Cambodia’s Economy

In the recent years Cambodia changed from a communist command and planned economy to a free market economy with the usual implications. Means that state owned companies got cheaply privatized and big firms are favoured in the tax system and can play their game widely free. Workers rights are therefore short.

Since the level of technological development in Cambodia is after the total destruction of the country in the 1970s extremely low, it’s completely depending on imported technologies brought by investing foreign companies.

The main attraction for international companies to produce in Cambodia lies in the cheap labour here. Disadvantages are the weak infrastructure and high energy costs.

Since about 1999 the Cambodian economy grows at an annual average of around 6% to 7%. That sounds impressive for western countries, but one has to consider the low base from which it grows. In absolute terms 7% of little is very little. 1% of a big cake is still much.

The most important industies are the garment producers. Clothing is therefore the biggest export good of Cambodia, followed by timber, rubber, rice, fish, tobacco and footwear. The garment factories are mostly owned by foreign investors from China and Hongkong, Taiwan, Singapore, Malaysia. Merely 5% of the factories are owned by Cambodian entrepreneurs, 4% are USA owned.

So, most of the export contains of unprocessed agricultural products. Timber production is not sustainable for there is the notorious destruction of the last remaining forests behind – not at all an unexhaustable resource.

Rubber therefore is growing on the grounds of the before destroyed rain forest. All the Southeast Asian states compete in rubber production. World market prices are not stable and dropped sharply in 2012.

Besides of the traditional products of fish and rice the tobacco production is a great example for a completely negative product. The use of arable land for it competes with food production and tobacco is not good for anything except harming peoples health, not only that of the consumers themselves but also that of the passive smokers around, who have no choice left than to inhalate the smog.

The garment industries are only competitive on the world market because of the relentless exploitation of the workers. Any efforts to rise wages weakens the production location. Besides, garment production is the oldest modern industry and the structure of Cambodia’s economy looks therefore very much for early industrialization. There is even an industrial base missing for the textile industries, yarns and other raw materials have to be imported. That makes the garment industry more vulnerable for competition, together with labor unrest and the already mentioned lack of a developed infrastructure.

More than 90% of the garment workers are female, many of them are very young. That comes together with the wide poverty of the masses. Much reminds here to the world of Charles Dickens, including childrens labour in the industries and human traffic – what is also part of the economy.

At the other end the country is depending on the import of all kind of processed goods like electronics, machinery, vehicles, medicals, construction materials and petrol and petroleum products. Processed goods are much more expensive than the unprocessed goods Cambodia produces. This creates a sharp export – import imbalance which leads to an annual trade gap of some billion US dollars (2.65 billion US dollars in 2012).

To come over it international aid helps the country which usually fills part of the trade gap and prevents Cambodia from an economic collapse scenario.

Tourism plays another role in the Cambodian economy, and it’s a rising factor. The number of arrivals is growing in the last years. Most of the foreign tourists come from Asian countries as south Korea, China, Thailand, Japan and others. Westerners make only a fraction of the arrivals. Arriving Vietnamese are seldom here for touristic purposes but mostly for business opportunities. Alltogether make the tourist industries the second largest sector of the Cambodian economy.

By distance the most attractive place for tourists to visit in Cambodia are the ruins of the famous medieval Angkor, followed by Phnom Penh and the Mekong River system including the Great Lake of Tonle Sap. To mention is at this point also the the attraction of the sex industries including the countries notorious child sex tourism.

For a great deal of Asian tourists from neighbouring countries the gambling industry with all the (many of them new) casinos are the central reason for a visit. Since gambling is prohibited in Thailand generally and in Vietnam for Vietnamese subjects, many Thai People and Vietnamese enter Cambodia exclusively for gambling. That’s the main reason why so many casinos are placed very close to the borders.

Mining bauxite, gold, iron and gems makes another contribution of the countries economy. Licences for exploitation are given to companies. In 2005 there were offshore oil deposits found within Cambodia’s waters. The timing of it’s exploitation remains yet unclear.

The construction industries as a capitalistic key industry profits from anything else what is growing in an economy. The governmental infrastructure projects to attract foreign investment or building big administration buildings, developing industries, new shopping centers, the expansion of Phnom Penh, tourism with it’s hotels, guesthouses and restaurants – the construction industry is always part of it.

In all day life it looks pretty poor around here. There are not many shops like groceries and supermarkets or electronic and computer shops. The shops are pretty ill-equipped, reminding to the shops in the countries of the former Soviet Block, the choice and the quality of the goods is normally very low and prices are high. What is missed here in usable goods is replaced by a great variety of lifestyle products nobody really needs – sun bleechers in a great amount, much to sweet soft drinks and small amounts of crappy snaks in plastic bags to spoil the childrens and harm their health. One get’s a choice of 25 different skin creams, but not a single one of good quality without disturbing chemical indegrents.

The immense corruption is also a characteristic for Cambodia. The high price level and inflation has also to do with the omnipresent corruption. At the end every business which is forced to give money to corrupt officials has to put it on it’s prices and finally it arrives on the price tag for the end consumer.

Corruption makes also infrastructure projects failing or being delayed, when necessary money is ‘disappearing’.

The inflation rate is high, consumer prices rose in 2011 for example at 5.5%. Although the Asian Development Bank predicts a lower inflation for the next two years it seems too optimistic, for it’s based on the presumption of economic recovery of the European Union and the USA.

Poor education and a poor job market don’t give people hope for a better future and keep the majority in poverty. 37% of the Cambodian children under the age of five years old suffer chronic malnutrition. Over 50% of the population is younger than 25 years. Half of the governments budget is coming from foreign donors.

Cambodia is and remains one of the poorest countries in Southeast Asia.

Know…

This is only a part of the illustrated article ‘Cambodia’. Read the whole article on Cambodia by Asienreisender.

Keep yourself up-to-date

Check the list of recently published articles on a great variety of Southeast Asian themes. All of them are richly illustrated: Asienreisender

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