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Poor Governance Seen as Hindering Cambodia’s Growth

FILE PHOTO - A Cambodian bathes near his slum home Thursday, Feb. 19, 2009, on the outskirts of Phnom Penh, Cambodia. (AP Photo/David Longstreath)

About a fifth of Cambodians live below the national poverty line, according to the World Bank.

Cambodia continues to rank near the bottom in almost all global development indicators but left the group of least developed countries in 2015, upgrading its status to a low-middle income country.

However, according to the World Bank, about a fifth of Cambodians still live below the national poverty line.

Unhealthy Growth

Cambodia has maintained strong economic growth over the last decade. According to the World Bank, the country had a gross domestic product (GDP) of about $20 billion in 2016, and per capita, it increased to about $1,200 in 2016 from $250 in 1995.

“Economic development has been very successful. Over the 15-year period, you see the economy has more than tripled in size. Poverty fell by more than a half. That’s quite a remarkable achievement,” Nick Beresford, UNDP Country Director, told VOA Khmer.

But Cambodia's debt has also increased, reaching almost $6 billion in 2017. The International Monetary Fund (IMF) has reported that Cambodia’s debt is still manageable, but it is vulnerable to external shocks.

“Debt sustainability is becoming increasingly vulnerable to adverse macroeconomic shocks including a fall in exports and a disorderly adjustment in the exchange rate, fiscal revenue shocks, and the materialization of contingent liabilities,” a 2017 IMF report said.

Many Cambodian who live slightly above the poverty line are vulnerable to those shocks, Beresford said.

“You have the people below the poverty line. At the moment, we estimate that it is probably at 10 percent of the population underneath the national poverty line,” he said. “But there is a large section of the population who are only just above the poverty line. They might not be counted as the poor, but they're quite near poor. We would categorize them as being vulnerable.”

Chinese Loans

China is the largest donor to Cambodia. It pledged about $20 million for the national elections. China has also provided $100 million in military aid to Cambodia.

China has faced strong criticism as a creditor for allegedly manipulating the debt conditions to grab the sovereign assets of the debtors. Critics provide numerous examples of the so-called Chinese debt trap in Asia and Africa.

Some scholars have pointed out that Cambodia needs to pay attention to rising Chinese debt as it could be unsustainable and unhealthy for Cambodia’s economy in the long run.

"I think the possibility of it [Cambodia] going into the trap gets heightened. It gets heightened when more debt is taken on, and there are no alternative sources of revenue or even alternative sources of bidders for projects that are brought in,” said Charles Edel, a senior research fellow and a visiting scholar at the United States Studies Center.

Some scholars view Chinese investment as a tool to suppress democratic development and human rights in the country.

Brian Eyler, a director of the Southeast Asia program at the Stimson Center, said that Chinese aid hurts democracy and human rights, and leaves Cambodia with unsustainable development.

"When Chinese investment and resources come in, they come in with a certain way of looking at development. That is very much imported by China's own development pathway. What we see happening is kind of China's way of development happening in Cambodia," he said. "That can be harmful to the economy, for the environment, and the individual overall.”

While it is often said that Chinese aid comes without the strings related to the democratic development and human rights attached to western aid, Eyler says Chinese political interests, particularly with regards its relations with Asean states, do play a part.

“I don’t agree that there are no strings attached to China investment. I think that there is internal trading for political benefits for both China and Cambodia,” said Eyler.

Diversifying sources of investment and aid is beneficial for Cambodia to make the country more competitive, said Edel.

"There is an interest and need for, of course, foreign investment and investment that comes from multiple sources, that’s always how you make it more competitive for a country. And yet, there seems to be a restriction on that," he said.

Weak Institutions

The ruling Cambodian People’s Party own every seat in the general election in July, in the absence of the country’s main opposition party, the Cambodian National Rescue Party.

Eyler said that having only CPP politicians in parliament could be a risk for the country’s development. "We can imagine that the CPP, all party members think the same way," said Eyler.

Beresford expressed concerns over the repression of political and civil rights in the country. He said that the UNDP and the UN country team stand behind the secretary general calling for upholding democratic rights in Cambodia.

“On the issue of governance, just a couple days before the elections, the secretary-general issued a statement. He called for an inclusive and pluralistic political process. He called for the government to uphold international human rights standards, guarantee for civil society actors and political parties to exercise democratic rights,” he added.

Weak Decentralization

Cambodia has a long history of centralizing state power, having moved to strengthen decentralization since the early 2000s. But it has not delivered the desired results, experts say, despite holding local elections.

“The decentralization reform started since 2002. Cambodia set up the Commune/Sangkat Development Fund since 2002, which was largely funded by the development partners,” Theara Khoun, a researcher on Cambodia’s decentralization, told VOA Khmer. “In recent years, it shared about 3 percent of the national budget.”

Khoun raised concerns over the “unclear role” of local government departments, which lead to inefficiencies.

“For functional decentralization at the subnational level, the subnational functions are unclear,” Theara said. “The government should consider setting more specific functions so that the local government can implement the policy efficiently.”

Eyler said that an absence of a healthy opposition in Cambodia would leave the country with a lack of debate.

“There are many reasons to be concerned about the future of good governance in Cambodia. Without that healthy opposition party [the CNRP], who will drive that important conversation forward?”