Cambodia, Laos. Country Profile 2002

Transcription

1 Country Profile 2002 Cambodia, Laos This Country Profile is a reference work, analysing the country s history, politics, infrastructure and economy. It is revised and updated annually. The Economist Intelligence Unit s Country Reports analyse current trends and provide a two-year forecast. The full publishing schedule for Country Profiles is now available on our website at The Economist Intelligence Unit 15 Regent St, London SW1Y 4LR United Kingdom

2 The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For over 50 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. The Economist Intelligence Unit delivers its information in four ways: through its digital portfolio, where its latest analysis is updated daily; through printed subscription products ranging from newsletters to annual reference works; through research reports; and by organising seminars and presentations. The firm is a member of The Economist Group. London The Economist Intelligence Unit 15 Regent St London SW1Y 4LR United Kingdom Tel: (44.20) Fax: (44.20) london@eiu.com Website: New York The Economist Intelligence Unit The Economist Building 111 West 57th Street New York NY 10019, US Tel: (1.212) Fax: (1.212) dantecantu@eiu.com Hong Kong The Economist Intelligence Unit 60/F, Central Plaza 18 Harbour Road Wanchai Hong Kong Tel: (852) Fax: (852) hongkong@eiu.com Electronic delivery This publication can be viewed by subscribing online at Reports are also available in various other electronic formats, such as CD-ROM, Lotus Notes, on-line databases and as direct feeds to corporate intranets. For further information, please contact your nearest Economist Intelligence Unit office Copyright 2002 The Economist Intelligence Unit Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of The Economist Intelligence Unit Limited. All information in this report is verified to the best of the author's and the publisher's ability. However, the Economist Intelligence Unit does not accept responsibility for any loss arising from reliance on it. ISSN Symbols for tables n/a means not available; means not applicable Printed and distributed by Patersons Dartford, Questor Trade Park, 151 Avery Way, Dartford, Kent DA1 1JS, UK.

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4 Country Profile The Economist Intelligence Unit Limited 2002

5 1 Contents Cambodia 4 Basic data 5 Politics 5 Political background 6 Recent political developments 8 Constitution, institutions and administration 9 Political forces 11 International relations and defence 13 Resources and infrastructure 13 Population 14 Education 15 Health 15 Natural resources and the environment 16 Transport, communications and the Internet 17 Energy provision 18 The economy 18 Economic structure 19 Economic policy 21 Economic performance 22 Regional trends 22 Economic sectors 22 Agriculture 25 Mining and semi-processing 25 Manufacturing 26 Construction 26 Financial services 27 Other services 28 The external sector 28 Trade in goods 29 Invisibles and the current account 30 Capital flows and foreign debt 31 Foreign reserves and the exchange rate 32 Appendices 32 Membership of regional organisations 33 Sources of information 34 Reference tables 34 Population 35 National energy statistics 35 Government finances 35 Money supply and credit 36 Gross domestic product 36 Gross domestic product by expenditure The Economist Intelligence Unit Limited Country Profile 2002

6 2 36 Gross domestic product by sector 38 Consumer prices 38 Agriculture, livestock, fishery and forestry production 38 Main industrial production 39 Tourism statistics 39 Principal exports 39 Principal imports 40 Main imports and exports 40 Main trading partners 41 Balance of payments, IMF series 42 Net official development assistance 42 External debt 43 Foreign reserves 43 Exchange rates Laos 44 Basic data 45 Politics 45 Political background 46 Recent political developments 47 Constitution, institutions, and administration 48 Political forces 50 International relations and defence 51 Resources and infrastructure 51 Population 52 Education 53 Health 54 Natural resources and the environment 54 Transport, communications and the internet 56 Energy provision 57 The economy 57 Economic structure 58 Economic policy 60 Economic performance 61 Regional trends 62 Economic sectors 62 Agriculture 63 Mining and semi-processing 63 Manufacturing 64 Construction 65 Financial services 66 Other services 66 The external sector 66 Trade in goods 68 Invisibles and the current account 68 Capital flows and foreign debt 69 Foreign reserves and the exchange rate Country Profile The Economist Intelligence Unit Limited 2002

7 3 71 Appendices 71 Membership of regional organisations 71 Sources of information 72 Reference tables 72 Population 72 Transport statistics 73 National electricity statistics 73 Government finances 73 Money supply and credit 74 Gross domestic product 74 Gross domestic product by sector 75 Consumer prices 75 Rice production and yields 75 Principal crop production and yields 76 Livestock 76 Forestry output 76 Mining and quarrying output 77 Output of selected industrial goods 77 Tourism statistics 77 Principal exports 78 Principal imports 78 Main trading partners 79 Balance of payments, IMF series 80 Net official development assistance 80 External debt 81 Foreign reserves 81 Exchange rates The Economist Intelligence Unit Limited Country Profile 2002

8 4 Cambodia Cambodia Basic data Land area Population Main towns 181,035 sq km 13.3m (IMF estimate for 2001) Population in 000 Phnom Penh (capital) (mid-1993 official estimate) Battambang (mid-1993 official estimate) Climate Weather in Phnom Penh (39 ft above sea level) Language Measures Tropical; rainy season, May-October; dry season, November-April Hottest months, March-April, average daily temperature 27 C (daily maximum C); coldest month, January, average daily temperature 25 C; wettest month, October, 256mm average rainfall; driest month, January, 8mm average rainfall Khmer Metric system. Local measures include: 1 tao=15 kg 1 thang=40 litres (20-22 kg paddy) 1 hap=60 kg 1 king (or ray)=0.16 ha 1 chi=3.75 g 1 damloeng=37.5 g Currency Fiscal year Time Public holidays Riel (CR) introduced in March Average exchange rate in 2001: CR3,916.3:US$1; CR5,639.5: 1; exchange rate on October 28th 2002: CR3,835:US$1; CR5,975.7: 1 January 1st-December 31st Seven hours ahead of GMT January 9th (National Day); April 13th-15th (Cambodian New Year), 17th (Victory over American Imperialism Day); May 1st (Labour Day), 20th (Day of Hatred); September 22nd (Feast of the Ancestors); November 9th (Independence Day) Country Profile The Economist Intelligence Unit Limited 2002

9 Cambodia 5 Politics Cambodia has an 11-year old parliamentary democracy and constitutional monarchy. King Norodom Sihanouk is the head of state. Following years of political instability, a coalition government was put in place in 1998 comprising the Cambodian People s Party (CPP), the dominant partner, and the National United Front for an Independent, Neutral, Peaceful and Co-operative Cambodia (FUNCINPEC). A member of the CPP, Hun Sen, is the prime minister. Political background The Angkorian Empire declines France relinquishes its colony Prince Sihanouk is embroiled in the Vietnam war Lon Nol leads a coup In the early ninth century rival Khmer principalities in the Mekong delta gave way to a highly centralised empire based at Angkor. After a period of political decline, Angkor was taken over in 1431 by the Thai kingdom of Sukothai. By the end of the 18th century the territory of the old Angkorian empire had been greatly reduced. In the mid-19th century, as the kingdom came under further threat from its Thai and Vietnamese neighbours, the Khmer monarch asked France for protection. In 1887 Cambodia was fully incorporated into the French Indochinese Union. The Japanese ousted the French colonial government in 1941 and a Khmer government was installed under the young King Sihanouk. Concerned about anti-royalist sentiment, King Sihanouk arranged for the French to return to power in 1946, but later requested full independence. Faced with defeat in Vietnam, France acceded and an agreement was ratified in In the run-up to the election that followed, King Sihanouk abdicated to lead his own party, the Sangkum Reastr Niyum (People s Socialist Community), taking the title of Prince Sihanouk, and his father, Norodom Suramarit, became king. Prince Sihanouk s party won, and he dominated the political scene for the next 15 years. Prince Sihanouk quickly found himself embroiled in the war between Vietnam and the US. Although not pro-communist, Prince Sihanouk allowed the Vietnamese communists to set up bases in Cambodia and use the port of Sihanoukville. In late 1967 the prince became concerned that victory for Vietnam might have negative repercussions for Cambodia, so he switched his allegiance to the US. He allowed the US to undertake secret air raids on Vietnamese communist troops in Cambodia, but these lasted for far longer than expected, and only served to drive the troops further into Cambodian territory. Prince Sihanouk s change of allegiance provoked the Vietnamese communists to provide arms to Cambodia s emerging underground organisation, the Communist Party of Kampuchea, known as the Khmer Rouge. Prince Sihanouk s indecisiveness caused his own generals to accuse him of destroying the national army. In 1970 the then-prime minister, Lieutenant- General Lon Nol, led the disaffected army in a successful coup. In 1972 the monarchy was abolished, a Khmer republic proclaimed and Lon Nol elected president. United only by their mutual opposition to the Lon Nol regime, Prince Sihanouk and the now powerful Khmer Rouge, led by Pol Pot, joined forces, plunging Cambodia into civil war. At the same time the US, which was The Economist Intelligence Unit Limited Country Profile 2002

10 6 Cambodia providing considerable financial support to the new government, commenced ground attacks on communist bases in Cambodia. The rural population was forced to abandon its crops and flee to the cities, resulting in severe food shortages. Eventually, the Lon Nol government crumbled and the capital fell to the Khmer Rouge on April 17th The Khmer Rouge declares a revolutionary state A Vietnamese invasion generates resistance In 1976 the Khmer Rouge, which lost no time in sidelining Prince Sihanouk, renamed the country Democratic Kampuchea and proclaimed a worker-peasant revolutionary state. The urban population was marched from the towns into large-scale rural co-operatives or industrial work camps. The punishment for disobedience was often execution. Money was abolished, the postal service halted, and Cambodia was isolated from the rest of the world except China, which still provided it with assistance. The strategy was a catastrophic failure, resulting in economic chaos and widespread starvation, and the regime carried out brutal purges of suspected counter-revolutionaries. It is estimated that Khmer Rouge rule caused the deaths of around 2m people. The Khmer Rouge then turned against its supporters in Vietnam and pursued a strategy of confrontation. Diplomatic relations were severed in 1977 and Vietnam invaded Cambodia in December Pol Pot s forces were quickly pushed to the far west and Vietnam installed a communist government under the newly created Kampuchean People s Revolutionary Party (KPRP), led by Khmer Rouge defectors. The new government renamed the country the People s Republic of Kampuchea. This led to the emergence of two non-communist resistance movements, the Khmer People s National Liberation Front (KPNLF, later to become the Buddhist Liberal Democratic Party) and the National United Front for an Independent, Neutral, Peaceful and Co-operative Cambodia (known by its French acronym, FUNCINPEC), led by Prince Sihanouk. In 1982 the two joined forces to fight with the Khmer Rouge against the KPRP government. Throughout most of the 1980s neither side managed to gain the upper hand. Recent political developments The Paris peace agreement provides for a UN role An uneasy coalition is formed In 1987 the Soviet Union scaled down its assistance to the KPRP government, and in early 1990 the five permanent members of the UN Security Council began to negotiate a settlement between Vietnam and Cambodia. The Soviet Union persuaded Vietnam and Cambodia to accept a limited UN role in supervising an election, designed to settle the matter democratically. This paved the way for the Paris Peace Agreements of October The KPRP was renamed the Cambodian People s Party (CPP) and the country was renamed the State of Cambodia. As constitutional monarch, Prince Sihanouk reverted to his title of King. In February 1992 the UN Security Council approved a massive peacekeeping operation, to be implemented by the UN Transitional Authority in Cambodia (UNTAC). The Khmer Rouge refused to disarm or to participate in the proposed general election, and the intimidation and murder of members of rival political parties marred the election campaign. The election went ahead nevertheless in May 1993 and 20 parties took part. FUNCINPEC, now led by King Sihanouk s son, Prince Norodom Ranariddh, won by a small margin, securing 45.5% of the vote. The CPP, Country Profile The Economist Intelligence Unit Limited 2002

11 Cambodia 7 led by Hun Sen, came second with 38.2%. Lacking a majority, FUNCINPEC was forced to form a coalition with its erstwhile battlefield enemy, and Prince Ranariddh and Hun Sen were appointed as co-prime ministers. A power-sharing arrangement proves to be unstable A fragile peace is in place The two leaders were, however, unable to put their differences behind them, and the power-sharing arrangement became a source of instability. Events came to a head in July 1997 when Hun Sen s forces overpowered those of Prince Ranariddh in a coup d état. Some FUNCINPEC members agreed to work with Hun Sen and the CPP thereby consolidated its power. Some key international donors withdrew aid, which lead Hun Sen to pledge that the election scheduled for May 1998 would go ahead. For a while this seemed uncertain, and Hun Sen insisted that Prince Ranariddh face charges brought against him by the CPP after the coup. However, Japanese diplomats brokered a peace plan in which Prince Ranariddh was sentenced and pardoned almost immediately afterward, and that allowed opposition politicians who had fled Cambodia to return. Important recent events July 1997: Forces loyal to the co-prime minister and leader of the Cambodian People s Party (CPP), Hun Sen, take over Phnom Penh. The other co-prime minister, Prince Ranariddh, and many others flee the country. The Association of South-East Asian Nations (ASEAN) responds by delaying Cambodia s admission to the grouping and some Western countries freeze aid to Cambodia. April 1998: The hard-line Khmer Rouge leader, Pol Pot, dies. July 1998: The general election takes place after some delay. The CPP wins but without enough seats to form a government on its own. November 1998: In a climate of mounting violence, King Norodom Sihanouk intervenes and a coalition government is formed, helped by an agreement to establish a new upper house of parliament (the Senate). April 1999: Cambodia becomes a member of ASEAN. January 2000: The government approves draft legislation for the holding of a Khmer Rouge tribunal. The UN counters that the legislation falls far short of what is needed for a proper trial. February 2002: Commune (local government) elections are held for the first time. The CPP wins the most votes after a campaign marred by violence and intimidation. The UN withdraws from talks with the government on plans to hold a Khmer Rouge tribunal because it fears that minimum judicial standards will not be upheld. July 2002: The UN considers resuming negotiations with the government on holding a Khmer Rouge tribunal. The general election was delayed until July In it the CPP won only 41% of the vote, which meant that it would have to form a coalition government, either with FUNCINPEC, which won 32% of the vote, or the Sam Rainsy Party (SRP), which won 14%. Lengthy negotiations ensued during which FUNCINPEC and the SRP accused the CPP of election-related fraud. By September, with still no coalition in place, political tensions turned violent as the opposition took to the streets. Eventually King Sihanouk intervened and in November the CPP and FUNCINPEC agreed to form a coalition in which Hun Sen would be prime minister and Prince Ranariddh the chairman of the National Assembly (the lower house of parliament). The coalition has survived the four years since this represents the longest period of broad political stability since the downfall of the Khmer Rouge. The Economist Intelligence Unit Limited Country Profile 2002

12 8 Cambodia Cambodia is broadly stable, but the election carries risks Although the quality of Cambodia's democracy is poor, the political scene is broadly stable. This reflects a combination of CPP political dominance, opposition weakness, and a recognition by FUNCINPEC senior officials that the party s interests are best served by maintaining the coalition with the CPP. The commune elections in February 2002 did little to undermine the CPP grip on power, nor did they affect political stability. An attack on the government by heavily armed rebels belonging to the anti-government Cambodian Freedom Fighters in November 2000 resulted in an hour-long gun battle in downtown Phnom Penh, but it never seriously threatened the government. Despite the current political stability, the process for the transfer of power is far from established; a smooth and orderly transfer of power has not taken place for nearly 50 years. Tensions between the CPP and FUNCINPEC, rooted in the memories of years of conflict, are continuing to hold back the process of establishing stable political institutions. The next election is due to take place on July 27th 2003 and is likely to be held on that date as the CPP has been drawing up the necessary revised election legislation. Historically, serious instability in Cambodia has tended to occur after elections, although the run-up to these is rarely smooth either. Constitution, institutions and administration A constitutional monarchy is in place The executive is dominant An upper house is set up in 1999 The 1993 constitution states that Cambodia is a constitutional monarchy. King Norodom Sihanouk, as head of state, is responsible for appointing the prime minister. The cabinet is chosen by the prime minister with the king s approval. King Sihanouk s influence has declined in recent years, owing to his poor health, but he has still been able to step in at decisive moments, most notably in brokering the coalition government formed in November The increasing frailty of the king has spurred speculation as to who might succeed him. The focus of attention has mostly been on his son, who is also the chairman of the National Assembly, Prince Norodom Ranariddh. According to the constitution, the nine-member Throne Council is to choose King Sihanouk s successor within seven days of his death. There is a lack of real separation in government, with the executive branch commonly dominating the legislature and the judiciary. The National Assembly s agenda, for example, is largely driven and controlled by the executive, which is dominated by the CPP. Judges are highly vulnerable to political pressure. King Sihanouk used to exert some control over the executive, but his powers have diminished and it is doubtful that that his successor will have the same authority. The coalition agreement of November 1998 stipulated that an upper house of parliament, or Senate, was to be established, with the old National Assembly becoming the lower house. The Senate was set up after the National Assembly passed a 40-article amendment to the constitution in March It has 61 members and runs concurrently with the lower house. King Sihanouk appoints two senators, and the remainder are appointed by the political parties according to their respective shares of seats in the National Assembly. The role of the Senate is to scrutinise laws passed by the National Assembly and act as a Country Profile The Economist Intelligence Unit Limited 2002

13 Cambodia 9 co-ordinator between the government and the lower house. The Senate president, Chea Sim, acts as head of state when the king is absent. The National Assembly is the lower house The bureaucracy is weak The CPP dominates the security forces The National Assembly has 122 members. Parliament cannot be dissolved before the expiry of its five-year term unless the government has been dismissed twice within 12 months. The five-year term can be extended by one year at a time if it is deemed that there is a threat to national security, on the recommendation of the king and with the approval of two-thirds of the National Assembly. Legislation can be passed only by an absolute majority of all members of parliament. Constitutional changes require the support of a two-thirds majority. In reality the legislative agenda is driven by the CPP. Policymaking is highly centralised around the executive branch of government. The bureaucracy is rarely a source of novel or alternative policy thinking. Its role is thus best understood in terms of carrying out ministerial wishes. However, its effectiveness in the implementation of policy is limited because it is technically weak, open to corruption, and prone to factionalism along political lines. The CPP has long dominated the military, the police and the judiciary. To redress the balance, two co-ministers, one from the CCP and one from FUNCINPEC, now run the defence and interior ministries (although the FUNCINPEC interior minister position is currently vacant). The current prime minister, Hun Sen, has pledged to make the military and the police more independent, but for the moment the security forces remain politically partisan, generally with a strong bias towards the CPP. Political forces The CPP is disciplined and powerful FUNCINPEC is marred by factionalism Of the 39 political parties competing in the July 1998 election, only three, the CPP, FUNCINPEC and the Sam Rainsy Party, won seats. The CPP is politically dominant, in terms of representation in the National Assembly (where it has 64 seats), in other state organs and in terms of its grassroots party network. Although it is in a coalition with FUNCINPEC, there is a history of hostility between the two parties. The president of the Senate, Chea Sim, is the chairman of the CPP and the prime minister, Hun Sen, is its deputy chairman. The CPP maintains strong Leninist roots, evident in its internal discipline, and in terms of economic policy it can be regarded as pragmatic reformist. This means that, even when it supports liberal economic policies, it is likely to be motivated by a desire to wrong-foot political rivals rather than a genuine belief in market reform. Currently holding 43 seats in the National Assembly, FUNCINPEC has been marred by factionalism since the 1993 election. Hun Sen s ousting from the government of the FUNCINPEC president, Prince Ranariddh, in July 1997 imposed great strains on the party. Some FUNCINPEC members took ministerial positions in the post-coup administration and others fled abroad or took up military positions in the north-west. Since joining the coalition government that was formed in November 1998, FUNCINPEC has been seeking to mend the divisions in its ranks with a view to defeating the CPP at elections. However, if anything, factionalism has got worse and the party s support has declined in the rural areas. The Economist Intelligence Unit Limited Country Profile 2002

14 10 Cambodia Factions are divided in part by disagreement over whether to remain in coalition and enjoy the fruits of office, such as access to public funds, or to openly challenge the CPP. Personality conflicts also play a role. FUNCINPEC s strongest card is its association with the monarchy. It lacks any solid core of beliefs, although it often takes more conservative positions than the CPP or the Sam Rainsy Party (SRP). The Sam Rainsy Party is the main opposition party The SRP is the only opposition party represented in the National Assembly, where it has 15 seats. It was founded in November 1995 by a former finance and economy minister, Sam Rainsy, who is also a former FUNCINPEC member. Although he is the dominant figure, the party is prone to factionalism. It is highly critical of the government, especially the CPP. Because of its outspokenness, party members have suffered severe intimidation. It has strong support in urban areas, particularly from workers and independent unions. Its rural support base is nascent. Its policy orientation is ostensibly more radical than the other main parties, in both political and economic spheres, favouring greater transparency and a tougher line on corruption. However, it is hard to say whether this policy orientation would continue if the SRP were to win office. General and local election results (% of vote) 1993 (general election) 1998 (general election) 2002 (local elections) CPP FUNCINPEC Others n/a SRP n/a Source: Press reports. Key political figures King Norodom Sihanouk: After abdicating in 1955 to lead his own political party, Prince Sihanouk was returned to the throne as a constitutional monarch in He is revered among ordinary Khmer but his political influence has declined owing to poor health. Hun Sen: Hun Sen defected from the Khmer Rouge in the late 1970s and established the Cambodian People s Party (CPP). He was instrumental in the July 1997 coup. He is the prime minister and vice-chairman of the CPP. Prince Norodom Ranariddh: The king s son, the leader of FUNCINPEC and the chairman of the National Assembly (the lower house of parliament). He served as the first prime minister from 1993 to 1997 before being ousted by Hun Sen. Sam Rainsy: As leader of and dominant figure within the opposition Sam Rainsy Party, the former FUNCINPEC finance and economy minister has many enemies in the CPP. Chea Sim: The chairman of the CPP plays the role of an elder statesman. He was formerly chairman of the National Assembly and is now president of the Senate. Sar Kheng: The deputy prime minister and co-interior minister is influential within the CPP. The Khmer Rouge is no longer a political force The Khmer Rouge has steadily disintegrated and is no longer a political force. In recent years this has largely been the result of the government s policy of enticing Khmer Rouge members to defect. In June 1997 top Khmer Rouge leaders Country Profile The Economist Intelligence Unit Limited 2002

15 Cambodia 11 turned on Pol Pot after he ordered the killing of a senior Khmer Rouge figure, Son Sen, for negotiating with the government. In July 1997 the Khmer Rouge tried Pol Pot and sentenced him to life imprisonment. He died shortly afterwards. During 1998 and 1999 the last remaining Khmer Rouge leaders either surrendered or were captured, and the government has pledged to put some of them on trial. There has been little progress in this regard since then. International relations and defence Relations are ambivalent with Western countries Relations with the US, the EU, and multilateral institutions, such as the IMF and the World Bank, were often difficult in the 1990s. They reached a low point in July 1997 when Hun Sen used military force to oust Prince Ranariddh from the government. Other sources of tension have included the government s failure to implement reform pledges and its poor human-rights record. Since the installation of the new coalition government in November 1998 the situation has improved relations with the IMF and the World Bank have been normalised, and aid flows have resumed. Nevertheless, differences remain over the speed of reform and the quality of governance in Cambodia. The UN-Cambodian war crimes tribunal Relations with the UN have been dominated of late by lengthy negotiations over plans to hold a Khmer Rouge tribunal. The UN originally wanted an international tribunal to be held, arguing that the Cambodian judiciary was too vulnerable to political pressure to oversee a legitimate trial. However, Hun Sen made it clear that the tribunal would be held on home ground. The holding of a Khmer Rouge trial is politically sensitive in Cambodia. The government says that it needs to balance its desire for national reconciliation with its desire to see justice done. More to the point, a large number of officials in the present government, including Hun Sen, are former members of the Khmer Rouge and a substantive trial might prove politically embarrassing. Some of those who might be put on trial, such as Ieng Sary, have powerful potential friends. Former Khmer Rouge officials still control large tracts of territory in the north-east. The UN agreed with the government in April 2000 that any trial verdict would require the support of four out of five judges; Cambodia would select three judges and the UN the two, in effect giving each side a veto. Since then, the National Assembly has approved prepatory legislation to stage a trial, but the UN and the government have been unable to resolve the remaining differences. The UN is sceptical that the trial, as proposed, would have sufficient safeguards to ensure minimum judicial standards. In February 2002 the UN announced its withdrawal from talks with the government. Although it has said that it would consider returning to the negotiating table, it seems to be waiting for a clear mandate from its member states. There is still no date for a trial. Cambodia joins ASEAN Cambodia was given observer status in the Association of South-East Asian Nations (ASEAN) in 1995, but as a result of the coup organised by Hun Sen in 1997, Cambodia failed to gain full membership in 1997 as originally planned. At the ASEAN summit in Hanoi in December 1998 it was agreed that Cambodia should be admitted, and this was formalised in April The Economist Intelligence Unit Limited Country Profile 2002

16 12 Cambodia Ties with China are close Relations with Thailand are improving Relations with Vietnam are vulnerable to border disputes Army demobilisation falls behind schedule Under Hun Sen Cambodia has moved closer to China. China is an important source of aid, trade and investment. Hun Sen has shown himself willing to jeopardise relations with Taiwan an important investor in Cambodia in the interests of good relations with China. China has consistently taken Cambodia s side in its disagreement with the UN and Cambodia frequently reiterates its commitment to the One China principle that denies recognition of Taiwan as an independent state. Cambodia s relations with Thailand have improved since Cambodia accepted that Thailand s leaders had severed ties with the Khmer Rouge. There are periodic difficulties along Cambodia s border with Thailand, notably the maritime border, where there is a dispute over an oil-rich area in the South China Sea. Of late, the two sides have paid increased attention to settling these disputes and developing commercial relations. Relations with Vietnam, soured by the Vietnamese occupation, have also proved vulnerable to border disputes. There are also problems with ethnic Vietnamese living in Cambodia. In general relations have become easier since Hun Sen, who is pro-vietnamese, assumed power. However, a decision allowing Vietnamese protesters who fled to Cambodia following rural unrest in Vietnam to go to the US strained relations in The Royal Cambodian Armed Forces (RCAF) are officially said to number around 130,000. The government is in the process of implementing a demobilisation programme. It discharged 1,500 soldiers in 2000 and 15,000 more in However, the programme seems to have fallen behind schedule in the last phase of the timetable, which requires a further 15,000 personnel to be demobilised by the end of The IMF has estimated the total cost of the demobilisation at US$47.5m. Streamlining the security forces should make it easier to realise planned cuts in defence expenditure. Security risk in Cambodia I. Armed conflict There is a moderate risk of armed conflict threatening business. The risk has declined in recent years, owing to the strength of the Cambodian People s Party s (CPP s) grip on power. Opposition to the CPP is now much weaker than before, reducing the likelihood of an armed struggle for power led by the opposition parties. A serious armed struggle last took place in July 1997, when the CPP launched a successful coup d état against forces loyal to the National United Front for an Independent, Neutral, Peaceful and Co-operative Cambodia (FUNCINPEC). This resulted in widespread if short-lived disruption to business activity. However, deep political differences remain between the main parties. The emergence of a split in the CPP currently unlikely might presage more serious armed conflict. Moreover, there are also risks stemming from dissident groups, such as the Cambodian Freedom Fighters, which attempted to overthrow the government in November 2000, and disaffected individuals, such as those who blew up two hotels in Phnom Penh in July Such acts are unlikely to be of sufficient scale to have a major impact on business activity. Country Profile The Economist Intelligence Unit Limited 2002

17 Cambodia 13 II. Unrest/demonstration There is a high risk of labour unrest causing disruption to business, especially in the garment sector, where labour unions backed by the opposition Sam Rainsy Party (SRP) are active and militant. There is also a moderate risk of civil unrest linked to divisions between the main political parties. Unrest is most likely to happen in the period surrounding general elections, especially after the election. The next general election is due to be held on July 27th III. Violent crime Street crime and burglary are serious problems in Cambodia. Foreigners are at particular risk because of their relative wealth compared to the local population. Moreover, thieves frequently carry guns. The US embassy has reported a recent rise in armed robberies of foreigners, which have mostly taken place after dark and have targeted foreigners travelling by motorcycle or bicycle taxis. Many rural parts are effectively lawless and are subject to banditry. Robbers have attacked boats and trains in rural areas. Air travel may be the safest option for some destinations. Extreme caution is advised for foreigners travelling outside provincial towns, especially at night. Ill-disciplined security personnel may also pose a risk to foreigners. Local business disputes are sometimes settled through violence and bombings. IV. Organised crime Given its reputation for lawlessness and lax border controls, Cambodia has attracted the attention of organised crime groups involved in gun-running, human trafficking and drug smuggling. However, the risk from such activity to foreign companies involved in legitimate business activities is small. V. Kidnapping/extortion There have been incidents of kidnapping and extortion in Cambodia. In the past the Khmer Rouge was active in this area, including the kidnapping of foreign tourists. Even with the demise of the Khmer Rouge, people visiting remote areas need to remain vigilant. Wealthy Chinese families have also been targeted. Armed personnel have charged tourists fees to pass illegal checkpoints in Siem Riep province, the location of the Angkor Wat temple complex, a major tourist attraction. VI. Landmines There are landmines in rural areas, especially in Battambang, Banteay Meanchey, Pursat, Siem Reap, and Kampong Thom provinces. There are clearly marked pathways around main tourist areas. Otherwise, local guides are essential for travel through forested areas and even rice paddies. Areas around small bridges on secondary roads are particularly dangerous. Resources and infrastructure Population Population indicators 2000 Population (m) 13 Crude birth rate (per 1,000) 32 Crude death rate (per 1,000) 12 Infant mortality rate (per 1,000 live births) 88 The Economist Intelligence Unit Limited Country Profile 2002

18 14 Cambodia Maternal mortality rate (per 1,000 live births) 5 Life expectancy (years) 54 Sources: World Bank, World Development Indicators; Cambodia: Progress in Recovery and Reform, 1997; UN Children s Fund (UNICEF); UN World Food Programme; IMF, International Financial Statistics. The population is poor and growing fast Between 1962 and 1998, the dates of the last two nationwide censuses, the population grew at an average rate of 2.7% a year to reach 12.9m, according to the IMF. Nearly 44% of the population is under the age of 14, and there is a severe imbalance between the sexes. Women outnumber men, particularly in the over-40s age group, a legacy of years of conflict. According to the World Bank, annual income per head was just US$260 and 36% of the population was classified as poor in Future population growth rates are likely to be high given the number of people currently under the age of 30; the Asian Development Bank (ADB) has identified a post-war baby boom (see Reference table 1 for historical population data). According to the commerce ministry s Business and Investment Handbook , around 85-90% of the population live in rural areas. The largest city by far is Phnom Penh, which has a population estimated at around 1m, although the last official estimate was in 1993 (at 691,000). National population density is low, averaging 64 people per sq km (compared with 117 people per sq km in Thailand and 225 in Vietnam). However, the more densely populated central provinces have an average of 161 people per sq km. According to government data in 1998, 87% of the labour force was concentrated in rural areas, mainly working as farmers. Age structure of population (% of total unless otherwise indicated) years years years 2.8 Total population (m) 11.4 a a World Bank estimates differ from those of the IMF. Source: World Bank, World Development Indicators. There is a sizeable Vietnamese and Chinese population Around 90% of the population are of Khmer ethnic origin. The other main ethnic groups are the Vietnamese and the Chinese, who number around 500,000 and 600,000 respectively. There is also a small Cham population and a number of non-khmer highland groups (Khmer Loeu). Racism directed against the Vietnamese is widespread. The ethnic Chinese were persecuted during the rule of the Khmer Rouge, but managed to establish themselves as a significant economic force from the early 1990s. Education Skills levels are poor By the end of the Pol Pot era formal education had ceased, and many educated Cambodians had been killed or had fled abroad. According to the national census conducted in 1998, only 48% of those over 25 years of age had completed primary education. In 1997 the government estimated that 69% of the population was literate (82% of men and 58% of women). This compares with World Bank estimates of male literacy at 58.6% and female literacy at Country Profile The Economist Intelligence Unit Limited 2002

19 Cambodia % in Literacy levels fell in the 1990s, partly reflecting the state s increased demand for parents to contribute to the cost of their children s education. According to the UN Development Programme (UNDP), 100% of children of the relevant age were enrolled in primary-level education in 1998, but only 20% in secondary level. Educational opportunities at tertiary level are inadequate, resulting in shortages of skilled labour, a problem both for investors and for government efforts to improve public administration. Budgetary constraints limit the scope for developing education. Health Public health expenditure is extremely low Mortality figures reflect the poor state of public health provision in Cambodia. About half of the population has no access to the public healthcare system, which is seriously run-down. There has been a sharp decline in the number of doctors and nurses per head of population since the mid-1960s. Public health expenditure was estimated at 0.6% of GDP in 1998, according to the UNDP, the lowest percentage among countries reporting data except for Myanmar and Antigua and Barbados. The private sector has sought to fill the gap private health expenditure is estimated at 6.3% of GDP but personnel offering medical treatment are often poorly qualified. Various indicators reveal the dismal condition of healthcare in Cambodia. The World Bank estimated infant mortality at 100 per 1,000 live births in 1999, and maternal mortality at 5 per 1,000 births; the true figures may be much higher as only about one-third of births are attended by qualified medical staff. The UN classifies half of all children under the age of five as stunted and 20% suffer from severe malnutrition. Only 29% of the population has access to safe drinking water (the figure is lower in rural areas) and only 18% has access to adequate sanitation facilities. HIV/AIDS is also a serious problem, although infection rates have fallen recently, possibly reflecting the impact of prevention strategies. Life expectancy at birth is only 54 years, compared with 70 years in Thailand (according to UN Children s Fund, known also as UNICEF, estimates in 1999). Natural resources and the environment Cambodia is a resource-rich country Forest cover has declined Cambodia is the smallest of the three former Indochinese countries. It is bordered by Laos to the north, Vietnam to the east and Thailand to the west. Apart from the Cardamom mountains in the south, which divide Cambodia s interior from its short southern coastline, most of the country consists of a shallow basin centred on Tonle Sap (the Great Lake). The Mekong river bisects Cambodia, running from north to south. During the rainy season flooding is commonplace. Forests are Cambodia s most valuable resource. A UK-based environmental group, Global Witness, estimates that over the last 30 years forest cover has declined from 70% to around 30% of total land area. However, no full forestry survey has been undertaken since 1969 and other estimates differ. The government has attempted to regulate forest exploitation, but with limited success. Fish stocks are abundant, although overfishing is causing a decline in stocks. Cambodia is believed to have modest but commercially viable deposits The Economist Intelligence Unit Limited Country Profile 2002

20 16 Cambodia of phosphate, granite, limestone, sand, gravel, clay and bauxite, and there are also gold, gem and oil and gas reserves. The precise extent of these has not been assessed, although some oil exploration has been undertaken. Transport, communications and the Internet Poor infrastructure hampers development Few roads are paved Inland waterways may be the only option in the rainy season There is only one deepwater port The national airline is no longer operational Cambodia s transport and communications infrastructure is in a serious state of disrepair. In a report to the UN Conference on Least Developed Countries in Brussels in 2001 the government emphasised the need to develop the road and rail networks in order to boost trade with neighbouring countries. However, the government also stressed the importance of air transport as a way of bypassing problems on the ground. Progress has been made in recent years, but bureaucracy, shortages of qualified staff, inadequate financial resources and, until recently, the poor security situation, have hampered implementation. A halt in international lending between 1997 and 1999 because of political instability caused delays in infrastructure projects. Private-sector capital has traditionally been scarce, reflecting an inadequate regulatory environment and concerns about the political situation. Cambodia has about 4,200 km of national roads, 3,600 km of provincial roads and 28,500 km of rural roads. The majority of roads are not paved, including national roads (despite repair work over the last few years, only 12% of national roads were paved in 2001, according to government estimates). Many bridges and ferries are in a poor state of repair. Foreign donors are financing a wide range of road and bridge projects, including ones in provincial areas. Motorcycle and vehicle traffic is increasing in urban areas, but overall road traffic remains light. Inland waterways provide important transport routes, particularly during the rainy season when many roads are impassable. The major routes are the Mekong and Tonle Sap rivers. Siltation of the Mekong has rendered some stretches impassable for large boats, leading to a need for regular dredging, which is taking place. Cambodia s two main ports are Phnom Penh on the Mekong river and Sihanoukville, the only deepwater seaport (although Phnom Penh can receive small ocean-going vessels). Both suffer from siltation and have antiquated cargohandling equipment. Anecdotal evidence suggests that shipping companies prefer to dock at Sihanoukville rather than Phnom Penh despite the subsequent land journey that this involves because of the lengthy Vietnamese paperwork required for ships sailing up the Mekong. Upgrading work on Sihanoukville port, originally scheduled for completion in 2003, has fallen severely behind schedule in Cambodia s main airports are at Phnom Penh (Pochentong airport), Sihanoukville and Siem Reap. There are regular flights between Phnom Penh and destinations within Asia. Regional airlines are now permitted to fly directly to Siem Reap, which has been upgraded to handle increased tourism traffic. There are eight domestic airports. Cambodia has three operational airlines: Mekong Airlines, Cambodia Air and Royal Phnom Penh Airways. The national airline, Royal Air Cambodge (RAC), suspended operations in October 2001 after Country Profile The Economist Intelligence Unit Limited 2002

21 Cambodia 17 the withdrawal of its foreign partner. Efforts are under way to find a new backer. In 1997 Hun Sen announced the abrogation of RAC s monopoly position. Competition from other carriers has contributed to its difficulties. There are two railway lines Telecommunications infrastructure is weak The railway system comprises a 385-km line running from Phnom Penh to Poipet on the Thai border, which is in urgent need of repair, and a 263-km route from Phnom Penh to Sihanoukville, which was upgraded in The government is hoping to receive grant aid from both Japan and France to further upgrade the network. Discussion is also taking place on building a new railway linking Phnom Penh to Ho Chi Minh City in Vietnam, but this is some years off. Responsibility for the railways rests with the state-owned Royal Cambodian Railways. Telephone density is low at 0.7 telephones per 100 people, compared with 1.4 in Vietnam. The US$50m telecommunications network installed for the UN Transitional Authority in Cambodia (UNTAC) by an Australian telecoms company, OTC/Telstra, links all 21 provinces. However, many small towns are without telephone connections. Telecoms links also exist via the Intelsat system, which provides international communications services through a network of satellites. The government has said that it would be willing to sell off as much as 70% of the state-run telecoms network, Cambodia Telecoms, to foreign and domestic investors, but nothing has yet come of it. Mobile-phone systems are widely used in urban areas to bypass deficiencies in the fixed-line telecoms network. Internet use is concentrated in Phnom Penh but is low compared with most other Asian capital cities. E-business is largely undeveloped. Energy provision Power cuts are frequent Major investment is needed Publicly generated capacity in Cambodia stands at around 35 mw, of which 25 mw comes from diesel-fuelled generators and the remainder from hydroelectric sources or imported batteries. The state-run Electricité du Cambodge (EdC) was replaced by a newly empowered regulator, the National Electricity Bureau, in Many companies and hotels have installed their own generators, and this is estimated to have increased nationwide capacity by over 100 mw. The majority of the population have no access to electricity. Phnom Penh, which has around 10% of the population, uses around 85% of total electricity consumed. The distribution system is old and badly in need of repair and power cuts are commonplace. Owing to the inefficient generation and distribution systems, the unit cost of electricity is high at around US cents per kwh. All of the diesel used to generate electricity has to be imported (see Reference table 2 for historical national energy statistics). The World Bank s central forecast is for power demand in Cambodia to increase by an average of 8% each year until This is slightly above average for countries in the Mekong region as a whole. Upgrading energy provision in Phnom Penh has been identified as a priority. This includes an overhaul of the city s distribution system, which is being jointly financed by the ADB and the World Bank. The government has also begun installing transmission lines in order to allow for the purchase of electricity from Vietnam. The Economist Intelligence Unit Limited Country Profile 2002