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.

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.

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?

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.

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!

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.

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).

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.

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.

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.

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.

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.

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.

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.!!