FT.com
By Raphael Minder in Phnom Penh
Published: July 18 2008
Sovan, a cadre from the ruling Cambodian People’s party, has been driving around Phnom Penh to rally voters for next Sunday’s legislative election.
“We will certainly win,” he says, his voice turned hoarse from shouting slogans into his megaphone.
Few Cambodians seem ready to dispute that prognosis. Although the CPP is being challenged by 10 opposition parties, the contenders have been weakened by internal bickering and high-profile defections.
Hun Sen, a former communist who has led the government since 1985 when Vietnamese troops occupied the country, is expected to secure not only another five-year term but also enough votes to end his coalition with the royalist Funcinpec party, a power-sharing arrangement in place since Cambodia’s first multi-party election in 1993.
In a country ravaged by decades of war and a genocide, the CPP’s guarantee of stability appears to have more clout than calls for government rotation, particularly among a business community that has benefited from average annual growth of 9 per cent over the past decade.
“Until a few years ago, Cambodia was not considered investable because of a perception of political instability and a weak legal structure,” says Douglas Clayton, who has been investing in south-east Asia for 20 years and manages Leopard Capital, a Cambodian fund. “We can now predict who will be running the government for the next five or even 10 years – and a government that is pro-business – which isn’t the case in Thailand, Malaysia or the Philippines.”
But legal concerns remain, with Cambodia regularly among the worst performers in international corruption studies. The World Bank has also been forced to shelve some Cambodian projects because of corrupt procurement procedures.
Stories of forced land evictions abound, while evidence that newly-acquired wealth is often coupled with disregard for the law can be seen on the streets, where limousines and SUVs speed along without number plates.
As a latecomer to Asia’s decade-long boom, Cambodia has benefited from some of the more recent difficulties of others. Its biggest industry, textiles, has grown as Chinese exporters have struggled with anti-dumping duties and, more recently, higher labour costs.
“This country is coming from a very low base,” Mr Clayton argues, “so there is still a lot of low-hanging fruit and very little downside.”
As long as foreign property companies continue to invest in redrawing Phnom Penh’s skyline, government officials show little inclination to discuss Cambodia’s underground economy.
“Corruption exists everywhere in the world,” says Chea Vuthy, deputy secretary-general of the Council for the Development of Cambodia, the agency that vets investment proposals. “They [international agencies] can rank us wherever they want, but look at our GDP growth and improved living standards. If investors want to judge us by looking at the reports of the World Bank and others, it’s better for them to stay at home.”
In a sign that the government is worried that surging prices will weaken its power base, it stopped publishing relevant indicators at the start of the year after inflation hit 18.7 per cent, up from an annual rate of 5 per cent in 2007. A local economist says he has seen recent data showing inflation accelerating to 32 per cent.
The government also recently doubled reserve requirements for banks to 16 per cent, a move seen by some as evidence of panic. In Channy, chief executive of Acleda Bank, which has Cambodia’s largest branch network, says: “By increasing reserves, they think they can reduce spending. I don’t see how this is a good measure. It means we cannot effectively use collected deposits.”
Economic hardship is expected to reduce voter turnout, which was above 90 per cent in the 1990s but fell to 65 per cent in 2003. The main textile workers’ union forecast that 40 per cent of the country’s 340,000 garment workers would be unable to vote as they could not afford the trip to their home constituency because of higher travel costs.
The campaign has been marred by allegations of vote-buying and intimidation in the countryside, unfair CPP control on the media, as well as some killings. Still, US development group the Asia Foundation said this week: “Although these reports are shocking and the methods unacceptable, the current situation is nevertheless a marked improvement from the characteristic suppression and violence of past elections.”
Sam Rainsy, leader of the eponymous party that is the CPP’s most resolute opponent, remains optimistic about next Sunday’s vote, but also gives a bleak forecast should the CPP secure an absolute majority. “We will simply go the Burmese way,” he told the FT.
By Raphael Minder in Phnom Penh
Published: July 18 2008
Sovan, a cadre from the ruling Cambodian People’s party, has been driving around Phnom Penh to rally voters for next Sunday’s legislative election.
“We will certainly win,” he says, his voice turned hoarse from shouting slogans into his megaphone.
Few Cambodians seem ready to dispute that prognosis. Although the CPP is being challenged by 10 opposition parties, the contenders have been weakened by internal bickering and high-profile defections.
Hun Sen, a former communist who has led the government since 1985 when Vietnamese troops occupied the country, is expected to secure not only another five-year term but also enough votes to end his coalition with the royalist Funcinpec party, a power-sharing arrangement in place since Cambodia’s first multi-party election in 1993.
In a country ravaged by decades of war and a genocide, the CPP’s guarantee of stability appears to have more clout than calls for government rotation, particularly among a business community that has benefited from average annual growth of 9 per cent over the past decade.
“Until a few years ago, Cambodia was not considered investable because of a perception of political instability and a weak legal structure,” says Douglas Clayton, who has been investing in south-east Asia for 20 years and manages Leopard Capital, a Cambodian fund. “We can now predict who will be running the government for the next five or even 10 years – and a government that is pro-business – which isn’t the case in Thailand, Malaysia or the Philippines.”
But legal concerns remain, with Cambodia regularly among the worst performers in international corruption studies. The World Bank has also been forced to shelve some Cambodian projects because of corrupt procurement procedures.
Stories of forced land evictions abound, while evidence that newly-acquired wealth is often coupled with disregard for the law can be seen on the streets, where limousines and SUVs speed along without number plates.
As a latecomer to Asia’s decade-long boom, Cambodia has benefited from some of the more recent difficulties of others. Its biggest industry, textiles, has grown as Chinese exporters have struggled with anti-dumping duties and, more recently, higher labour costs.
“This country is coming from a very low base,” Mr Clayton argues, “so there is still a lot of low-hanging fruit and very little downside.”
As long as foreign property companies continue to invest in redrawing Phnom Penh’s skyline, government officials show little inclination to discuss Cambodia’s underground economy.
“Corruption exists everywhere in the world,” says Chea Vuthy, deputy secretary-general of the Council for the Development of Cambodia, the agency that vets investment proposals. “They [international agencies] can rank us wherever they want, but look at our GDP growth and improved living standards. If investors want to judge us by looking at the reports of the World Bank and others, it’s better for them to stay at home.”
In a sign that the government is worried that surging prices will weaken its power base, it stopped publishing relevant indicators at the start of the year after inflation hit 18.7 per cent, up from an annual rate of 5 per cent in 2007. A local economist says he has seen recent data showing inflation accelerating to 32 per cent.
The government also recently doubled reserve requirements for banks to 16 per cent, a move seen by some as evidence of panic. In Channy, chief executive of Acleda Bank, which has Cambodia’s largest branch network, says: “By increasing reserves, they think they can reduce spending. I don’t see how this is a good measure. It means we cannot effectively use collected deposits.”
Economic hardship is expected to reduce voter turnout, which was above 90 per cent in the 1990s but fell to 65 per cent in 2003. The main textile workers’ union forecast that 40 per cent of the country’s 340,000 garment workers would be unable to vote as they could not afford the trip to their home constituency because of higher travel costs.
The campaign has been marred by allegations of vote-buying and intimidation in the countryside, unfair CPP control on the media, as well as some killings. Still, US development group the Asia Foundation said this week: “Although these reports are shocking and the methods unacceptable, the current situation is nevertheless a marked improvement from the characteristic suppression and violence of past elections.”
Sam Rainsy, leader of the eponymous party that is the CPP’s most resolute opponent, remains optimistic about next Sunday’s vote, but also gives a bleak forecast should the CPP secure an absolute majority. “We will simply go the Burmese way,” he told the FT.
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