Democratic Reform Needed to Ensure Growth, Prosperity

By Simon Henderson - September 27, 2013

With the long-ruling CPP sworn in to govern for another five years despite the opposition CNRP abstaining from sitting in the National Assembly due to election irregularities, a new report argues that imminent threats to Cam­bodia’s future development can only be overcome with significant government reforms to improve democratic governance.
The comprehensive analysis by Cambodia Development Research Institute (CDRI)—a think tank with long and close relations with the government—examines Cambodia’s development over the past two decades and sets out the many challenges it now faces in meeting ambitious socio-economic targets.
And despite having made “remarkable” progress since the extreme poverty and nascent democracy of Cambodia 20 years ago, sluggish developments by the government on these two fronts will no longer satisfy an electorate with elevated expectations, the report says.
Furthermore, unless the government commits to immediate corrective measures, the hard-earned gains of the past 20 years could easily be lost, CDRI said.
“[The] report is optimistic about Cambodia’s potential to build on its past development dynamics and march towards a prosperous, healthy and educated society…but it is also cognizant that the outcomes could fall far short of that goal…[and that] an alternative, much less promising development outcome for the country is thus not out of the reckoning,” the report says.
Sustainable growth can only be achieved with improvements in equality, health, education, industry, the environment, business investment, good governance and democracy—every area of governable society, the report states.
The report compares six medium-sized Asian economies with similar income levels—Laos, Vi­etnam, Burma, Bangladesh, Nepal and Pakistan—and Cambodia has seen the most growth since 1994.
“During 1994-2011, Cambodia’s annual [gross domestic product] growth averaged 7.8 percent. By both global and Asian standards, economic growth of this magnitude is remarkable,” the report says.
By April 2013, the country’s per capita income had risen from about $240 in 1993 to $970, putting it just below the $1,025 benchmark that the World Bank uses to classify “lower-middle income” economies, which the report says could be reached by 2015.
But such positive growth data cannot mask the considerable economic and social inequalities pre­sent in society, as well as political vulnerabilities that could derail growth entirely. For growth to be sustainable it must be inclusive, and in terms of shared prosperity and inequality, Cambodia, despite many improvements, fares badly, the report says.
In 2009, only 1 percent of GDP in Cambodia was spent on government-funded safety nets including child welfare, health care assistance and unemployment benefits, lagging far behind Vietnam’s 4.7 percent of GDP.
Cambodia’s life expectancy for example, at 63.6 years, is also the lowest of all the countries compared, and the country has the lowest number of physicians at 0.2 percent per 1000 people.
In terms of education, Cam­bodia continues to face considerable challenges.
“At about 16 percent, the percentage of adults with at least secondary education in Cambodia is the lowest among the comparator countries,” the report states.
“While past performance gives countries and societies much-needed self-confidence to push ahead, it does not necessarily assure future success,” the report says.
For example, joining the “low-middle income” bracket will also bring paradoxical problems for a country whose industrial growth has been reliant on one sector: garments and footwear. Citing 2010 figures from the World Bank, the report says garments made up 87 percent of total manufacturing output.
“None of the comparator countries has as high a concentration of manufacturing in one sector. Indeed…no other country in the world has as much concentration of industry in one sector as Cam­bodia,” the report says, adding that Cambodia’s reliance on the garment sector is too high to sustain the country’s future development.
Diversifying industry is a pressing concern, according to the report, especially since the agricultural sector is overwhelmingly the greatest source of jobs but is badly undeveloped.
A lack of government investment in education also leads to a lack of skills for expanding that industrial base, according to the report. Businesses also shy away from expanding to Cambodia due to corruption, cronyism in awarding land concessions and disparity in international and local human rights obligations.
“[For example,] except for the cost of paying taxes and trading across borders, Cambodia’s business environment parameters are much less investor-friendly than in Vietnam, not to mention Thailand…. Major procedural reforms and simplifications would be required to create a more investor-friendly business environment,” the report says.
Despite the as yet, near-sighted nature of the government’s attempt to open Cambodia up to more investment, the report offers a clouded hope that it will find the focus to address the matter, though most of the suggestions are almost axiomatic criticisms long leveled at the government.
“Effective implementation of the law…is as important as enacting it,” is one suggestion in the report that the government has in the past been unenthusiastic about heeding, though not implementing.
Unsurprisingly, one area of transformation that the report says would better equip Cam­bodia to adapt to its fast-changing political and economic climate is democratic reform.
“[A] democracy characterized by an independent genuine multi-party system, a better balance between the legislative and the executive arms of the government, an independent judiciary, enhancement of civil liberties, a more independent and impartial National Election Committee, and above all, change in the political culture that enables better citizen participation in decision-making,” the report says.
But as the CPP carries on regardless of the will of almost half the voting population, the government’s strategy of implementing any of these reforms remains to be seen.

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