Cambodia's Economic Crisis & The Ways To Tackle It (english Assignment)

       

Class : Department : Subject : Group :

Year-2, Semester 2 Economic Science English E2A41

English Assignment:                                 

Taught by lecturer: Chhour Laymeng Compiled by:

-Sak Khmao -Kong Sotheara

Royal University of Law and Economics   

English Assignment  

 

 

Preface At the time of the very beginning of the financial crisis in the US, some economists claimed that Cambodia would not be much affected by the world financial crisis because Cambodian economy has not had specific relations with the relations with the regional and international economy. On the contrary, in Cambodia now, homes have been lost; jobs shed; businesses shut and our health care is too costly because of the financial crisis in the US and no effective measures. That’s why we the year-2 students studying Economic Science in Royal University of Law and Economics have made a small group to research and address the crisis and solution to it in order to make a book entitled “Cambodia’s Economic Crisis and the Ways to Tackle It” so as to know what is going on and to learn about how the world is changing. We hope that this book will be an important document for the students next generation. We believe that this book may contain some mistakes because we do not have enough experience to consider perfectly. We are happy to be criticized by all readers in order to have better book next time.

Phnom Penh, 28/05/2009 Sak Khmao and Kong Sotheara  

 

Year-2 Student, Semester 2   

 

Kong Sotheara & Sak Khmao

Royal University of Law and Economics   

English Assignment  

 

 

Content I/ Introduction ............................................................................................................................................... 1 II/ Cambodia’s Economic Crisis ................................................................................................................... 1 1-Agriculture Sector................................................................................................................................ 1 2-Textile and Construction Sector .......................................................................................................... 1 3-Tourism Sector .................................................................................................................................... 2 III/ How to Tackle Cambodia’s Economic Crisis ......................................................................................... 2 1-Solution to Agriculture Sector Problem .............................................................................................. 2 2-Keeping Garment Sector in Good Health ............................................................................................ 3 3-Creating New Jobs ............................................................................................................................... 3 IV/ Conclution .............................................................................................................................................. 3 References ..................................................................................................................................................... 4

 

Year-2 Student, Semester 2   

 

Kong Sotheara & Sak Khmao

Royal University of Law and Economics   

English Assignment  

 

 

I/ Introduction After a decade of double-digit growth, driven by the four keys of Cambodia’s economics such as the agriculture, garment, construction, and tourism sectors, the Cambodian economy is predicted to contract significantly in 2009. In fact, the financial crisis in the US, the unfavorable external environment, is leading to less demand for Cambodian exports, fewer tourists, less foreign investment, and joblessness. Inflows of foreign direct investment are projected to slow from a record high of 10% of GDP (Gross Domestic Product) in 2007 to 5.2% in 2009, as foreign investors become more cautious about investing in developing countries as Cambodia which has unsustainable economic situation. So, the four key drivers of Cambodia’s economic growth are suffering severe storm causing very many problems. Below are the descriptions of Cambodia’s economic crisis and the ways to tackle it.

II/ Cambodia’s Economic Crisis

1-Agriculture Sector About Cambodian farmers’ problems, the distressing economic situation resulting from the world financial crisis has caused market prices of agricultural products (such as paddy, corn, bean, cassava) to plummet by 30 to 80 percent over the last few months. More seriously, in northwestern provinces such as Battambang and Banteay Meanchey, where the farmers used to sell most of their crops to Thailand, the situation is particularly distressing because prices have touched record lows at a time when Thailand has closed its borders to Cambodian products such as cassava because Thailand is using the protectionism. Furthermore, the hundreds of thousands of farmers have extensively borrowed money from banks and other creditors to buy oil and fertilizer and now are facing other expenditures to produce their crops. In addition, some farmers who are unable to reimburse their debts in the present circumstances and risk to see their lands or properties being seized since these lands have been given as collaterals to banks and other creditors.

2-Textile Sector and Construction Sector In the textile sector, competition is increasing and profits drop as people cut their spending worldwide. And competition from countries like Vietnam and China is increasing. We are facing tough times and already factories are closing. Moreover, shrinking demand from the US and Europe markets has already forced 60,000 job losses in the garment sector. Anyway, about construction sector, it is slowing down too, due to the consequences of the crisis on Korea who had until now been acting as a locomotive for the Cambodian construction sector. Reduced foreign direct investment has seen a further 25,000 jobs lost in construction. Early indications show that many unemployed workers are returning to their villages, where livelihood opportunities outside subsistence agriculture are severely limited. To  

Year-2 Student, Semester 2   

 

 

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Royal University of Law and Economics   

English Assignment  

 

 

survive, more and more Cambodian women and children may find themselves in the informal economy for lower wages, poorer conditions, and greater risk of sexual exploitation and trafficking.

3-Tourism Sector A slowdown in tourist arrivals was noticeable in the first six months of 2008. In fact, the global financial crisis has affected Cambodia’s tourism industry, especially in Siem Reap, site of the world famous tourism attraction- Angkor Wat Temple, with tourist arrivals falling. As a matter of fact, tourist arrivals to Siem Reap fell by more than 16 percent in the first quarter of 2009 compared to last year. Consequently, some luxury hotels temporarily shut down so that there are low occupancy rates meaning that staff members are taking unpaid leave or have been temporarily laid off in many hotels. The Cambodian tourism has been directly affected by weaker global economy on the one hand and the border disputes with Thailand on the other hand. So, in Cambodia, the people such as taxi drivers, tourist guides, tourist bus drivers, etc who earn money and have jobs related to tourism sector are losing their incomes or losing their jobs.

III/ How to Tackle Cambodia’s Economic Crisis

1-Solution to Agriculture Sector Problem To tackle Cambodia’s economic crisis in agriculture sector, Cambodian government had better quickly implement measures and mechanisms aimed at supporting and stabilizing agricultural prices, so as to protect and guarantee farmers’ revenue and living conditions nationwide. How to do this kind of strategy is to plan to spend approximately US$1 billion this year to buy farm products such as tapioca, rice, maize and palm oil under the agricultural intervention scheme. Under this purchase of farm products, government should pledge to buy them with pledging price to increase by 20% per month until one point of time or the next few months. Then the government might be able to export all agricultural products bought under the intervention scheme in a bid to prop up domestic prices. By the way, about heavy indebtedness of hundreds of thousands of farmers who are unable to pay their debts in the present situations and whose lands or properties will be confiscated due to giving their lands as collaterals to banks and other creditors, the government must take appropriate and urgent measures to prevent banks and other creditors from seizing farmers’ lands or properties while our farmers are suffering from the present crisis. There must be a debt moratorium. In the meantime, interest rates and payments must be reduced pending negotiations for a comprehensive resolution of the debt problem. On the other hand Cambodian policymakers ought to enact work-for-food schemes that guarantee employment, encourage poor people to grow private gardens rather than rely solely on income, and  

Year-2 Student, Semester 2   

 

 

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Royal University of Law and Economics   

English Assignment  

 

 

establish common property rights over water. All these strategies will drive Cambodia’s agriculture development and guarantee Cambodian farmers’ living conditions.

2-Keeping the Garment Sector in Good Health As described in such a context above, Cambodia bound to lose its market shares in the United States since demand will clearly be reduce. The Kingdom will then be force to seek new markets. Cambodia must boost its competitiveness and must be one of the country’s priorities by facilitating trade, offering fiscal stimulus and dealing with labor-related conflicts. Moreover, the government has to promote and encourage foreign direct investment in a more appropriate way by combating corruption because investors are complaining about corruption and they are going to other countries. So, Cambodia has to attract legitimate investors, but also high-quality investors with technical expertise, and that will diversify industries. For factories or enterprise having financial problems, Cambodia must dare implementing slightly more ambitious, expenditure policies to pay the debts of those factories in order to prevent them from going bankrupt so as to gaurantee employment of Cambodian workers.

3-Creating New Jobs To outlast Cambodia’s economic crisis, as what French Prime Minister Nicolas Sarkozy and other responsible and caring governments in other countries have done, Khmer government should quickly call for quick and bold action to create new jobs by making construction sites to develop public infrastructure, restore ecological system, construct or mend buildings for retirees, etc. Doing so, the government will create so many jobs for people losing jobs.

IV/ Conclusion If the government is willing or able to implement the three above-described measures to tackle Cambodia’s economic crisis, Cambodians hopefully will not get much negative impact from the international crisis. Starting today, Cambodian government must pick Cambodia up, dust Cambodia off, and begin again the works of remaking Cambodia.  

 

Year-2 Student, Semester 2   

 

 

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Royal University of Law and Economics   

English Assignment  

 

 

References 1- http://balita.ph/2009/05/22/cambodias-tourism-drops-due-to-global-financial-crisis.mht, “Cambodia's tourism drops due to global financial crisis”. [May 22, 2009] 2- http://cambodia.ka-set.info/index2.php?option=com_content&do_pdf=1&id=104, “Economic crisis in Cambodia, from the World Bank's point of view: with bad luck comes some good?”. [December 11, 2009] 3- http://irinnews.org, “CAMBODIA: Food security threat as economic crisis takes hold”. [May 07,2009]

 

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