Cambodian economy fights to heal wounds<\/p>\n
By Robert Birsel<\/p>\n
PHNOM PENH (Reuter): Cambodia's once buoyant economy has been
\nstopped in its tracks by July's violent coup and its aftermath,
\neconomists say.<\/p>\n
A recovery is seen as unlikely until badly-bruised confidence,
\nboth at home and abroad, begins to heal.<\/p>\n
Business has been in the doldrums ever since strongman Hun Sen
\nsnatched power from First Prime Minister Norodom Rannarridh on
\nJuly 6. The coup sparked violent clashes in the capital and later
\nin the west of the country.<\/p>\n
But while the political dust has begun to settle, the economy
\nis still gasping in the wake of the turmoil. Amid July's chaos
\nconsumers cut back spending, tourists stayed clear and investors
\nand aid donors tried to take stock of where the strife-torn
\ncountry was going.<\/p>\n
Work on some construction sites in Phnom Penh has ground to a
\nhalt while long lines of idle taxis wait outside near-empty
\nhotels. Thousands of jobs are thought to have disappeared.<\/p>\n
Economists say Cambodia's recovery is only a matter of time
\nbut the task ahead has been made much more difficult by financial
\nturmoil elsewhere in Southeast Asia.<\/p>\n
\"There has been a definite shock to the economy, a stunning
\nshock, but I would not categorize it as a crippling shock yet,\"
\nsaid an economist at an international organization.<\/p>\n
\"A stunning shock will take some time to recover from but the
\neconomy will not be crippled completely,\" said the economist, who
\ndeclined to be identified.<\/p>\n
Two days of fighting and a third of looting in Phnom Penh as
\nSecond Prime Minister Hun Sen ousted his coalition partner and
\nco-premier Ranariddh caused some $70 million in damage, according
\nto government estimates. It also sparked an exodus of thousands
\nof frightened foreign tourists, business people and aid workers.<\/p>\n
Before the coup, growth this year was expected to hit about 7
\npercent after four years of similar expansion and moderate
\ninflation. Nominal per capita income doubled from $150 to $300
\nover the same period, according to World Bank figures.<\/p>\n
But growth this year is now expected to be around 2 percent,
\nand then only if there is a good rice harvest.<\/p>\n
\"It's a sort of malaise after the event in July,\" said
\nCambodia's Asian Development Bank representative, Someth Suos.<\/p>\n
Business people and economists say there has been a sharp drop
\nin consumption due to the political violence and subsequent
\nuncertainty, and small businesses are now suffering.<\/p>\n
\"There's been a contraction of demand due to reduction in
\ndisposable incomes and people are perhaps trying to keep more
\nmoney for a rainy day than they did when everything was rosey,\"
\nsaid the economist.<\/p>\n
An economist at the Cambodia Development Resource Institute
\n(CDRI) said many market vendors and small traders were now
\nthreatened with bankruptcy.<\/p>\n
\"A lot of people complain that if the current situation
\ncontinues then they may have to close their shops because they
\ncannot even pay rent or tax to keep their shops open,\" said the
\nCDRI economist who declined to be identified.<\/p>\n
Many thousands of people, especially in the service sector,
\nare thought to have lost their jobs since July but economists
\nsaid it was very difficult to get an accurate picture of
\nunemployment especially when many Cambodians have two or more
\njobs.<\/p>\n
The fall in consumption has hit imports, which is particularly
\nbad news for a government that depends on customs revenues for
\nabout 70 percent of its total tax revenue.<\/p>\n
\"People aren't going out and spending much money,\" said the
\nexecutive director of International Management and Investment
\nConsultants, Craig Martin. \"Traders aren't importing so much
\nstock. They're drawing down stock across the board.\"<\/p>\n
\"In the past traders liked to hold stock but now it's more
\nimportant to have cash in hand,\" Martin said. \"If people aren't
\nimporting they're not paying customs revenues so government
\nincome is down.\"<\/p>\n
Minister of Finance Keat Chhon has ordered all ministries to
\ncut operating costs, including expenses on gasoline, electricity
\nand telephones to make up for the expected revenue shortfall.
\nBut as well as the sharp contraction in consumption Cambodia is
\nalso facing lower inflows of foreign funds in the aftermath of
\nthe July upheaval.<\/p>\n
Aid makes up half of Cambodia's annual budget, but Hun Sen's
\nbloody grab for power has led the United States to suspend all
\nbut humanitarian help and Germany to cut all assistance, reducing
\ntotal foreign aid by 10 percent.<\/p>\n
Other donors are keeping existing projects going but many are
\nnot putting money into new projects for the time being.<\/p>\n
In addition, an International Monetary Fund (IMF) loan to
\nCambodia was suspended at the end of August. The government's
\nfailure to meet conditions concerning the leakage of its revenues
\nin the forestry sector led the IMF to cancel a $20 million
\ntranche of the loan last year.<\/p>\n
Restoring confidence in the country was key to Cambodia's
\nrecovery, analysts said.<\/p>\n
\"It all depends on the government,\" said Someth Suos. \"Donors
\ncan help support government efforts but the government must
\nincrease revenue, provide employment opportunities and create a
\nclimate for further private investment.\"<\/p>\n
\"That depends on political stability and law and order.\"<\/p>\n
But Cambodia is also likely to feel the chill wind of
\nfinancial turmoil elsewhere in the region.<\/p>\n
\"A large number of investors come here from Malaysia,
\nIndonesia and Thailand,\" said the economist at the international
\norganization. \"They invest money borrowed from their financial
\ninstitutions but now they don't have that access to lending.\"<\/p>\n
\"People aren't going to be ready with cash to invest here.\"<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/cambodian-economy-fights-to-heal-wounds-1447893297", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }