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Cambodian Insight Organization
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IMF Still Cautious on State of Global Economy
Update; 27th June 2009
The IMF is urging governments to fully implement the spending
measures they have announced to combat the global economic crisis and not to
relax in supporting an incipient recovery. The latest economic news from
around the world gives some reason for cautious optimism, said John Lipsky,
the IMF’s First Deputy Managing Director, and added that “Tentative signs
are emerging that the rate of decline in global output is moderating and
that financial conditions are improving.” Lipsky said it was far too early
to draw firm conclusions. But he said this news “offers positive
reinforcement for the unprecedented efforts under way to resist the
unprecedented challenge. After all, the breadth and severity of the
financial crisis and economic slowdown are the most serious experienced
since the 1930s.” Nevertheless, he said that ongoing policy support would be
crucial in laying down firmer foundations for renewed growth, including the
restoration of financial sector health. Lipsky said policymakers around the
world had responded with flexibility and ingenuity, using all the weaponry
available in their arsenal, including large-scale fiscal stimulus, very
accommodative monetary policy, plus strong and often innovative support for
the financial sector. “The speed and magnitude of the policy response no
doubt played a key role in beginning to turn around market sentiment, in
slowing the decline in economic activity, and in truncating the downside
risks.” But while clear signs of recovery are visible in some emerging
markets, particularly in Asia, the recovery still appears to be struggling
to become established in most advanced economies, Lipsky stated. Countries
should not relax their fiscal stimulus measures. “Regarding fiscal policy,
the implementation of the announced stimulus measures is an incomplete
challenge.” Lipsky said that although experience varied across countries and
programs, actual spending of announced stimulus measures was relatively low
in many cases. “It is straightforward to conclude that the spending measures
already announced must be implemented if they are to support the incipient
recovery. Moreover, if the signs of recovery turn out to be a false dawn,
consideration may need to be given to providing additional stimulus,” he
added. The IMF, which has forecast an end to the recession later this year,
with a recovery in 2010, will give its latest projections for global
economic growth on July 7. |
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Thai’s Are Ludicrous – In Action and in Claims
Update; 25th June 2009
Thai Second Army Region commander Lt-General Wiboonsak Neeparn was
quoted by the Bangkok Post as saying that the situation along the border at
Preah Vihear was very tense with the two sides faced off against each
other. What else is new? The Thai’s could never be trusted and are trying to
do again what their leaders before the current regime had tried and what the
invading forces of the ancient empire failed to attain. His assertion that
policy-makers in the two countries should quickly find a solution to the
problem and that if the situation escalates further, that could mean more
violence is outrageous as it is clearly evident that Thais are provoking a
confrontation with the Cambodians, probably based on their (Thais) belief
that the RTAF is better equipped and trained then their counterpart RCAF.
what the Thais have failed to realize, to the detriment of the body count
thus far on the Thai side is the RCAF facing off the RTAF are seasoned
battle weary former forces whose entire career was spent defending the
country against foreign aggressors. The claims that Thai troops in the area
would not initiate a clash but would be prepared to retaliate if Cambodia
opened fire first is again provocative as each incident thus far was
provoked by the Thais themselves. To add insult to injury, their Prime
Minister, after a visit to Cambodia pledging friendship, turned tails and
said that Thailand was bringing the Preah Vihear issue back to UNESCO. What
could be more ludicrous than the irrational actions of the Thai military and
the leadership, which obviously does not or has very little control over the
RTAF! Tensions have been mounting along the border near the Hindu temple
since last week, when the Thai government decided to maintain its objection
to Preah Vihear's World Heritage inscription. |
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Why Not a Food For Oil
Deal?
Update; 23rd June 2009
Recent report about the Gulf Cooperation Council showing keen
interest to invest in farming in Cambodia has brought to mind the alleged
“neo colonial” land grab by rich governments and multinational corporations
for arable land in Africa in order to ensure their food and energy security.
(The Gulf Cooperation Council comprises Bahrain, Saudi Arabia, Kuwait, Oman,
Qatar and United Arab Emirates.) In Africa alone, it was reported that an
estimated 15-20 million hectares are up for grabs across the continent – an
area equivalent to the total amount of land currently under cultivation in
the whole of Germany. South Korea’s business juggernault, Daewoo Logistics,
for instance, has concluded a deal to lease one million hectares of land in
Madagascar. The aim is to produce five million tonnes of corn by 2023 and
palm oil from a further 120,000 hectares in the country to ensure food
security. To be honest, the Gulf Cooperation Council should be commended for
their foresight to ensure their own food security for the future. The
failed crops in several food-producing countries a few years back which
resulted to sharp rises in grain prices may have tempted the Gulf states to
look for land in such potentialluy high rice-producing country like
Cambodia to ensure their own supply of rice on a long-term basis. But
instead of rejecting outright the Gulf states’ investment proposal, why
don’t we seize the opportunity to bargain for a quid pro quo arrangement to
ensure our own energy security since we are net importers of huge amounts
of oil each year for domestic consumption. How about a food for oil deal on
fair terms for the benefits of both parties? |
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Our Educators Must do
Better
Update; 21st June 2009
Mob rule seems to be the name of the game these days for
disgruntled people, and the mobs seem to be wanting to be effective in
pressing state authorities to accept their demands, even if they go against
established principles and reason. A case in point is the statement made by
the president of one of independent unions in Cambodia who said that there
will be mass demonstrations if opposition parliamentarian Mu Sochua is
stripped of her parliamentary immunity and arrested. Rong Chhun president
of the Cambodian Independent Teachers Association, has issued a statement
mid June that his union, the Free Trades Union of Cambodia and the
Federation of Cambodian Students and Intellectuals will mobilize 85,000
people to rally on the street in support of Mrs. Mu Sochua. This a typical
mob mentality. The teachers and the unions, instead of focusing on their
main task of educating the children, seem to be educating themselves, their
colleagues and the students on illegal activities. This is preposterous as
educators are paid by the Government and the people to educate children
under their care and not teach them on activities which are detrimental to
civil society. |
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Which Era did the Rand National Defense
Research Institute Base its Findings on Cambodia?
Update; 19th June 2009
The RAND Institute stated that there were three aspects of the
overall terrorism environment in Cambodia. First, it considers the country’s
potential to become a sanctuary and theater of operations for international
terrorists and the extent to which their activities could be enabled by
extant criminal elements. Second, it assessed the potential for
radicalization of the Cham and Malay Muslim communities. Finally, it
evaluated efforts on the part of the central administration in Phnom Penh to
dampen and constrain extremist violence. This is a widely damning report,
which has not based its findings fully on facts but by research, probably
arm chair to a large degree, and which is based on assumptions and events
which has occurred in the past decade but not so to the degree the report
claims in the current decade. That the US is an active partner in educating
the Cambodian Chams through various programs and seminars has been over
looked. Cambodia is not like Thailand where there is a disparity between the
Chams and the predominantly Buddhists. Both people exist and live
collectively and in harmony. Though it cannot be denied that issues related
to smuggling and porous borders are probably true to a large extend, to lump
it into one analysis without considering the progress the security apparatus
has made, is not a step in the right direction. Cambodia would not be in
such a position in the past and even the present if bigger or nations with
sinister motives did not encourage illegal activities or simply stop using
Cambodia as an excuse or a case study for their dubious research! |
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The Siamese Cannot be
Trusted, Whoever the Prime Minister Is!
Update; 17th June 2009
Thai Prime Minister Abhisit Vejjajiva made an official visit to
Cambodia last week and returned several stone artifacts from the Angkorian
period to Prime Minister Hun Sen. Then he went home and ratcheted the ante
and sparked the ultra nationalist on both sides of the border with the
stupendous, highly irresponsible and provocative statement that the Thai’s
would seek joint World Heritage registry for the contentious Preah Vihear
temple, a place where blood has been spilled (maybe not enough on the Thai
side). Hundreds of troops on each side are engaged in a long-running
standoff. “I want to see the temple a peaceful area so that the temple of
the two countries can jointly benefit from this site of high historical
importance,” Abhisit said, but this can surely be achieved with the Thai’s
recognizing that Preah Vihear belongs to the Cambodians as decreed by the
World Court and with the Thai army withdrawing and stopped unilaterally to
trespass or conduct provocative border maneuvers at the contentious border
area. The fact that Abihisit made this statement soon after extending a hand
of friendship during a visit to Cambodia, is a signal which Cambodia must
take seriously. It is similar tone hand being extended to shake the hand of
Cambodia’s Samdech Hun Sen while the left hand (Abhisit’s) is holding a
dagger. Thailand should stop playing to its domestic media to divert
attention away from its domestic political and security issues and refrain
from using Preah Vihear as a tool for this purpose. |
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Thai's Stumped by Barrack
Obama
Update; 15th June 2009
The latest decision on Southeast Asia by US President Barack Obama is
the second disturbing action by Washington affecting this region. Mr, Obama
announced a major new policy initiative. The low-level statement that he was
declaring Laos and Cambodia eligible for major US loans and trade
concessions took the rest of the region by surprise. The first visit to
Southeast Asia by Secretary of State Hillary Clinton largely ignored the
longest and strongest US allies. Now, the decision to give special treatment
to Laos and Cambodia came as a bit of shock, including in Thailand. Mr
Obama's "determination" about each country was a brief official statement,
posted at the White House media room and website. Such presidential
determinations are legal obligations in many cases in the United States;
these were the 20th and 21st of an early presidency. But as these statements
showed, they are often "game changers" by the president. In these almost
identical statements, Mr Obama declared that Laos and Cambodia are eligible
to be beneficiaries of US Export-Import Bank loans for American businesses
in those countries. The reason, Mr. Obama said, is that each "has ceased to
be a Marxist-Leninist country". Mr. Obama was apparently not concerned,
rightly so, with the nuances of Marxist evolution. It was mandatory to
declare Laos and Cambodia were not communist countries in order to achieve
his true goal - to provide millions, and perhaps billions, of investment
capital for American businesses to set up, operate in and trade with the two
neighboring countries. Mr. Obama did not explain why he set this goal.
Indeed, the manner of the announcement was to keep all questions and
justification to a minimum. This apparently was to stifle the negative
reaction of political groups in the US who are appalled at the treatment of
Hmong tribes people by Laos. A more important result, however, is that Mr.
Obama has created negative fallout in Thailand and the region. The US Exim
Bank rarely is involved with Thailand, and generally supports one-time sales
rather than investment. Mr. Obama's unexpected support for Laos and Cambodia
disappointed many in Thailand. For years, Thai businesses have expanded into
these countries. The overseas business expansion - ironically with the
frequent support of the Exim Bank of Thailand - has been a major engine of
Thai growth. This in turn has led to decreasing dependence upon foreign help
and special programs by Washington. The sudden entry of the US Exim Bank
into these Thai markets will affect Thai trade and the economy. But why
should Cambodian’s be overly concerned about this? Afterall, one country’s
loss (Thailand) is another country’s gain – CAMBODIA! God bless America (at
least in this instance). |
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Thai PM Must Do More to
Minimize or Eliminate Continuing Border Provocations
Update; 13th June 2009
Chak Chreng area became a new flashpoint of renewed border tensions between
the two countries when a group of 30 Thai troops occupied the areas about a
month ago. The Thai military has reinforced their troop numbers by sending
100 soldiers to the areas in four military trucks, escorted by tanks and
armored personnel carriers equipped with heavy weaponry. The near eruption
of armed clashes was caused by unusual Thai troop movements with tanks and
armored personnel carriers trying to force their ways into Khmer
territories. The Cambodian troops resisted and stopped them with severe
warnings or face resistance by RCAF. The Thais then stropped the push and
made a contact to their superiors who then contacted the Cambodian
commanders. The Thais claimed that the tanks and armored carriers were
escorting their commander, Gen. Sethadee, to inspect the areas. This is off
course utter rubbish as why would they want to bring such heavy weaponry if
it was just an escort mission? Surely the RTAF is not expecting the RCAF to
ambush their general, especially when Cambodia was preparing to receive the
Thai Prime Minister. |
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Cambodia Asks US for Debt
Relief
Update; 11th June 2009
Cambodia has asked the U.S government to forfeit $300 million of
debts that Cambodia owed since the early 1970s.The debts which were owed by
the Lon Nol regime since 1972. The original debt was $160 million but due to
compounded interests for the last 37 years, the debts have doubled to $300
million. During the 1980s, under the Heng Samrin regime, Cambodia had
borrowed about $1,000 million from Russia. Cambodia had already asked Russia
to cancel that debt, but so far has not received an answer from the Russian
government yet. Cambodia was said to be heavily indebted to China as the
Khmer Rouge regime was said to have borrowed heavily from the Chinese
government during their 3 year-rule in the 1970s. |
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Farmers to Get Access to
Loans
Update; 9th June 2009
Cambodia Public Bank and ANZ Royal will provide loans to small
and medium businesses, through a program with the UNDP and International
Trade Center. The loans will be available from October 2009 and will focus
on 100 agricultural-related businesses. The two banks were selected from
some other banks that had an interest in offering loans to small and medium
enterprises. The UNDP is working with the International Trade Center to
provide technical support to banks and businesses for the 18-month project.
The Agence France de Development will provide credit guarantees for two
partner banks. Trade experts and economists say Cambodia’s small and medium
enterprises are currently driving the economy. But these businesses lack the
formal financial support they need to expand, because banking and finance in
rural areas are not fully developed. Studies show that of around 64,000
small and medium enterprises in Cambodia, only 80 percent get loans from
banks. Informal loans, meanwhile, lead to financial problems down the road.
The bank-loan project will provide financial management training and
guidance to enterprises. Under the project, the two banks will be able to
evaluate strength and weakness of the businesses. Loans to SMEs, would be
beneficial as they grow quicker, and SMEs are seen as the biggest generators
of jobs. |
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Perceived Impact of
Economic Slowdown
Update; 7th June 2009
The World projected a 1 percent contraction of the Cambodian
economy. This is based on an analysis of available statistics and feedback
from a range of economic actors. Yet, to many, it remains hard to
conceive. It is true that seeing" such a contraction will be difficult.
Basically, what it means is that economic activity in 2009 will be pretty
much the same as in 2008. So the fact that Cambodia continues to have
traffic jams in Phnom Penh, see tourists at the Royal Palace, and hear
construction machines in many residential areas is consistent with such a
projection. What will change, though, is that incomes will not increase this
year as fast as past years and it will also become more difficult for the
250,000 young people leaving school each year to find their first job. What
also will be different is that with no growth in aggregate, there will be a
proportion of those with a livelihood at the end of the year worse than at
the beginning. Significant signs are those factories that either close
definitely or temporarily. A one percent contraction of the economy more or
less means that every production activity stops for an additional 3 days
this year. There are also visible signs in Siem Reap, with less-than-full
hotels. This will likely to see migrations as well as people move as a
reaction to missing opportunities. The other reason of incredulity is that
most people in Cambodia live off agriculture or informal jobs. It is true
that these sectors often do not face the direct consequences of the global
economic crisis: the crisis affects Cambodia's economy because it leads to
fewer consumers to buy Cambodian shirts; less money to go on a trip to
Angkor Wat; and fewer investors to develop Cambodia's formal sector. The
rural and informal sectors have traditionally been the shock absorber of a
rather resilient economy. The livelihood of many rural families depended on
remittances from a woman in the family that was working in a garment factory
or a man working on a construction site. So, even the informal sector is not
entirely insulated from the global crisis. The main question, thus, is how
long the slowdown will last. Comparing this question with the development of
children, one would probably not notice immediately if one of them would
stop growing for a little while. And it might not be an issue anyway, as he
or she could later catch up. But sustained slow growth is much more of a
problem. The World Bank analysis remains positive on the medium-term
prospects of growth for Cambodia. Will the resilience of Cambodia's economy
avoid a contraction of the economy this year? Has the country the capacity
to rebound as early as next year? Yes it can. If prudent fiscal and
monetary measures are put in place coherently, co-efficiently and
cohesively. |
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Agriculture Expected to Maintain Momentum
Update; 5th June 2009
Despite the gloom of the garment, construction and services
sectors in 2008, the agricultural sector, on the contrary is bracing itself
for a demand boom. The agricultural sector continues to be natural resource
based and growth increased by approximately 4.8 percent in 2008, down from
a 5.1 percent increase in 2007. Growth was bolstered by an expansion in
cultivated areas and higher agricultural product prices. The agro-investment
has remained weak, despite soaring prices and demand on the local and global
market. Despite the global crisis remaining in 2009 and prices of
agro-products are going down, the agricultural sector growth is expected to
keep the moderate growth pace of about 4.3 percent in 2009 as prospects
remain moderate in the coming years. Promoting the agricultural sector is an
urgent need to diversify the sources of growth. The garment and
construction industries appear to be insufficient for the country’s
economic growth in the coming years. Repeatedly, more effective irrigation,
infrastructure, and natural resource management systems are required to
speed up and achieve sustainable agricultural growth and thus reduce
poverty, as the agricultural sector is the main source of income for the
country’s poorest inhabitants. The optimism in the agricultural sector stems
from the fact that an estimated US$320 million of the investments approved
in the first four months of 2009 is in this sector, compared to the overall
FDI of US$985 million. With the possibility of more industrial scale farm
investments expected, mainly from the Middle East, the agricultural sector
continues to give a sense of optimism though prices are currently quite
depressed.
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The Major Challenge for Cambodia in 2009
Update;
3rd June 2009
The major challenge for Cambodia in 2009 is economic and social
stabilization. Though there are those who doubt whether the Royal Government
can cope with the pressure of mounting job losses in the garment,
construction and tourism sectors, while it seek to resolve these economic
problems, it is nevertheless to stress that efforts are being made, albeit
insufficient to many. It is a high mountain for a relatively young and LDC
status country like Cambodia to climb, to restore economic and social
stability and ensure the continuity of generating employment to hundreds of
thousands of people it weathers the storm of the global economic crisis and
social problems. The positive side of the government is that it has no
security issues, except to the festering border dispute with its
recalcitrant neighbors – the Thais over Preah Vihear , bureaucracy, and the
business community. The veteran politicians in the Government and the
dominant CPP are also fully behind the Prime Minister despite never ending
rumors of internal rifts. The GDP growth rate for 2009 is projected to be 2
per cent. The closures of garment factories since September 2008 and
continuing till now, will definitely affect the sentiment of foreign
investors and outsiders adversely. The government has realized the problem
and is attempting to use monetary and fiscal means to revive the economy.
The government however does not have the funds for spending on mega
projects and infrastructure to boost the economy in medium term. For this,
it has to rely on ODA and probably the Chinese as ODA from other sources is
also withering. The global economic slowdown will decrease demand for
Cambodia’s garments in the US, UK, and other EU countries. But exports from
Cambodia are mostly necessary goods such as foods and daily used items that
could still be in demand. Despite the fact that a large per cent of the
Cambodian GDP comes from exports, Cambodia has nevertheless yet to develop
a diversified export base so it will be heavily affected from the lower
export orders from the main industrial country markets. A positive factor is
that inflation rate will be lower due to declining prices, which will also
bring down product costs and living expenses.
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Lost Millions and Lost
Opportunities
Update;
1st June 2009
The lost of almost 100,000 garment factory workers since
September 2008 to end May, 2009 is catastrophic. The loss of jobs,
shuttering of factories, temporary suspensions and pay cuts, reduced working
hours, are together, having a massive impact on the Government and the
economy as a whole. While the government is trying its best to come to terms
with this economic hardship, brought about by the loss of jobs to its
people and an estimated USD60 million and USD100 million per year in loss
income, is money which is disappearing from the national economy. Adding to
this woes is the loss of up to US$20 million a year in remittance from the
workers in the factories to their families, thus a loss of US$20 million
evaporating from the rural economy – the end destination of most of these
remittance. Add to this the multiplier effect and the figures would be mind
boggling. The Ministry of Commerce efforts to establish training centre and
pay laid off employees a meager US$1 dollar a day as training subsistence
living allowance is paltry yet welcome as it is a sign of effort. Trying to
persuade the banks to lend to the garment sector is also not working as the
garment sector is a high risk sector and the banks do not want to be exposed
to such risks. In fact, the banks would prefer not to lend money to almost
any sector at all. Thus, CIO would like to suggest several points to the
authorities such as the Central Bank. 1st. Enforce a minimum must lend
policy to the following sectors: Garment, Construction, Manufacturing and
SME’s. 2nd. Enforce a base lending rate or Cambodia Inter-Bank Base Lending
Rate (CIBOR) to curb run away interest rates on loans, often attributed to
the high cost of funds. 3rd. Reduce the mandatory reserves from the current
12 percent to the former 8 percent level to enhance liquidity, but with the
condition attached that lending too increases with this freed liquidity.
Investigate why there is a sudden influx of bank licenses in a depressed
economy and in an economy which is simply too small for these number of
banks.!! |
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