Cambodia: Positioning for 2008

Southeast Asian Affairs 2006 CAMBODIA Positioning for 2008 Verghese Mathews There is truly never a dull day in Cambodia and 2005 was no exception. What started off as an uncertain year ended much better than expected, but only to subsequently witness renewed excitement and condemnation ofthe government forthe detention of some high-profile political activists towards the end of the year and in early January 2006. Truly, too, some things hardly ever change. In contemporary Cambodian politics any issue is fair game for both the opposition and the government — as one tries to make the country ungovernable while the other tries to make its adversary impotent. The country's friends and detractors alike assess the post-conflict Cambodian political culture as nothaving yetimbibed Western concepts ofpower sharing, loyal opposition, and open dissent.1 Politicking, it would appear, is both in the blood and in the roots of the hairs of Cambodian politicians who practise it with great enthusiasm and blatant impunity. The Economy in 2005 Interestingly enough, Cambodia has managed to record a fairly impressive economic growth rate the past few years. In 2005 the economy grew more than 6 per cent. While this was less than the 7 per cent of 2004, it exceeded World Bank projections three times over. The garment industry continued to spearhead growth, followed by the tourism and construction sectors.2 Nonetheless, Cambodia remains one ofthe poorest countries in the world with a per capita income ofonly US$320.3 The growth was due, in no small measure, to increasingly prudent fiscal policies and to overall sustained political stability.4 In this context, in late December 2005, Verghese Mathews is Visiting Research Fellow at the Institute of Southeast Asian Studies and a former Singapore Ambassador to Cambodia. 74Verghese Mathews the Royal Cambodian Government (RCG) was delighted with the announcement of the International Monetary Fund (IMF) that it would grant Phnom Penh a 100 per cent debt relief, amounting to approximately US$82 million — the amount that Cambodia had amassed before 1 January 2005. The cherry on the cake of the announcement was the IMF observation that Cambodia, one of a handful of countries to be thus rewarded, had qualified for the debt relief because "of its overall satisfactory recent macroeconomic performance, progress in poverty reduction, and improvements in public expenditure management". The IMF further noted that since 1999 Cambodia had enjoyed robust economic expansion, with annual growth rates averaging over 7 per cent, inflation well under control, and improvements in its public administration — in particular, public expenditure management.5 While this was a rare and sweet vindication of Cambodian efforts in the last few years, the country still has other debts to worry about. When presenting the 2006 budget, Finance Minister Keat Chhon emphasized that despite the IMF relief, Cambodia still had great difficulties in repaying debts, accumulated since 1992, of US$500 million to the Asian Development Bank (ADB) and US$570 million to the World Bank. Meanwhile, Cambodia was negotiating with Russia and the United States over old debts owed to the two countries.6 Likewise, the well-regarded Director-General of the Finance Ministry, Hang Chuon Naron, a man with both his feet firmly on the ground, admitted that even though Cambodia had achieved high economic growth, the poverty levels had also remained high because growth had been very narrow, concentrated on the garments and tourism sectors.7 Both these warnings are a reminder that while there are undoubtedly ongoing attempts by both the RCG and the non-governmental organizations (NGOs) to reduce poverty levels in Cambodia, the harsh reality is that there is so much more to be done. Donor Assistance There is no doubt that Cambodia's progress in poverty reduction and improvements in infrastructure and education, however modest, was to a large extent because of the generous annual foreign aid, which the country continues to depend on. In 2005, donors pledged US$504 million in aid, raising the post-1993 total to over US$5 billion.8 In recent years, donor countries have become more insistent that in return for aid, Cambodia had to demonstrate adequate progress in the mutually agreed Cambodia: Positioning for 200875 reform targets. At the...