Brown Bag Lecture Series

Impact of the Global Crisis on Cambodia’s Politics and Economy

Thursday, 28 January 2010

Co-sponsor: WEAI as part of the “Global Financial Crisis” series

Kheang Un, Assistant Director of the Center for Southeast Asian Studies at Northern Illinois University, spoke about the impact of the global financial crisis on the economics and politics of Cambodia. Although it was not greatly affected by the 1997 economic crisis in East Asia, over the past decade it has become integrated into the global and regional economy. As a result, the 2008 crisis has greatly affected Cambodia's economy, particularly its export sector and foreign-direct investment, with the garment, tourism, and construction industries feeling the greatest impact.

Professor Un illustrated how the Cambodian garment industry relies primarily on exports to the United States and Europe; its tourist industry relies on U.S., South Korean, and Japanese tourists; and its construction industry relies on Chinese and South Korean direct investment. All of these foreign markets were harmed by the financial crisis, and thus the effects were felt in the Cambodian market.

The Cambodian People's Party has recently become more popular electorally, despite a poor record on civil and political liberties, due to the party's ability to provide rapid and sustained economic growth until 2008. Its popularity also derives from its ability to preside over a neo-patrimonial state through provision of gifts and infrastructure from government officials, business tycoons, and multilateral and bilateral assistance. The recent economic downturn, then, may have affected the CPP's legitimacy. Un argues that this is unlikely because the government has been able, with assistance from multilateral institutions, to set up relief programs including material assistance and social and construction projects, most of which are carried out in neo-patrimonial fashion. Further, overseas development assistance, bilateral assistance and investment from China help to act as leverage against the impact of the global economic and financial downturn.

Professor Un believes the government seems to be moving from a patron-based system to a more pragmatic focus on service delivery and social safety. The financial crisis and Cambodia's increasing interconnections with the region and world have made such government reform even more necessary. The challenge is that the government has to strengthen its revenue collection which has been affected by widespread corruption.