Responses to the Global Economic Crisis – Sunday, 26.4.2009

Posted on 27 April 2009.
http://cambodiamirror.wordpress.com/

The Mirror, Vol. 13, No. 609

As the crisis is global – it makes sense to consider not only what happens, and what is done in Cambodia.

One newspaper recollected a number of important international voices on trends of the Cambodian economic and social situation: “International Economic Experts Assessed that Cambodia Is Vulnerable due to Growing Poverty” - referring to recent statements by the Asian Development Bank, the World Bank, the International Monetary Fund, and the Economist Intelligence Unit. All of them come to somewhat similar - negative – predictions for the near future.

We had also mirrored voices representing the political leadership in Cambodia, dismissing these voices of warning – either accusing some of them, saying that their detailed and transparently presented data are intentionally falsified to present Cambodia in a negative way, or pointing to the special situation of Cambodia, where people who are dismissed into joblessness in the cities could easily return to their native villages and be integrated again into the rural family economy.

First of all it may be worthwhile to see that – in spite of warnings about the future – during this week there were also a number of reports about continued international economic assistance for Cambodia. It is not probable that such actions would have been taken, if the warning about negative economic and social developments would have been ill intended. In spite of such warnings, commitments to assist continue:

The German government will focus on cooperation to create hydro-electric energy and to develop small and medium enterprises – pointing into a direction of sustainability even under a situation of crisis. Another field of German cooperation aims at producing methane gas from processing garbage of the city of Phnom Penh – a similar orientation.

While Cambodia received since 1992 already around US$1 billion in loans from the Asian Development Bank, the same bank continued to provide more that US$50 million in new loans in 2008.

The European Community granted an additional amount of Euro 4 Million [approx. US$5.3 million] to Support Food-for-Work programs in Cambodia.

That there were also reports about the Minister of Foreign Affairs and International Cooperation, asking Korean investors to speed up their investments in Cambodia, and the Prime Minister being quoted to have said that investments by Japan do not yet meet what Cambodia wants – at a time when there are only 436 companies registered, compared to 862 one year ago - shows the urgent interest for a stronger involvement by these two economies in Cambodia - but they have their own problems. And it is surely not very attractive to increase their involvement in a country

where the Minister of Interior has to warns officials not to provide document where they faked their age, where another riverbank collapsed destroying some houses – while an order of the Ministry of Water Resources and Meteorology had been disregarded for weeks without enforcement by the authorities, where the administration of the capital city of Phnom Penh suspects that some officials illegally connect to the public electricity network for personal use, and
where the government has not consented that complaints about suspected corruption can be reported - without fear of retaliation – to a credible institution of the choice of the complainer and not only to a Cambodian government sanctioned institution.

And - as I am at present in Germany, and as we had two reports about German cooperation in Cambodia during the week – a quick review of some German reactions to the global economic crisis. The International Monetary Funds predicted that the German economy will shrink by 6% in 2009, more than in any other industrialized Western European country. It will be a decline which never happened during the last 80 years. The worst recession after the end of the Second World War was in 1975 with a decrease in the economy of 0.9%.

In spite of these problems, the government does not plan to organize another special economic rescue package to promote economic activities through huge investments as some other countries do. Rather social support programs may be boosted – like extended payments for reduced working hour arrangements (instead of dismissals), and the covering of social security contributions to be taken over by the state is under discussion.

As there will be general elections in September 2009, one of the two parties in the present coalition government announced their program how to adjust the taxation laws to secure sufficient income for the state. The lowest, marginal tax rate is at present 14%, which is to be lowered to 10% - which will provide benefits for about 25 million people of the lowest income group (Germany has about 82 million citizens, plus more than 6 million foreigners). On the other hand, the highest tax rate is to be raised from at present 45% to 47% - an additional burden for about 1.5% of those who have to pay taxes.

Such taxation arrangements are related to Article 14 of the Constitution of the Federal Republic of Germany, which states: “To own property carries obligations. It is to be used also to serve the well-being of the public.” Therefore, the present suggestions to change the taxation laws are based on the same understanding: Those members of the public who have greater resources have to exercise financial solidarity with those who have less. And Article 20 adds: “The Federal Republic of Germany is a state with a democratic and social orientation.” The public responsibility resulting from economic wealth is clearly defined as a basic element of society.

For comparison, Article 56 of the Constitution of the Kingdom of Cambodia says speaks also of the “market economy”: “The Kingdom of Cambodia shall adopt the market economy system.” Any social restraint on the forces of the market is not mentioned.

In Article 16 is the only reference to the term “social” - however in a very limited sense: “The Queen of the Kingdom of Cambodia shall exercise activities that serve the social, humanitarian, religious interests, and shall assist the King with protocol and diplomatic functions.”

On the way to the Labor Day on 1 May in the coming week, it is appropriate to mention that the labor unions in Germany have an important publicly established role in society, being part of a state with a social orientation. They have contributed to the social stability and to the economic growth over the last decades, and they are again a major partner in the public discourse about the present economic predicament of Germany. To restrict their freedom of assembly or of organizing public manifestations at the occasion of the Labor Day is unthinkable; if it would be attempted, it probably would lead to a severe disruption of the social stability which continues to exist, in spite of all the economic problems.