, secretary of state for the Ministry of Economy and Finance.

The government and the IMF both agree on a 6 percent growth rate, with 4 percent inflation, he said. The IMF concluded a growth rate of 4.8 percent in 2010.

Cambodia, which relies heavily on donor aid and loans, saw a big boon to its economy in the investment from China and Vietnam, in energy, telecoms, agriculture and mining. The garment sector still relies heavily on orders from the US.

IMF forecasts economic growth less than 7% ... but Hanoi PhD Hun Sen vows 7% economic growth

Cambodian PM Vows Commitment To 7% Annual Economic Growth

Sunday November 9th, 2008

PHNOM PENH (AFP)--Cambodian Prime Minister Hun Sen said Sunday he was committed to maintaining annual economic growth of 7%, after warnings that the country's red-hot economy would soon slow.

Hun Sen, addressing crowds at the Independence Day celebration, vowed to maintain high gross domestic product growth despite the global financial slowdown, and said the government was committed to reducing poverty by more than 1% a year.

"The government [is] well aware that the strategic plans are highly ambitious amid the global economic crisis," Hun Sen said at Phnom Penh's Royal Palace.

"But we depend on our experience, our achievements and determination, and we are very positive that the country will accomplish its visions."

The International Monetary Fund recently said that Cambodia's economy is expected to flounder next year as the world crisis deepens.

The country has enjoyed double-digit growth over the past few years, but that will likely ease to 6.5% this year and 4.8% in 2009 as the crisis deepens, IMF official David Cowen said on Friday.

After being written off as a failed state after the devastating 1975-79 Khmer Rouge regime and several decades of civil war, Cambodia has struggled back in recent years to become an improving economic success story.

But despite recent growth, underemployment remains high in Cambodia, while about 35% of the country's 14 million people live on less than 50 U.S. cents a day.

World Bank: Growth Despite Inflation [... but inflation is a concern for poor Cambodians]

By Mean Veasna, VOA Khmer
Original report from Phnom Penh
01 April 2008

Cambodia's economic growth is expected to remain positive, despite nettling concerns over inflation, World Bank officials said Tuesday.

Inflation has increased in recent months, and it is not likely to decrease to its original level, which is a concern of the poorest Cambodians, a World Bank official said, following a semiannual report.

Cambodia's economy grew by 9.6 percent in 2007, according to the World Bank. That growth rate is expected to shrink in 2008, even as inflation hit a nine-year high at the end of 2007, the World Bank said.

"As we said in the report, the high inflation rate will not pose any serious threat to Cambodian economic growth for 2008, but it does impact the poor," said Huot Chea, a economist for the World Bank's Cambodia office.

Inflation will not decrease to its original level, but is likely to increase next year, from 5 percent to 10 percent.

"I guess about 25 percent of the poorest people in our country spend 70 percent of their total income on food," Huot Chea said. "So as long as food prices are rising, it automatically has a worse impact on their daily living standard."

Earnings that once bought 2 kilograms or 3 kilograms of rice can only buy 1 kilogram, he said.

The government has responded positively on inflation, he said, citing as example the recent ban on rice exports, the lifting of a ban on imported pigs and pork products and the release of a rice surplus on the market at a subsidized price.

However, sustained inflation could further hamper the government's poverty reduction efforts, said Tim Conway, a senior poverty specialist in the World Bank's Cambodia office.

Chea Peng Chheang, secretary of state for the Ministry of Finance, said Tuesday that estimates of the World Bank echoed predictions of the ministry.

Cambodia's high economic growth rate is sustainable, he said, because the growth is based mostly on agriculture, as well as tourism and construction.

"Of course, there will be an impact from inflation," he said. "But this inflation mostly affects countries that have important business with America."

Poverty reduction is not likely to be affected, he said, because the government has a strategy to prevent and delay the rate of inflation.

Hun Sen's rosy economic outlook ... albeit not distributed equally nor equitably

Hun Sen estimates that the rate of poverty will be at 30% in 2008

29-02-2008
By Ky Soklim
Cambodge Soir Hebdo
Translated from French by Luc Sâr

The economic growth in the country for 2008 was evaluated at 7.3% versus 9.6% for 2007, and 10.8% in 2006. That was what Hun Sen announced on Thursday 28 February during a conference on economic outlook for the country in 2008.

Hun Sen self-complimented for these numbers, but he regretted that the growth was not distributed equally and equitably.

In 1994, the rate of poverty was at 47%. In 2004, it fell to 24%. No actual survey (on poverty rate) was made in 2004, but based on an (assumed) reduction of more than 1% per year, Hun Sen estimated the rate of poverty at 30% in 2008.

He recalled that the GDP per capita is $589, but that this would reach $1,000 in 2015.

Full Steam Ahead for Asia

World Bank expects little drag on growth in developing regions

November 16, 2007
By KAREN LANE
The Wall Street Journal

SINGAPORE -- The economies of emerging East Asia should grow strongly this year and next, with few signs of any sharp acceleration in core inflation or other imbalances in the region, the World Bank said Thursday.

The Washington-based body forecast in an East Asia and Pacific update that gross-domestic-product growth in the region, which excludes Japan, Australia and New Zealand, would be 8.4% this year and 8.2% in 2008.

The new forecasts are higher than those it issued in April of 7.3% and 7%, respectively, because of "unexpected and large domestic demand-led acceleration of growth in China," it said.

Strong domestic demand in the region should continue into next year as high capacity-utilization levels and healthy corporate balance sheets provide a favorable footing for investment.

Nevertheless, the World Bank warned the difficulty of managing high balance-of-payment inflows raises concerns about central banks losing control of monetary policy, which could lead to overheating of markets and economies and vulnerabilities in the financial sector.

"Although the signs of such problems are limited at present, they could grow into significant concerns," it said, noting that spare capacity in most economies has been largely used up while equity prices have surged to highs in many countries.

Much of the region also has seen headline inflation rates tick up, largely because of high food and energy prices.

China, in particular, has suffered from costlier food, but the World Bank said price pressures there have been largely confined to that sector. It forecast that inflation will start to ease late this year and continue to subside next year.

Slower demand for Asia's exports, because of the U.S. subprime-mortgage crisis, should have only a modestly negative effect on the region.

Like its sister organization, the International Monetary Fund, the World Bank warned of increased downside risks to the regional economy if there is a sharper-than-anticipated downturn in the U.S. and other major economies.

Soaring oil prices also are a risk. The organization calculates that an average oil price of $90 in 2008 would result in an income loss in the region equivalent to about 1.1% of GDP. The bank now forecasts an average price of $72 a barrel in 2008 and slightly less than $70 a barrel in 2009.

In the event that Asia's economies are threatened, the World Bank said central banks have room to ease monetary policies while governments could undertake supportive fiscal measures.

The World Bank forecast China's economy will expand 11.3% this year and 10.8% in 2008. These new projections are up from April forecasts of 9.6% in 2007 and 8.7% next year.

Vietnam will be the next-fastest-growing economy, with forecast growth of 8.3% this year and 8.2% next year.

The World Bank said China is experiencing faster inflation and a surging trade surplus that is pumping excessive liquidity into the financial system. But it said of the potential problems that "none appears serious enough at present to derail the current momentum of growth, or to cause the authorities to make major policy changes that would lead to a marked slowing in the near term."

However, the organization warns that China alone will be unable to offset a sharp slowdown in global demand, as Chinese growth couldn't be much faster than it already is and the country's share of world imports is still small compared with its share of the world's GDP.

For the World Bank, emerging East Asia includes China, Indonesia, Malaysia, the Philippines, Thailand, Vietnam and some smaller economies like Cambodia and Mongolia, plus the so-called newly industrialized economies of Hong Kong, South Korea, Singapore and Taiwan.

Write to Karen Lane at karen.lane@dowjones.com

Cambodian economic boom to be steady at 9 pct for 2007: IMF

September 08, 2007

The International Monetary Fund 's (IMF) Cambodia director has said the forecast 9 percent growth of the Cambodian economy this year is the fruits of the country's steady economic policy reform and slow inflation, according to the latest issue of the Phnom Penh Post published this weekend.

"9 percent is very high growth," IMF Resident Representative John Nelmes was quoted as saying by the newspaper.

The Cambodian economy is surging ahead in most areas, the latest IMF report on this country's economy said, adding that agriculture has improved on 2005's record breaking year, reflecting increases in yields and cultivated land.

"Construction and services, particularly the financial sector, underpin a vibrant urban economy," the IMF report said.

Cambodian tax revenues in the first four months of the year were up 60 percent over the same period in 2006 due to improved collections, it added.

Nine percent growth is a dip from the Asian Tiger style growth of 10.75 last year and 13.5 the year before, but is in line with Cambodia's average economic growth since 2000, the Phnom Penh Post said.

Source: Xinhua

Cambodia seeks investors for economic expansion

Cambodian passengers sit on top of pickup truck driven past an unfinished building in Phnom Penh, Cambodia, Monday, Sept. 3, 2007. Investors pushed the Cambodian government to allow foreign ownership on property Tuesday, saying such a step is important for advancing economic growth in the country. (AP Photo/Heng Sinith)

Wednesday, September 05, 2007
AFP

PHNOM PENH: Cambodia’s private sector met Tuesday with government officials for talks on the future of the economy, with a clear call from businesses for the country to seek more foreign investment.

The underlying point from business leaders was that investment must be encouraged, even if that meant loosening controls in sectors on which the government has historically kept a firm grip.

Chief among these is the country’s real estate market, which in the past few years has enjoyed an unprecedented boom as land prices soar and dozens of building projects get underway in the capital.

Business people have urged the government to deepen its investment base by opening property ownership to foreigners for the first time — a measure that many expect could dump tens of millions of dollars into the economy and spur on greater industrial growth.

Under the current rules, foreign property investments must be made in the name of a Cambodian national, and many are unwilling to risk losing their assets to unscrupulous local partners.

While Cambodia’s investment law was amended in 2005 to allow foreign ownership of permanent fixtures, the legislation has yet to be implemented and the initiative has floundered.

“This is already a sector of the economy that is dynamic, but foreign ownership of apartments, condominiums and other such structures on the land will help spur further economic growth,” said Bretton Sciaroni, an American lawyer who serves as the chairman of the International Business Club.

“Such a regulatory development will provide a dramatic indication that Cambodia has an investor-friendly environment,” he added.

After decades of turmoil, Cambodia has emerged as a rising economy in the region — posting an average of 11 percent growth over the past three years on the back of strong tourism and garment sectors.

But these economic pillars are by no means insulated from growing regional competition, and officials said moves must be made to protect the gains made over nearly a decade of rapid expansion.

Cambodia’s 2.5 billion-dollar textile industry has posted double-digit export growth year-on-year and employs some 350,000 workers, making it the country’s largest industrial operation.

But it also continues to be buffeted by labour disputes which will become especially critical next year when restrictions against Chinese garment exports expire, forcing Cambodia into greater competition with this Asian giant.

“In short, there are too many unions,” said Van Sou Ieng of the Garment Manufacturers Association of Cambodia (GMAC), urging greater government regulation of the more than 1,000 workers’ groups.

Illegal strikes, sometimes as many as two a day, and repercussions against workers who do not walk off the job are also endemic, he told government leaders.

“The frequency of these occurrences ... is becoming alarming, and if left unattended and unresolved, they will destroy Cambodia’s reputation for attracting and maintaining investors,” he said.

The tourism sector, which has also enjoyed significant yearly growth, must also adapt if it is to attract both visitors and investors, business leaders said.

Already, several private companies have been granted licenses to develop Cambodia’s islands off its southern coast as the country tries to scale up its resort offerings.

Officials Tuesday also mooted for the first time the revival of a national air carrier that is hoped to take advantage of growing regional tourism.

The country’s last national carrier, Royal Air Cambodge, was shuttered in 2001 after running up losses of 30 million dollars.

Domestic air routes are expected to prove vital to developing some of Cambodia’s more remote locations, as well as encouraging travelers to seek sights beyond the famed Angkor temples in northwest Cambodia, which remain its most popular tourist draw.

“National carriers are an important tool for promoting destination tourism for any country,” said Ho Vandy, president of the Cambodian Association of Travel Agents.

Asian economies on ‘demographic cliff’

August 12 2007
By Andrew Taylor in London
Financial Times

The rise in the size of Asia’s labour force is expected to slow over the next decade threatening output growth in some of the region’s fastest growing economies, according to the International Labour Organisation.

Uneven rates of population growth, ageing workforces, and a huge shift in employment from rural areas to cities pose challenges for the region’s rapidly growing economies it says in a report to be published on Monday.

Asia’s workforce is expected to increase by 221m to 2bn by 2015 as countries such as Iran, Bhutan, Cambodia and Pakistan continue to benefit from a rise in the proportion of “prime working-age” people, between 25 and 54. But the life of this “demographic dividend” would be limited with the proportion of children aged 0 to 15 and youth aged 15 to 24 declining across the whole of the region.

The ILO warns that more developed regions such as Singapore, South Korea and parts of China are likely to hit the “demographic cliff” even earlier.

“At the end of the decade, there will be a marked increase in the share of the population aged 65 and above in every region, with the largest increases taking place in the developed economies,” it says.

More than a quarter of the people in some “developed economies” are expected to be older than 65 by 2015. In China family planning policies had “accelerated the process of demographic transition”. As a result, the country was “ageing faster than any other nation in history”. In Japan the number of people retiring from the country’s workforce since 1999 had exceeded the number of new recruits.

In spite of average annual GDP growth of 6.3 per cent between 2000 and 2006 – more than twice rates experienced in the rest of the world – many people in the region were still suffering from serious poverty. More than 1bn people, representing almost 62 per cent of the region’s labour force, were still working in the “informal economy”. Some 900m were living on less than US$2 a day and “308m of these living in extreme poverty on less than US$1 per day”, says the ILO.

Problems facing employers and politicians include: increasing migration by millions seeking better paid work abroad; the growing movement of people from the land to cities, with the region’s urban population expected to grow by 350m by 2015, while the rural population is expected to rise by only 15m; rising income inequalities; and the need to improve job opportunities particularly for women.

The need for raw materials and energy to fuel growth was increasing environmental pressures. Juan Somavia, ILO director general, said: “One thing is clear: doing business as usual is not sustainable over the long term. Asia is experiencing unprecedented growth and development. At the same time, vulnerabilities arising from environmental pressures, economic insecurity, shortcomings in governance and unequal income distribution pose a threat to the region’s future development.”

Economic rate of growth slowing

Cambodian Economy Will Hit 9.0% In 2007

Rate of growth is slowing.

By Agence France-Presse

Aug. 2, 2007 -- On the back of rising private sector confidence, Cambodia's economy is expected to post 9% growth this year, the International Monetary Fund's managing director Rodrigo de Rato said August 1.

But immediate reform is needed in governance and the banking sector if the country hopes to see its economy continue to expand. "These are the immediate challenges," he said. "The only alternative for reducing poverty is sustained growth over time," he added.

This year's growth estimate represents a dip of more than a point from last year's growth of 10.8%, and is significantly down from the IMF's 2005 growth figure of 13.5%. The country's economy is still too narrowly based on the garment and tourism sectors, the IMF said in its 2007 report on Cambodia.

While both industries continue to gallop -- six-month tourism figure rose 20% over the same period last year -- they are increasingly vulnerable as Cambodia enters the global market.

Analysts have warned that the key garment sector, which accounts for some 80% of Cambodia's export earnings, could nosedive following the end of U.S. and EU safeguards against Chinese textiles which are due to expire at the end of 2007.

De Rato said that the recent discovery of oil and gas reserves off Cambodia's coast was a "positive thing" that could bring much needed revenue to the impoverished country. Hundreds of millions of barrels are estimated to lie in off-shores fields, and at least half a dozen foreign firms are negotiating with the government for exploration rights. But he also warned that a solid legal framework was needed to handle the sudden influx of cash that an oil rush could bring.

Political Cartoon: Sharing Growth

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

Public confidence alone cannot help the economy when corruption and lawlessness are rampant in Cambodia

June 07, 2007

Cambodian PM stresses public confidence as foremost condition for financial development

Particular attention has to be paid to the means of strengthening of public confidence, an essential element for fostering the role of banks in the economy, Prime Minister Hun Sen said on Thursday.

"To this end, the concerned authorities need to create an environment conducive to activity of a sound banking sector, and develop a strong and well functioning infrastructure for banking activities as well as for fair and competitive market structures," he told a symposium about the partnership between the government and the Asian Development Bank (ADB).

Meanwhile, he said, developing a national payment system is one of the key priorities in the kingdom's Financial Sector Development Strategy in 2006-2015.

"Without an efficient and wide-reaching national payment system, the financial sector will not be able to provide effective intermediation, or offer its services throughout the economy," he said.

The enactment of the Law on Negotiable Instruments and Payment Transactions is a necessary first step that gives the National Bank of Cambodia (NBC) clear authority over the payment system and to make improvements, he said.

The design of the payment system should ensure that the needs of individual consumers as well as corporations in the real sector will be adequately accommodated, he added.

In addition, he said, given Cambodia's current economic structure, it is very important to focus on the role of micro-finance and entrepreneurship in poverty alleviation and economic development.

"Within this framework, I am glad to see that the micro-finance sector reserves a chapter of its own in the Financial Sector Development Strategy for 2006-2015. Currently, the financial sector has focused its services mainly on the advanced sectors, while micro enterprises still not gained adequate access to financial services," he said.

To address the financing needs of small farmers, he said, the competent authorities need to be opened to innovative ideas, encourage banks to lend to MFIs using proper micro-finance methodologies, but at the same time Cambodia needs to also set in place certain parameters to ensure that risks associated with agriculture financing are properly managed.

During his speech, Hun Sen also stressed the importance of the introduction of financial market.

"It can help to mobilize the Cambodian people's saving and channel them into long-term investments in social, economic and infrastructure projects. A good start for a financial market would be the government bonds, which are very crucial for the development of money and inter-bank market," he said.

Additionally, he highlighted the importance of the insurance sector, saying that "with increased per capita income there is also great potential to develop the insurance market and the supervisory and regulatory framework should be enhanced, while skills and experiences on risk management need to be upgraded."

He also outlined the establishment of financial institutions and legal framework as well as capacity building and development as supporting factors for the financial sector.

Cambodia's economy enjoyed double-digit growth rate in the last decade and urgency has been shown for development in the financial sector. The kingdom now still lacks stock and futures market.

Before the economic boom, Cambodian was ravaged by years of war and most banks were just unable to provide enough cash, thus crippling the depositors' confidence and undermining the financial construction.

Source: Xinhua

IMF predicts drop in Cambodian growth

05/06/2007
Australian Broadcasting Corporation

The International Monetary Fund says tourism and garments continue to keep Cambodia's economy ticking over.

But it says growth is expected to drop more than a point to 9 per cent this year.

Jeremy Carter, an advisor with the IMF's Asian and Pacific Department, says growth could be further clipped in 2008 to around 7.5 percent as the garment sector comes under pressure from increased competition from Vietnam and China.

Cambodia's garment exports jumped 17 per cent to more than $US2.5 billionn 2006 but are not on track for the same meteoric growth this year.

Mr Carter says weather also remains an unpredictable force on Cambodia's agriculture production, but that revenue collection is improving.

He says Cambodia is able to cover its debt load, in part with donor aid and loans.

Cambodia Economic Forum focuses on rural development [-It may help if land-grabbing is stopped first]

May 09, 2007

Cambodia's key government officials and policy makers met here Wednesday to discuss ways to improve rural and agricultural development in order to help the country achieve its Millennium Development Goals.

They were discussing the issues at Cambodia the Economic Forum, the second of its kind organized by the Supreme National Economic Council (SNEC) of Cambodia in collaboration with the United Nations Development Program (UNDP), according to a UNDP press release.

Their discussions focused on policy action that can provide inputs for further engagement within different government institutions on improving agricultural development in terms of increasing agriculture inputs, productivity and trade, the release said.

"To realize the ambitious Cambodian development goals, it will be essential to turn agriculture into a driver of economic growth and spread human development to the poor in the countryside," said Dr. Hang Chuon Naron, Secretary General of the SNEC.

The first Cambodia Economic Forum was held in January 2006, which gave central attention to economic opportunities and threats facing Cambodia, the release said, adding that the forum generated a great deal of debate on the subject of the discovery of oil and gas and its socio-economic implications.

Source: Xinhua

Many Cambodians Dubious Over World Bank's Upbeat Forecast

Seng Ratana, VOA Khmer
Oringinal report from Phnom Penh
10/04/2007

Everyday Cambodians and labor leaders said this week they had a hard time seeing improvement in their lots, despite a recent World Bank report touting the country's high economic growth rate.

While the economy may be growing, they said, it meant little to most people, especially laborers, with the cost of fuel and other consumer goods rising.

"The economic growth is reflected in the families of the wealthy and the powerful," said Chea Mony, president of the Free Trade Union of Workers of the Kingdom of Cambodia. "The workers' [monthly] salaries go up $5 to $45, but the commodities are still high and so is the gasoline price."

A recent World Bank report put the country's growth rate at 10.5 percent last year and projected 9 percent this year. The growth was being pushed especially by tourism at Angkor Wat, which sees an increasing number of visitors each year.

World Bank country manager Nisha Agrawal said that when one sector drives the growth, workers outside the industry sometimes do not feel the effects.

"So for example at the moment, say, tourism growth is higher than agricultural growth. Who benefits from tourism growth? Not so many poor people work in tourism as they do in agriculture," she said. "What's important now is, now that the government has prepared an agricultural strategy, to try to implement it."

Meanwhile, Cambodia remains one of the poorest countries on Earth, while a gap between the rich and poor is widening.

"Poor people are still poor," a vendor at Old Market told VOA. "The gasoline price is still high. The poor people work hard all the time and dare not quit."

"The poor people have nothing," a motorcycle taxi driver said. "The rich people are progressing…. I get 10,000 riel ($2.50). I have to take out gasoline, expenses, food, and there is nothing left."

Economic growth may be high, said Sok Hach, director of the Economic Institute of Cambodia, "but the workers' salaries decrease or are lower. The GDP is up, but to say the income goes up too is wrong."

Policy slips, politics to knock GDP

Friday April 06, 2007
World Bank: Growth this year to fall behind

Parista Yuthamanop
Bangkok Post

Political uncertainties and policy missteps leading to a slackening of investment are expected to slow Thailand's economic growth to 4.3% this year, versus 5% in 2006, according to the World Bank.

"Political disturbances in 2005, the coup in 2006 and the impending elections and transition in 2007 have created considerable political uncertainty which cannot be addressed quickly," the bank said in its new report.

Thailand is expected to trail the region in economic growth, with the World Bank projecting Southeast Asia to post 6.5% growth this year. Emerging East Asian economies should show 7.3% growth this year, down from 8.1% last year.

Other countries in the region are expected to fare much better, with the World Bank forecasting 8% growth in Vietnam, 9.6% in China, 6.3% in Indonesia and 10.5% in Cambodia.

Exports are expected to remain the key driving force for the Thai economy in 2007, as public investment is likely to come in under target due to uncertainties over the government's infrastructure megaprojects.

Kazi Matin, the lead economist for the World Bank in Thailand, said the cut in the growth forecast reflected poor investor confidence as a result of uncertainties in the country's economic policies and political situation.

"Low investor confidence has put pressure on the short-term prospects for the Thai economy, although the economic fundamentals will remain supportive for medium-term growth," he said.

"The main problem for Thailand is a lack of policy clarity and policy direction."

Foreign investors have become increasingly sceptical about the Thai economy since the Sept 19 coup.

Since then, the interim government has perplexed analysts and investors with moves to tighten the Foreign Business Act while the central bank decided to impose capital controls on foreign inflows.

Mr Matin said the government's signing of the Japan-Thailand Economic Partnership Agreement (JTEPA) earlier this week would help restore direct investment from Japan, one of Thailand's most important economic partners.

"The signing of the Japan-Thailand free-trade agreement is already having a positive effect on investor confidence, even if the actual impact on exports and investment will only be felt after it is fully effective in October 2007," he said.

Mr Matin said modifying the Foreign Business Act to liberalise key service sectors would also help boost private investment.

He noted that domestic demand rose only 1% last year, the lowest figure for many years, as private consumption and private investment fell due to the political and policy uncertainties.

"In Thailand, the challenge is to improve private investor confidence through quick policy actions," Mr Matin said.

Global economic growth, meanwhile, is expected to slow to 3.4% this year from 4% last year, as a result of an expected slowdown in the US economy, the world's largest.

Weakness in the US economy and its massive trade deficit will continue to create imbalances for global financial markets.

Capital flows have poured into Asia in search of higher returns, putting pressure on currencies across the region. Asian central banks have intervened heavily in the currency markets to stem appreciation of their currencies to protect their export-led economies.

The issues of market volatility and capital flows dominated the agenda at the 11th Asean Finance Ministers' meeting this week in Chiang Mai, where policymakers pledged to strengthen regional cooperation and coordination to help guard against future economic crises.

Finance Minister Chalongphob Sussangkarn, speaking at the meeting, said market volatility was likely to continue medium term due to global imbalances.

Emerging markets such as Thailand needed to take steps to cope with instability in world markets, he said.

Mr Chalongphob said Asean was now facing similar challenges of economic volatility as it did during the 1997 crisis.

9 Percent Growth Rate Expected in 2007, World Bank Says

Typical "big and new homes being built" in rural areas,
as claimed by Kim Phalla, an analyst at the
Ministry of Economy and Finance (Photo: RFA)

Seng Ratana, VOA Khmer
Original report from Phnom Penh
05/04/2007

The World Bank has forecast a 9 percent GDP growth rate for Cambodia in the year ahead, a slight falling off from the 10.5 percent rate of last year but still a considerable showing for a country whose growth saw a crippling plunge following a coup in 1997.

High growth rate is expected to continue in coming years, as oil and gas exploration off the coast continue, and was being driven by garment export, tourism, construction, and agricultural expansion, according to a World Bank report.

"For us, basically, we are proud that the poverty level is being reduced, so we can see that this reflects the people's living conditions have improved," World Bank economist Chea Huot said.

Kim Phalla, an analyst at the Ministry of Economy and Finance said the proof of improvement was visible. "We just look around," he said.

"When we go to the rural areas, we will see many big and new homes being built. We ask [people] about them and they say they were built between 1990 and 2000."