ASIA
HAND Cambodia's cowboy
capitalism By Shawn W Crispin
BANGKOK - Despite his rough and ready
reputation, Cambodian Prime Minister Hun Sen has
presided over an extraordinary transformation of
the country's once war-torn, now booming local
economy, marking Southeast Asia's latest
successful transition from a centrally planned to
market-driven economy.
But as Cambodia's
capitalist reforms enter a crucial new phase - one
where multilateral organization economists say
that to sustain fast growth, economic benefits
must be more equitably
distributed - it's altogether
unclear whether Hun Sen and his Cambodian People's
Party-led government are up to the egalitarian
task.
Over the past three years,
Cambodia's gross domestic product has expanded at
double-digit growth rates, averaging a breakneck
11.4% per annum. Garment exports, the economy's
top foreign-currency earner, accounting for nearly
14% of total GDP, grew by 20% last year, despite
predictions that Cambodian producers would start
to lose a substantial market share to China and
Vietnam.
Foreign direct investment touched
a record high US$475 million last year and, in a
show of fiscal confidence last weekend, the
government unveiled a new $26 million parliament
building, which is about 10 times the size of the
previous complex. Meanwhile, hopes are running
high that recent discoveries of big new oil and
gas deposits will translate into a
multibillion-dollar boon and by as early as 2010
transform the country into a net fuel exporter -
potentially one of Asia's largest.
Monetary authorities have successfully
reined in inflation, which on average galloped
well over 50% per annum throughout the 1990s, to
less than 3% last year, and policymakers are now
feeling emboldened enough to talk about
"de-dollarizing" the economy in a nationalistic
bid to shore up the local currency, the riel.
International credit-rating agencies, including
Standard & Poor's and Moody's, recently issued
their first sovereign ratings for the country, in
anticipation of new stock- and bond-market
launches in 2009.
Hun Sen, a former
communist guerrilla and currently Southeast Asia's
longest-serving elected leader, deserves a fair
measure of credit for the progress. In the
state-sanctioned press, he's frequently seen
presiding over the opening of new roads, bridges
and schools, putting his personal populist mark on
public-funded investments.
His deputies
have recently taken to portraying him as one of
the region's vanguard economic reformers, who
began dumping communism for capitalism through
limited land-ownership reforms in the mid-1980s.
In advance of the 1991 Paris Peace Agreement,
which ushered in United Nations-sponsored
elections and a new power-sharing government, Hun
Sen introduced full-scale land reforms, slashed
price controls, privatized state enterprises and,
to a degree, liberalized foreign investments.
More recently, Hun Sen has in the main
stayed the course of a World Bank-designed
market-reform strategy, which aims to boost the
private sector and move the economy away from its
age-old reliance on subsistence agriculture. That
has included substantial policy reforms aimed at
improving the investment climate and trade
facilitation, including recent automation of
traditionally corruption-prone customs-related
services.
Rich man, poor
man Still, there are contrary indicators
that Cambodia's emerging brand of wild and wooly
capitalism is unevenly - and in instances perhaps
illegally - benefiting the politically connected
few at the great expense of the indigent masses.
A recent World Bank research report shows
that robust economic growth over the past decade
has helped to reduce the national poverty rate
from 47% to 35% over the 10-year period spanning
1994-2004. Over that same period, however, average
consumption per capita rose a mere 8% for the
bottom fifth of the wage-earning population, while
rising a whopping 45% for the top tier.
Where land ownership was seen as equitable
after the 1989 land reforms, now levels of
inequality in landholding and landlessness are
among the highest in Asia, due to recent
government policies in favor of large-scale land
concessions - not to mention increasing
state-backed land grabs from the poor. Lightly
populated Cambodia, remarkably, now ranks worse
than Malthusian dread-ridden India in this
category.
The World Bank report also
warned that, in general, high levels of inequality
contribute to market failures and reduced
investment, give rise to institutions that favor
the rich over the poor and, over prolonged
periods, often result in social and political
instability. Those dire predictions are arguably
already coming due, seen in the recent rash of
land grabbling, where international rights groups
such as Human Rights Watch estimate that tens of
thousands of people have been forcibly evicted to
make way for state projects and big plantation
agriculture.
More damaging, however, were
the allegations in a recent investigative report
titled "Cambodia's Family Trees" issued by
UK-based environmental watchdog Global Witness.
The globally respected outfit alleged that senior
army, police and government officials, many close
to Hun Sen, including the head of his personal
bodyguard unit, had profited hugely from illegal
logging activities.
The report also
claimed that a "kleptocratic elite" - including
members of Hun Sen's direct family - were
complicit in exploiting large swaths of officially
protected forest lands. The report notably
mentioned by name Hun Sen's wife as benefiting
from the alleged illicit trade. For its part, the
government banned the publication, issued a
blanket denial, and threatened journalists who
followed up the allegations.
One Radio
Free Asia reporter was forced to flee the country
after he received an anonymous death threat
related to his reports, which corroborated some of
Global Witness' findings. He was the second RFA
reporter to flee the country this year because of
concerns about possible government reprisals over
critical news coverage. Further, Hun Sen refused
in May to meet with the UN special representative
on human rights for Cambodia, Yash Ghai, who had
conducted investigations into allegations of
state-backed land grabs.
Such statistical
and investigative findings explain why - despite
Hun Sen's recent consolidation of political power
and his pivotal role in accelerating economic
growth - foreign and local observers still have
big doubts about his style of governance. For
instance, last year international corruption
monitoring group Transparency International rated
Cambodia 151 out of 163 nations it ranked in its
global government corruption index.
A more
recent Indochina Research Limited public-opinion
poll found that 88% of Cambodians feel that
growing inequality in wealth is a pressing issue,
while a World Bank survey released this week found
that perceptions of Cambodia's government
effectiveness, regulatory quality and control of
corruption all declined from 2005 to 2006.
Cambodia is no doubt growing, and growing fast,
but increasingly the perception is that the
benefits are only gushing up and not trickling
down.
Shawn W Crispin is Asia
Times Online's Southeast Asia editor. He may be
reached at swcrispin@atimes.com.
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