Q+A-Will Cambodia's economic woes affect stability?

Thursday August 20, 2009

BANGKOK, Aug 20 (Reuters) - Cambodian Prime Minister Hun Sen is facing pressure from rights groups and foreign donors while he battles to minimise the damage to the country's fragile economy from the global financial crisis.

Foreign governments, rights groups, non-governmental organisations and political rivals continue to hound the former Khmer Rouge soldier over his authoritarian leadership style and his attempts to muzzle critics.

However, analysts say neither the criticism of Hun Sen's government nor the effects of the slowing economy are likely create instability in the near future.

HOW DOES HUN SEN RESPOND TO CRITICS?

Hun Sen's government has filed a series of lawsuits against journalists and opposition lawmakers for defamation or "disinformation", which rights groups and foreign diplomats say are attempts to silence critics and strengthen his grip on power.

Two opposition MPs critical of Hun Sen and his party were recently stripped of parliamentary immunity, effectively unseating them from the national assembly. Other cases have included a young political activist jailed for painting anti-government slogans on his house and an advocate of cultural preservation who criticised lighting plans for the ancient Angkor Wat temple.

"Hun Sen does not know how to respond to criticism and the fear is he will respond with an iron fist through more suppression, which would undermine Cambodia's democratic progress," said Ou Vireak, president of the U.S-funded Cambodian Centre for Human Rights.

WHAT ABOUT FORCED EVICTIONS, CORRUPTION?

Tens of thousands of people have been evicted by force from prime land in the capital, Phnom Penh. Rights groups say as many as 250,000 people have been affected nationwide. The government says the dwellers are land-grabbers who refuse to accept their offers of compensation.

The World Bank and other donors say the evictions are hampering efforts to tackle poverty in a country where 35 percent of the population live on less than $1 a day. The ruling party's control over the police, military and the courts means those made homeless have limited power to fight the evictions.

The government has also come under fire for failing to deal with rampant corruption, which the United States says costs the country $500 million a year. Cambodia, which anti-graft watchdogs rank as one of the world's most corrupt countries, has dismissed the claims as foreign interference. An anti-corruption bill drafted in the 1990s is also yet to be approved.

Analysts say the failure to tackle graft will restrict the amount of foreign investment in the country.

IS ALL THIS ANY THREAT TO HUN SEN?

Hun Sen's Cambodian People's Party (CPP) enjoyed a landslide election victory in 2008 on the back of four years of double-digit growth driven by pro-investment policies, which helped create jobs and improve infrastructure and public services.

Analysts say that after decades of war and political strife, Cambodians are better off under Hun Sen. Although he is criticised for his authoritarian style, people are largely supportive of his nationalist and conservative approach to running the country.

"He has a desire to maintain Khmer traditions and morals and that maintains some strong fabric on which to base policy decisions. That's good for political stability," said Ian Bryson, a specialist on Cambodia at Control Risks in Singapore.

COULD A SLOWING ECONOMY AFFECT CAMBODIA'S STABILITY?

A boom in the garment manufacturing industry in the 1990s helped lift many rural people out of poverty, but the global financial crisis has hurt tourism and slashed demand for Cambodian-made clothes in countries like the United States.

Analysts believe victims of lay-offs are unlikely to blame the government or protest against factory closures. They say stability rests on the government's future handling of inflation, diversifying its economy and improving its investment climate.

"The government should invest more in agriculture and other industries and reduce its reliance on garments and tourism," said Pou Sothirak, a senior research fellow at Singapore's Institute of South East Asian Studies (ISEAS).

(Compiled by Martin Petty and Ek Madra in Phnom Penh; Editing by Alan Raybould and Bill Tarrant)

Cambodia's Hun Sen looks safe despite some unease

Thu Aug 20, 2009
By Ek Madra

PHNOM PENH (Reuters) - Trouble is mounting for Cambodia's long-serving prime minister, Hun Sen, with rising unemployment and an economic slowdown on top of growing criticism from diplomats, rights activists and political rivals.

But analysts see little threat to his power or the long-term investment outlook in a country that has made great strides after decades of poverty, brutalilty and instability.

"Things are far from perfect in Cambodia, but democracy is a slow process and we have to see the bigger picture," said Pou Sothirak, a senior research fellow at Singapore's Institute of South East Asian Studies (ISEAS).

"Hun Sen's priority has been the economy, social order and the avoidance of conflict, and the current situation is a significant improvement from the past."

Hun Sen's government has come under fire recently, accused of corruption, abuse of power, and undermining the judiciary, raising concerns about future stability and its sincerity about carrying out long-awaited reforms.

Tens of thousands of people have been driven out of their homes in a slew of land seizures, while critics have blasted Hun Sen for filing lawsuits they say are merely attempts to intimidate journalists, activists and political opponents.

However, Hun Sen gets plenty of plaudits as well, and some analysts say the firm hand of the undisputed strongman is exactly what Cambodia and its economy needs.

"It's easy to criticise Hun Sen as a single-party ruler, authoritarian and totalitarian, but he's a pragmatist -- he does what he needs to do," said Ian Bryson, a regional analyst for Control Risks.

"There's no reason to forecast any instability in the near future. Cambodia's pretty rock solid. Hun Sen is healthy and he really is quite well-regarded."

Given the steady turnaround in Cambodia's fortunes since Hun Sen came to power 25 years ago, the popularity of the Khmer Rouge defector and former farmer and monk, comes as no surprise.

RECOVERY COURSE

Six years after Vietnamese invaders ended the Khmer Rouge's 1975-79 "killing fields" reign of terror, Hun Sen became premier and cultivated a reputation as a moderate, investor-friendly democrat, which helped put Cambodia on the road to recovery.

Until the global economic crisis struck, Cambodia had seen four straight years of double-digit growth fuelled by Hun Sen's pro-business policies, which created new jobs and infrastructure and raised living standards among the rural poor, many of whom live on less than $1 a day.

With backing from the poor, his Cambodian People's Party (CPP) scored 73 percent of the vote in 2008 elections, which observers said had only minor irregularities, to win its first outright majority after years of bickering coalition governments.

"I see no party that can challenge the CPP. They've improved the livelihoods of the poor and boosted their hopes and expectations for the future," said a Cambodian political science lecturer, who asked not to be named.

"The criticism Hun Sen has received does not reflect the overall situation. I can see the ruling party will continue to hold power ... and foreigners will continue to invest here."

Analysts say complaints about graft, cronyism, lawsuits and forced evictions from donors, rights groups, diplomats and financial institutions have irked Hun Sen, but will have little impact on his popularity.

The biggest challenge for the CPP, they say, is to revive the economy and ensure jobs are created to minimise the threat of social problems or civil disorder that could undermine its grip on power.

Foreign direct investment has slowed since the global financial crisis took its toll. Economic growth slowed to 5.5 percent in 2008 and the economy is forecast to shrink by 0.5 percent this year, according to the International Monetary Fund.

With a slump in demand from key markets like the United States, at least 130 garment factories have closed since late last year, prompting an estimated 50,000-60,000 lay-offs in an industry that brought in $3.8 billion in 2007.

But analysts say workers have accepted this is not the fault of government mismanagment, and that it looks unlikely to pose a threat to Cambodia's stability.

Neither, they say, will long-running diplomatic disputes with traditional foe Thailand over border demarcations, near the 11th-century Preah Vihear temple and in the Gulf of Thailand, where oil and gas deposits have been found.

Both sides have beefed up their military presence in the areas and seven soldiers died in skirmishes over the past year. But too much is at stake for both countries, and that is preventing the disputes from escalating significantly.

"It's been a bumpy ride for Cambodia, but stability is, and will remain, very much intact," added Pou Sothirak of ISEAS. "And for that reason, I expect foreign investors will return when the global economic situation improves."

(Additional reporting by Martin Petty)

Two factory strikes in one day

Tuesday, March 17, 2009
Everyday.com.kh
Translated from Khmer by Socheata

Workers at two factories held simultaneous demonstrations on 16 March to demand suspension pay and to demand money collected from closed factories in which the owner fled. 400 workers were on strike at the Go International garment factory, located in Kbal Damrey village, Kakab commune, Dangkao district. May Vattana, a representative of the Khmer Youth union, indicated that this factory suspended work for the workers for the past two months, starting on 10 January until 04 March. On the day the workers were supposed to return back to work, the factory owner had decided to suspend their work for another two months, an act which is contrary to the law. At another factory located on Street No. 371, More village, Dangkao commune, Dangkao district (in the past, it used to be located in the Stung Meanchey commne), about 650 workers went on strike since 11 March after they learnt that the Korean factory owner fled Cambodia to return back to his country. Som Aun, president of the Federation of Unions of Cambodia, said in the afternoon of 16 March that, after receiving the news that the factory owner fled Cambodia to return to Korea, and that he could not be reached, Som Aun asked the landlord to put all the equipments on sale to collect salaries for the workers.

Sacrava's Political Cartoon: Hanoi Pig-hD, Hun Xen

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

Government revises down economic growth [-Hun Sen's regime finally waking up to a dose of reality?]

Finance Minister Keat Chhon pictured in this file photo. The minister’s latest prediction for 2009 puts growth at five percent. (Photo by: TRACEY SHELTON)

Monday, 15 December 2008
Written by Nguon Sovan
The Phnom Penh Post

Minister of Economy and Finance Keat Chhon announced that a slowdown in the garment and real estate sectors could drive growth down to 5.0 percent

GOVERNMENT officials have once again lowered Cambodia's economic outlook, saying the Kingdom will see only five percent growth next year.

The revision follows strident criticism by the National Bank of Cambodia governor last week of the World Bank's prediction that growth would shrink to 4.9 percent next year. Previous government predictions vary from nine percent earlier this year to 6.5 percent last week.

Finance Minister Keat Chhon made the announcement at a meeting on Friday with special envoys of Japanese prime minister - Asean Ambassador Yoshinori Katori and Masakazu Toyoda. The dignitaries were visiting Cambodia to discuss the impacts on Asia of the world economic crisis.

Cheam Yeap, chairman of the Commission on Economy, Finance, Banking and Auditing at the National Assembly, told the Post Sunday that the lower growth outlook came after consultation with economic experts.

"I have analysed the growth for 2009 with economists, and we agree with Keat Chhon's forecast of five percent instead of the previous forecast of 6.5 percent," Cheam Yeap said.

He blamed a deepening slowdown in the garment and real estate sectors for the revised estimates, but added that strong agriculture and tourism growth could help limit the impact next year.

"Even the IMF, the World Bank and the ADB have predicted that tourism will also be affected by the crisis. I predict, as the former minister of tourism, that the sector will remain strong because of the political crisis in Thailand, which will divert tourists to Cambodia," he said.

Some 1.7 million tourists visited Cambodia between January and October this year, an increase of 8.5 percent over the same period in 2007, according to statistics from the Ministry of Tourism.

"The government's lowering of the growth rate to five percent is reasonable and probably appropriate," Chan Sophal, president of the Cambodia Economic Association, told the Post on Sunday.

"However, there will still be uncertainties, especially in the garment and real estate sectors, over the involvement of foreign investors."

He added that tourism may be slightly impacted by the crisis.

"The number of Western tourists may decline, but Asian tourists such as the Chinese, Japanese and Koreans may still spend their holidays in Cambodia."

Cambodia saw an average of 11.1 percent economic growth from 2004 to 2007, according to a World Bank report released last week.

The report added that growth would slow this year to 6.7 percent and drop to 4.9 in 2009.

Consumers trade fashion for practicality: vendors [-Welcome to the real economic world!]

Ry Srei Ya, 17, talks on her mobile phone on the Phnom Penh riverside this week. (Photo by: Heng Chivoan)

Friday, 12 December 2008
Written by Sam Rith
The Phnom Penh Post

Local retailers say they are feeling the effects of the global economic crisis as traditionally robust sales of luxury mobile phones, vehicles decline

AS OFFICIALS and international analysts scramble to assess the local impact of the global economic crisis, retailers in Phnom Penh say sales of high-end mobile phones, automobiles and motorbikes have plummeted as the capital's middle classes tighten their belts.

Luxury mobile phone sales - a largely youth-driven economic indicator - have dropped substantially as more people do without or settle for cheaper models.

"This year's sales at my shop have dropped 70 percent compared to last year," said Heng Vantha, owner of Asia Phone Shop in Phnom Penh.

Average sales used to be about 15 phones per day, she said. Now she moves only about two or three per day - mainly inexpensive models.

"Last year, customers were buying phones that cost US$100 and up. This year, they are buying models that cost $30 or less," she said.

Automobile sales have also proven vulnerable to the global economic slide, as more and more professionals trade in their luxury cars for cheaper modes of transport.

Real estate agent Chea Chansangha, 27, used to drive a late-model car and routinely spent a small fortune on the latest mobile phone technology. Falling land sales, however, have forced him to forgo his accustomed luxuries.

"I recently sold my $300 mobile phone and bought a cheaper one instead."

"Now, I'm almost broke. I don't have money for new phones or cars to look trendy and fashionable, as I did last year," he said.

"I've not been able to sell any plots of land [this year]. Last year ... I made a lot of profit, but now the land market is quiet," he added.

Kong Nuon, president of Cambodia's only Toyota distributor, TTHK Co Ltd, said sales of Toyota vehicles had fallen almost 50 percent since May.

A drop in land sales has dried up cash streams that in previous years were swollen by the property boom, realtors say, adding that price fluctuations have made consumers much more conservative in their spending - a trend that one property expert says will take time to reverse.

"It will take about one or two years for land prices to return to normal," said Sung Bonna, head of leading property firm Bonna Realty.

In the meantime, some consumers have begun to look for ways to cut their losses by sacrificing flash for practicality.

"I recently sold my $300 mobile phone and bought a cheaper one instead," real estate agent Chea Chansangha said, adding that he gave up his car in favour of a motorbike.

Nom Leanghim, owner of the Blue Heart Phone Shop in Kandal market, said he sees signs of growing economic hardship every day.

"Young people do not have money now. Some of them have exchanged their expensive phones for cheaper models," he said, adding that many have given them up altogether.

"I am now buying back more mobile phones from young people than I am selling to them," he said.

The World Bank on Wednesday predicted economic growth of only 4.9 percent in Cambodia in 2009, down from 6.7 percent projected this year.

Thousands of garment factory jobs under threat: owners, unions

Tuesday, 18 November 2008
Written by Sam Rith
The Phnom Penh Post

With the global economic crisis taking its toll on Cambodian garment exports, the sector may face factory closures and mass layoffs

THOUSANDS of garment workers in Cambodia could be laid off in coming months if global markets, particularly the United States, continue to fall into deepening economic crisis, labour leaders and garment industry officials said Monday.

Chuon Momthol, president of the Cambodian Union Federation (CUF), a government-aligned union, said as many as 35 garment factories could be shuttered in November or December if dire international market conditions to not improve.

"So far, at least 20,000 workers have been laid off," he said, adding that the 35 factories facing closure employ between 1,000 and 5,000 workers each.

Van Sou Ieng, chairman of the Garment Manufacturers Association of Cambodia, said 30 factories have been closed this year.

"They closed because there were no purchase orders," he said.

"Our factories this year have only been operating at about 70 percent capacity."

He added that there was no indication that the situation for garment makers would improve in the near-term.

"Next year, the garment sector will face greater shortfalls in orders, particularly from buyers in the United States," he said.

Cambodia's nearly 500 garment factories employ about 350,000 workers nationwide, with most coming from the country's rural provinces, the CUF's Chuon Momthol said, adding that September saw the start of a critical downturn in the garment sector.

But Chea Mony, president of the Free Trade Union of Workers, said the garment sector would be unaffected by the economic slump.

"Factory closures were caused by the pullout of some investors who had been in Cambodia for 10 or 20 years but who have moved on to avoid legal conflicts over labour issues with the workers," he said.

Cambodia Economists Predicts Slower Economic Growth [-General commodity price of Cambodia has increased by some 66% since the beginning of the year]

PHNOM PENH, July 2 (Bernama) -- The Cambodian Economic Institute has predicted that the country's economic growth will slow down due to inflation and stagnation of real estate transactions.

Both the factors will drag Cambodia's leg of the economy and is expected to cause more problems hence after, China's Xinhua news agency quoted the institute experts, as saying at a month-seminar on domestic economic situation.

According to official statistics, general commodity price of Cambodia has increased by some 66 percent since the beginning of this year.

Meanwhile, most real estate projects and transactions are on hiatus due to political calculation of the ongoing general election.

The Cambodian government and international financial institutions once estimated that the economic growth rate of Cambodia will reach seven to nine percent in 2008.

The economic growth rate of Cambodia stood at double digits during the past three years due to strong exports of garments and a booming market of infrastructure construction.

Economic growth to drop to 7 percent: International Monetary Fund

Monday, 09 June 2008
Neth Pheaktra
The Mekong Times

Cambodian economic performance remains robust though the pace of growth is expected to ease to around 7 percent in 2008, down from over 10 percent last year according to an International Monetary Fund (IMF) statement released Friday.

An IMF staff mission led by Luis Valdivieso, visited Cambodia from May 28 - June 5, to hold discussions with senior Cambodian government officials on macroeconomic developments and policies. The mission also met representatives from the business community and development partners.

The IMF said the drop in economic growth to around 7 percent this year mirrors slowing growth in the garment sector. Garment exports are under pressure because of a decrease in international demand and intensified regional competition, the IMF explained.

Cambodia’s garment industry is a major contributor to the gross domestic product (GDP) with 301 factories and over 340,000 workers exporting US$2.9 billion worth of garments last year.

“Tourism continues to expand at a healthy pace,” the IMF stated, with the Tourism Ministry reporting around two million tourists visiting Cambodia last year generating a total revenue of US$1.4 billion. Cambodia’s tourism industry accounts for 15 percent of GDP and employs tens of thousands, indirectly benefiting many more.

Cambodia, as a net rice exporter, should benefit from higher rice prices, the IMF said, but it warned higher food prices will adversely affect the most vulnerable, particularly the urban poor and the landless.

Inflation, running at 18.7 percent in January, was a major IMF concern.

The IMF welcomed measures to deal with inflation – a temporary ban on rice exports and the provision of subsidies – announced by Prime Minister Hun Sen Apr 23.

The IMF emphasized that maintaining a “prudent fiscal stance is key to moderating inflation pressures,” while recommending “efforts be made to limit the overall budget deficit to around one percent of the GDP in 2008, so as to continue building up government deposits of 2 percent of the GDP in the National Bank to help contain inflation pressures.”

The IMF mission also lauded the government’s “ongoing efforts to safeguard the financial system.”

Cambodian economic growth to drop to 7% in 2008

The IMF warned higher food prices will adversely affect the most vulnerable, particularly the urban poor and the landless.

PHNOM PENH, June 9 (Xinhua) -- Cambodian economic performance remains robust though the pace of growth is expected to ease to around seven percent in 2008, down from over 10 percent last year, local media reported Monday.

According to an International Monetary Fund (IMF) statement released recently, the drop in economic growth to around seven percent this year mirrors slowing growth in the garment sector, the Mekong Times newspaper quoted the IMF as saying.

Garment exports are under pressure because of a decrease in international demand and intensified regional competition, the IMF said.

Cambodia's garment industry is a major contributor to the gross domestic product (GDP) with 301 factories and over 340,000 workers exporting 2.9 billion U.S. dollars worth of garments last year.

"Tourism continues to expand at a healthy pace," the IMF stated, adding that with the Tourism Ministry reporting around two million tourists visiting Cambodia last year generating a total revenue of 1.4 billion U.S. dollars.

Cambodia's tourism industry accounts for 15 percent of GDP and employs tens of thousands, indirectly benefiting many more.

Cambodia, as a net rice exporter, should benefit from higher rice prices, the IMF said, but it warned higher food prices will adversely affect the most vulnerable, particularly the urban poor and the landless.

An IMF staff mission led by Luis Valdivieso, visited Cambodia from May 28 to June 5, to hold discussions with senior officials of the Cambodian government on macroeconomic developments and policies.

Cambodia's economic growth set to slow down

Sunday, June 08, 2008
ABC Radio Australia

The International Monetary Fund predicts Cambodia's economic growth will slow by more than three percentage points this year, while inflation rises sharply.

With inflation at 18.7 percent in January, the IMF is urging the Cambodian government to build up its central bank deposits to curb inflationary pressures.

The IMF says growth will drop from 10.3 percent last year to 7 percent because of the downturn in garment exports.

While acknowledging the continuing robust economic activity from growth in tourism and higher prices for rice exports, the IMF warns the country's poor still remain vulnerable.

Under employment and low wages mean that some 35 percent of the country's 14 million people still live on under 50 US cents a day.

No more double digit growth in 2008? [-Cambodia yearly trade deficit: $1.5 billion]

Cambodia expects 2008 growth of 7.3 percent - PM

PHNOM PENH, Feb 28 (Reuters) - Cambodia's economy is expected to expand by 7.3 percent this year, a slower rate than in 2007 due to the pressure of high world oil prices, Prime Minister Hun Sen said on Thursday.

However, a blossoming private sector, overseas aid, sustained foreign investment and continued political stability should ensure healthy growth in the key garment, tourism, construction and agriculture sectors, he said.

"Cambodia needs to sustain this growth to catch up with and keep pace with neighbouring countries," Hun Sen said at a economic conference for international investors.

Cambodia's economy struggled during the 1990s to shake off the legacy of decades of civil war and upheaval, including the atrocities of the Khmer Rouge "Killing Fields".

However, it has taken off in the last few years, and expanded at an estimated 9.6 percent last year, making it one of the fastest-growing economies in the world.

Its gross domestic product is $8.4 billion, giving a per- capita annual income of more than $500.

The garment sector, valued at $3.8 billion last year, represents the lion's share of exports, a government report showed.

The Southeast Asian nation also received 1.7 million tourists last year and expects a 25 percent increase in 2008.

The report said reserves had increased by $600 million last year to $1.7 billion, but said the country ran a trade deficit of $1.5 billion, mainly due to the increase in value of petroleum imports.

ADB foresees economic slowdown in Asia in 2008

HONG KONG, Dec. 14 (Kyodo) - Economic growth in emerging economies of East Asia next year will ease a bit from 2007 due to the slowdown of the U. S. economy, the credit outlook and rising oil and commodity prices, the Asian Development Bank said Thursday.

The Philippines-based bank, in the December edition of its semiannual Asia Economic Monitor, said economic growth in emerging East Asia will ease to 8 percent in 2008 from 8. 5 percent in 2007 as expansion in key industrialized nations moderates amid volatility in financial markets and rising oil prices.

''Slower growth but rising inflationary pressures -- despite appreciating currencies -- pose major challenges for the region's policy-makers,'' the report said.

The emerging economies were identified as China, Hong Kong, Taiwan, South Korea and the 10 members of the Association of Southeast Asian Nations, which groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

The report said China's growth is forecast to slow from 11. 4 percent in 2007 to 10. 5 percent next year if measures to cool the economy begin to take hold, the report said.

A series of tightening measures has been introduced by Beijing to curb rapid investment growth and asset-price inflation since mid-2006, but the full effect has yet to be seen.

Growth in the ASEAN region will slightly moderate to 6. 1 percent next year from 6. 3 percent in 2007, the report said, The report said a hard landing of the U. S. economy could have a significant impact on the emerging East Asia's growth as trade linkages with the major industrialized economies remain strong.

''The U. S. current account deficit this year is expected at 5. 6 percent of GDP, down sharply from 6. 2 percent last year.

Still, resulting global imbalances remain extremely large.

''To the extent that the ongoing correction in global financial markets may reflect the dynamics of underlying market forces to reduce the scale of global imbalances -- which entails a U. S. dollar depreciation, U. S. economic slowdown, and reduction of U. S. dollar asset returns -- even a gradual and thus protracted unwinding process would have significant impact on emerging East Asian markets,'' it said.

In conclusion, the report said that against a backdrop of continued uncertainty over the future growth outlook and global financial stability, ''deeper and more comprehensive'' financial sector and market reforms are required to enhance flexibility and resiliency of the region's banking and financial systems.

''Strengthening regulatory and supervisory frameworks is particularly important for emerging East Asian markets that employ relatively weak financial market infrastructure for credit risk assessment and effective risk management,'' it said.

''Formulating an appropriate policy framework to prepare for possible risks from continued global financial instability can help insulate emerging East Asia from any major deleterious effects.''