COUNTRY PROFILE 2001 Cambodia Laos

Transcription

1 COUNTRY PROFILE 2001 Cambodia Laos This Country Profile is a reference tool, which provides analysis of historical political, infrastructural and economic trends. It is revised and updated annually. The EIU 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 EIU delivers its information in four ways: through our digital portfolio, where our 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 2001 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 EIU 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 Comparative economic indicators, 2000 EIU Country Profile 2001 The Economist Intelligence Unit Limited 2001

5 1 Contents Cambodia 4 Basic data 5 Political background 5 Historical background 8 Constitution and institutions 9 Political forces 10 International relations and defence 12 Resources and infrastructure 12 Population 13 Education and health 13 Natural resources and the environment 14 Transport and communications 15 Energy provision 17 The economy 17 Economic structure 17 Economic policy 20 Economic performance 20 Economic sectors 20 Agriculture, fishing and forestry 22 Mining and semi-processing 23 Manufacturing 23 Construction 24 Financial services 24 Other services 25 The external sector 25 Trade in goods 26 Invisibles and the current account 27 Capital flows and foreign debt 28 Foreign reserves and the exchange rate 29 Appendices 29 Regional organisations 30 Sources of information 31 Reference tables 31 Population 31 National energy statistics 32 Government finances 32 Money supply and credit 32 Gross domestic product 33 Gross domestic product by expenditure 33 Gross domestic product by sector 34 Consumer prices 35 Agriculture, livestock, fishery and forestry production 35 Main industrial production EIU Country Profile 2001 The Economist Intelligence Unit Limited 2001

6 2 36 Tourism statistics 36 Exports 36 Main imports 37 Main imports and exports 37 Main trading partners 38 Balance of payments, IMF series 38 Net official development assistance 39 External debt 39 Foreign reserves 39 Exchange rates Laos 40 Basic data 41 Political background 41 Historical background 43 Constitution and institutions 43 Political forces 45 International relations and defence 47 Resources and infrastructure 47 Population 48 Education and health 49 Natural resources and the environment 50 Transport and communications 52 Energy provision 53 The economy 53 Economic structure 53 Economic policy 56 Economic performance 58 Regional trends 58 Economic sectors 58 Agriculture and forestry 59 Mining and semi-processing 59 Manufacturing 60 Construction 60 Financial services 61 Other services 62 The external sector 62 Trade in goods 63 Invisibles and the current account 64 Capital flows and foreign debt 65 Foreign reserves and the exchange rate 66 Appendices 66 Sources of information 67 Reference tables 67 Population 67 Transport statistics 68 National electricity statistics EIU Country Profile 2001 The Economist Intelligence Unit Limited 2001

7 3 68 Government finances 68 Money supply and credit 69 Gross domestic product 69 Gross domestic product by sector 70 Prices 70 Rice production and yields 71 Principal crop production and yields 71 Livestock 72 Forestry output 72 Mining and quarrying output 72 Output of selected industrial goods 73 Tourism statistics 73 Main exports 73 Main imports 74 Main trading partners 75 Balance of payments, IMF series 75 Net official development assistance 76 External debt 76 Foreign reserves 76 Exchange rates The Economist Intelligence Unit Limited 2001 EIU Country Profile 2001

8 4 Cambodia Cambodia Basic data Land area Population Main towns 181,035 sq km 13.1m (mid-2000 estimate) Population in 000 Phnom Penh (capital) Battambang (mid-1993 official estimate) (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 2000: CR3,840.8:US$1; CR5,823.0: 1; exchange rate on September 10th 2001: CR3,835:US$1; CR5,637.5: 1 January 1st-December 31st 7 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) EIU Country Profile 2001 The Economist Intelligence Unit Limited 2001

9 Cambodia 5 Political background Cambodia is a constitutional monarchy with King Norodom Sihanouk as its head of state. Following years of political instability, a coalition government was put in place in 1998 comprising the Cambodian People s Party (CPP) and the National United Front for an Independent, Neutral, Peaceful and Co-operative Cambodia (FUNCINPEC). Hun Sen of the CPP is the prime minister. Historical background The decline of the Angkorian Empire Independence from France Prince Sihanouk and the Vietnam war Lon Nol s 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, Norodom 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 the throne to lead his own party, the Sangkum Reastr Niyum (People s Socialist Community), taking the title of Prince Sihanouk, with his father, Norodom Suramarit becoming king. His party won, and for the next 15 years Prince Sihanouk dominated the political scene. 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. Then 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. Furthermore, Prince Sihanouk s change of mind 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 to a successful coup d état. The monarchy was abolished, a Khmer republic proclaimed and Lon Nol elected The Economist Intelligence Unit Limited 2001 EIU Country Profile 2001

10 6 Cambodia president in United only in 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 providing considerable financial support to the new government, commenced ground attacks on communist bases in Cambodia. The rural population was forced to desert its crops and flee to the cities, resulting in gross food shortages. Eventually the Lon Nol government crumbled and the capital fell to the Khmer Rouge on April 17th The Khmer Rouge period The Vietnamese invasion leads to resistance The Paris peace agreement In 1976 the Khmer Rouge, which lost no time in sidelining Prince Sihanouk, renamed the country Democratic Kampuchea and proclaimed a workerpeasant revolutionary state. The urban population was marched from the towns into slave labour in large-scale rural co-operatives or industrial work camps. Punishment for any disobedience was often execution. Money was abolished, the postal service halted, and the country was isolated from the rest of the world apart from China, which still provided aid and advice to Cambodia. 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 directly caused the unnecessary deaths of around 2m people. The Khmer Rouge changed tack and pursued a strategy of confrontation with Vietnam. 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 alongside the Khmer Rouge against the KPRP government. Throughout most of the 1980s neither side gained the upper hand. 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 agreement 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 implemented by the UN Transitional Authority in Cambodia. EIU Country Profile 2001 The Economist Intelligence Unit Limited 2001

11 Cambodia 7 An uneasy coalition The Khmer Rouge refused to disarm or to participate in the election, and the intimidation and murder of members of rival political parties marred the campaign. However, the election went ahead 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, led by Hun Sen, came second with 38.2%. FUNCINPEC was forced to form a coalition with its erstwhile battlefield enemy, and Prince Ranariddh and Hun Sen were appointed as co-prime ministers. However the two were never able to put their differences behind them, and power-sharing 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. Although some FUNCINPEC members agreed to work with Hun Sen, the reality was that power rested ever more tightly with the CPP. As a number of key international donors withdrew aid, Hun Sen pledged 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 in quick succession, and opposition politicians who had fled the country returned. 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 first 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. September 1998: Political tensions related to forming a coalition erupt into violence, resulting in a CPP crackdown on the opposition. November 1998: King Norodom Sihanouk intervenes and a coalition government is formed, helped by an agreement to establish a new upper house of parliament, or 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 2001: The draft legislation for a Khmer tribunal is rejected by the Constitutional Court for its mention of the death penalty, meaning that the parliamentary approval process must be begun afresh. Political stability The election, held in July 1998, gave the CPP 41% of the vote, but a government could only be formed through a coalition, either with FUNCINPEC, which won 32% of the vote, or the Sam Rainsy Party, which The Economist Intelligence Unit Limited 2001 EIU Country Profile 2001

12 8 Cambodia won 14%. Lengthy negotiations ensued during which the opposition accused the CPP of election-related fraud. With a coalition still not in place, political tensions turned violent in September when the opposition took to the streets. Finally King Sihanouk intervened and in November a coalition was agreed between the CPP and FUNCINPEC, with Hun Sen as prime minister and Prince Ranariddh as chairman of the National Assembly (the lower house of parliament). Since then Cambodia has experienced a period of unprecedented political stability although tension between the three main political parties persists. Constitution and institutions A constitutional monarchy The Senate The National Assembly The security forces and the judiciary 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 This increasing frailty of the king has spurred speculation as to who might succeed him. The focus of attention has mostly been on his son and the chairman of the National Assembly, Prince Norodom Ranariddh. According to the constitution, the nine-member Throne Council will choose King Sihanouk s successor within seven days of his death. 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. King Sihanouk appoints two, and the remainder are appointed by the political parties according to the proportion of seats that they hold in the National Assembly. The role of the Senate is to scrutinise laws passed by the National Assembly and act as a co-ordinator between the government and the lower house. The Senate president, currently Chea Sim, is acting head of state when the king is absent. The National Assembly has 122 members. Parliament cannot be dissolved before its five-year term has expired 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. 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. The current prime minister, Hun Sen, has pledged to make the military and the police more EIU Country Profile 2001 The Economist Intelligence Unit Limited 2001

13 Cambodia 9 independent but for the moment the security forces remain politically partisan, generally with a strong bias towards the CPP. Political forces The CPP FUNCINPEC The Sam Rainsy Party 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, both in terms of National Assembly representation (where it has 64 seats) and in terms of its grassroots party network. Although it is in 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. 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 strain on the party. Some FUNCINPEC members took ministerial positions in the post-coup administration, while 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 heal the divisions in its ranks with a view to taking the CPP on eventually at the polls. FUNCINPEC s strongest card is its association with the monarchy. The Sam Rainsy Party (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, a former member of FUNCINPEC. It is highly critical of the government, especially the CPP. Because of its outspokenness the party has suffered severe intimidation: a peaceful protest organised by the party in March 1997, for example, was disrupted by a grenade attack while a number of SRP activists have been killed in suspicious circumstances. Main 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 current 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 the opposition Sam Rainsy Party, the former FUNCINPEC finance and economy minister has many enemies in the CPP. Mr Rainsy has long advocated free-market, rather than statist economic policies. The Economist Intelligence Unit Limited 2001 EIU Country Profile 2001

14 10 Cambodia 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. In this role he is acting head of state in the king s absence. Sar Kheng: The deputy prime minister and co-interior minister is influential within the CPP. The Khmer Rouge 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. Pol Pot s right-hand man, Ieng Sary, defected in August 1996 and went on to form the Democratic National United Movement (DNUM). The DNUM did not contest the 1998 election, however, and its political role is unclear. In June 1997 top Khmer Rouge leaders turned on Pol Pot after he ordered the killing of another leader, 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 top Khmer Rouge leaders either surrendered or were captured, and the government has pledged to put some of them on trial. International relations and defence Relations with Western countries recover The UN-Cambodian war crimes tribunal 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 particularly low point in July 1997 when Hun Sen used military force to oust Prince Ranariddh from the government, and the government s failure to implement reform pledges and its human-rights record have not helped. Since the new coalition government was installed in November 1998 the situation has improved: relations with the IMF and the World Bank have been normalised, and aid flows have resumed. 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. But 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 the desire to see justice done. However, 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. In addition, some of those who could be put on trial, such as Ieng Sary, are potential allies of Hun Sen and still control large tracts of territory in the north-east. As a concession to the Cambodian government, which was determined to hold the tribunal in Phnom Penh, the UN reached an agreement with the government in April 2000 under which any trial verdict would require the support of four out of five judges, of whom three are to be Cambodian and two UN appointees. Legislation for the holding of a tribunal was approved by the National Assembly in February 2001 but was later thrown out by the EIU Country Profile 2001 The Economist Intelligence Unit Limited 2001

15 Cambodia 11 Constitutional Court for its mention of the death penalty, which is banned in Cambodia. The draft legislation has since been revised but in September there were still outstanding differences between the government and the UN and no date for a trial had been set. Cambodia is admitted to ASEAN Ties with China are burgeoning Relations with Thailand and Vietnam are improving 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 Under Hun Sen Cambodia has also developed close relations with 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. Relations with Thailand improved once it was accepted that its 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, increased attention has been paid 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, has been in 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 demobilisation of the army is slow 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 although it is behind schedule. So far, just 1,500 soldiers have been removed from the payroll as part of a pilot project. A further 15,000 are to be discharged in both 2001 and 2002, reducing the armed forces to around 100,000. The IMF has estimated the total cost of the demobilisation at US$47.5m. Foreign donors have offered to cover some of the costs. Streamlining the security forces should make it easier to realise planned cuts in defence expenditure. The Economist Intelligence Unit Limited 2001 EIU Country Profile 2001

16 12 Cambodia Resources and infrastructure Population Population indicators, 1999 The population is poor and growing fast Population (m) 12.8 Crude birth rate (per 1,000) 32 Crude death rate (per 1,000) 12 Infant mortality rate (per 1,000 live births) 100 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. Between 1962 and 1998, the dates of the last two nationwide censuses, the population grew by an average of 2.7% a year to reach 11.4m. Nearly 43% of the population is under the age of 14, and there is a high imbalance between the sexes. Women particularly outnumber men 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 in 1999 and 36% of the population was classified as poor. Future population growth rates are likely to be high given the number of people currently under the age of 30; the Asian Development Bank has drawn attention to the emergence of a post-war baby boom. (See Reference table 1 for historical population data.) According to the Ministry of Commerce 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 of around 1m. Total 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 is concentrated in rural areas, mainly working as farmers. Age structure of population, 1998 (% of total unless otherwise indicated) 0 14 years years years 3.5 Total population (m) 11.4 Source: Ministry of Planning, National Census, The Chinese are active in business 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. Having suffered persecution at the hands EIU Country Profile 2001 The Economist Intelligence Unit Limited 2001

17 Cambodia 13 of the Khmer Rouge, the ethnic Chinese have re-established themselves during the 1990s as a significant economic force. Education and health Educational enrolment rates are poor The public healthcare system is weak Cambodia suffers from low levels of education. 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 were literate (82% of men and 58% of women), although the World Bank estimated male literacy at 58.6% and female literacy at 21.1% in The level of literacy fell in the 1990s, possibly reflecting the fact that parents are increasingly expected to contribute to the cost of their children s education. 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. Mortality figures reflect the poor state of public health provision 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, although the true figures may be much higher. 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 have access to safe drinking water (the figure is lower in rural areas). 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, or UNICEF, estimates in 1999). About 50% of the population have no access to the public healthcare system, which is extremely run-down. There has been a sharp decline in the number of doctors and nurses per head of population since the mid-1960s. The private sector has sought to fill the gap, but people offering medical treatment are often poorly qualified to do so. Natural resources and the environment The smallest of the Indochinese countries 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, the greater part of the country consists of a shallow basin centred on Tonle Sap (the Great Lake). The Mekong river crosses Cambodia from north to south. During the rainy season a large proportion of the Mekong s floodwaters are diverted into Tonle Sap, doubling its size. Forests are Cambodia s most valuable resource. Estimates of forest cover vary widely, although the UK-based environmental group, Global Witness, The Economist Intelligence Unit Limited 2001 EIU Country Profile 2001

18 14 Cambodia estimates that over the last 30 years forest cover has declined from 70% to around 30% of total land area (a full forestry survey was last undertaken in 1969 when forest cover was 73%). Fish stocks are abundant, although overfishing is causing a decline in stocks. Cambodia is believed to have modest but commercially viable deposits 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. The cultivated area has declined According to the Ministry of Agriculture, the amount of land used for rice cultivation was 2.1m ha in 1999/2000. This represents an improvement compared with the early 1990s but is still below levels attained in the 1960s (in 1967 the area under rice cultivation was 2.5m ha). The poor security situation until the late 1990s, including the widespread presence of landmines, and the deterioration of irrigation infrastructure have contributed to the decline. Transport and communications Poor infrastructure is a constraint Roads Inland waterways Ports 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 developing the road and rail network with a view to maximising trade with neighbouring countries. However, it also stressed the importance of air transport as a way of bypassing problems on the ground. Progress has been made since 1993, but 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 led to 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 reconstruction of a bridge across the Tonle Sap river at Phnom Penh. Motorcycle and vehicle traffic is increasing in urban areas, but overall road traffic remains light. Inland waterways provide an important means of transport, 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. 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 EIU Country Profile 2001 The Economist Intelligence Unit Limited 2001

19 Cambodia 15 cargo-handling 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 coming up the Mekong. Upgrading work on Sihanoukville port is scheduled for completion in 2003, at which point the port should be well placed to handle increased traffic. Air transport 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. The national airline is Royal Air Cambodge (RAC), which is 60% owned by the government and 40% owned by a sister company of Malaysian Airlines. In 1997 Hun Sen announced the abrogation of RAC s monopoly position. Since then three other domestic carriers have been established: President Airways, which is Malaysian-owned; Phnom Penh Airways, owned by a son of King Norodom Sihanouk; and the Indonesian-owned Royal Khmer Airlines. Railways Telecommunications The railway system comprises two single-line, metre-gauge tracks: 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 According to the government, plans to renovate the Phnom Penh-Poipet line were at an advanced stage in Discussion is also taking place on building a new railway linking Phnom Penh to Vietnam s Ho Chi Minh City, but this is some years off. Responsibility for the railways rests with the state-owned Royal Cambodian Railways. Telephone density is extremely low at 0.7 telephones per 100 people, compared with 1.4 in Vietnam. The US$50m telecoms network installed for the UN Transitional Authority in Cambodia (UNTAC) by an Australian company, OTC/Telstra, links all 21 provinces, although many small towns are without telephone connections. Telecoms links also exist via the Intelsat system. In the past the government has said that it would be willing to sell off as much as 70% of the state-run telecoms network, to foreign as well as 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. Energy provision Electricity supply does not meet demand Publicly generated capacity in Cambodia stands at around 35 mw, of which 25 mw comes from diesel-powered generators and the remainder from hydroelectric sources. Many companies and hotels have installed their own generating units, 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 uses over 85% of the total consumed. With electricity demand in The Economist Intelligence Unit Limited 2001 EIU Country Profile 2001

20 16 Cambodia the capital running at around 75 mw and the distribution system old and badly in need of repair, power cuts are frequent. All diesel used to generate electricity has to be imported. (See Reference table 2 for historical national energy statistics.) Major investment is needed The private sector is cautious The World Bank s mid-range forecast is for power demand in Cambodia to increase by an average of 8% annually 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 Asian Development Bank and the World Bank. The government is also exploring the possibility of purchasing electricity from Thailand and Vietnam. The government wishes to attract private-sector investment in power generation. But the lack of a fully developed regulatory framework for privatesector participation has hampered efforts to attract investment, and most funding to date has come from bilateral and multilateral sources. A handful of agreements with private companies have been signed, including one under a build-operate-transfer (BOT) agreement, although the project has suffered from delays. In 2000 a Chinese company, China Electric Power Technology Import and Export Company (CITIC), agreed to renovate a hydroelectric power station in Kompong Speu province The state-run Electricité du Cambodge (EdC) manages the sector, although following legislation passed in 2000 it is to be replaced by a newly empowered National Electricity Bureau. Energy balance, 2000 (m tonnes oil equivalent) Oil Gas Coal Electricity Other Total Primary production a Imports Exports Primary supply a Net transformation Final consumption b a Expressed as input equivalents on an assumed generating efficiency of 33%. b Output basis. Source: Energy Data Associates. EIU Country Profile 2001 The Economist Intelligence Unit Limited 2001

21 Cambodia 17 The economy Economic structure Main economic indicators, 2000 Real GDP growth (%) 5.4 Consumer price inflation (%; av) 0.8 Current-account balance (US$ m) 19.3 Foreign debt (US$ m) a 2,262 Exchange rate (CR:US$; year-end) 3,905 a End Sources: Official estimates; World Bank, Global Development Finance; IMF, International Financial Statistics. Agriculture dominates GDP The share of industry and services is increasing Rural demand dominates private consumption Agriculture dominates the economy, contributing an estimated 43% of constant-price GDP in Rice and livestock each accounted for almost onethird of total agricultural output and together made up around 27% of total GDP; fishing and forestry together made up just over 5% of total GDP in In 1998 industry (comprising mining and quarrying, manufacturing, electricity, water and construction) accounted for around 20% of GDP, up from 15% in 1991, while services accounted for 37%. The manufacturing sector s contribution to GDP is rising steadily, and stood at 9% in The largest component of services is wholesale and retail trade, which contributed around 15% to GDP in In expenditure terms, GDP is dominated by private consumption, which contributed 86.4% of the total in Private consumption is dominated by rural consumption and thus fluctuates in line with the performance of the harvest. In cities such as Phnom Penh and Sihanoukville, private consumption is more influenced by domestic and foreign business confidence than in the countryside, while in Siem Reap the performance of tourism is the key factor. Public consumption contributed just 6.3% to expenditure GDP in 1999, reflecting the government s weak fiscal position. The contribution of gross fixed investment, although still a low 15.8%, has increased considerably since the early 1990s, when it was less than 10%. This primarily reflects growth in private investment, which accounts for around 70% of total investment. The importance of exports of goods and services has also increased in recent years. Economic policy Political instability has undermined policymaking Any government in Cambodia is faced with an unenviable legacy: a long history of warfare, the destruction of the country s economic and social fabric under Khmer Rouge rule ( ), and the consequences of central planning. The result is widespread poverty and underdevelopment coupled with a rundown (or in some regions non-existent) infrastructure and weak institutions. Government policy has been moving in a clearly market-oriented direction The Economist Intelligence Unit Limited 2001 EIU Country Profile 2001

22 18 Cambodia since the Khmer People s Revolutionary Party held its Fifth Congress in This has seen recognition of the private sector and greater openness to international trade and foreign direct investment. The first law on foreign investment was introduced in 1989 and a revised one followed in Major economic policy developments 1986: Collectivisation of agriculture is abandoned. 1994: The IMF approves a three-year enhanced structural adjustment facility (ESAF). A new foreign investment law is approved. 1995: Privatisation regulations are approved and a privatisation commission is established. 1996: A central bank law is enacted, strengthening the autonomy of the National Bank of Cambodia. 1997: The IMF withholds ESAF financing when Cambodia fails to improve budgetary management. 1999: The government introduces value-added tax and promises defence cuts and greater control over logging revenue. The IMF resumes lending. 2000: A three-year US$1.1bn public investment programme receives government approval, concentrating on health, education, transport and agriculture. 2001: The IMF lending facility remains on track but the Fund calls for further efforts on structural reforms to make up for previous delays. Foreign investment is welcomed Public finances are weak The Law on Investment, passed in August 1994, encourages investment in a range of sectors including export-oriented projects, tourism, agro-industry, infrastructure, energy and mining. Restrictions on foreign investment apply in law, accountancy, and certain areas of transport, construction and foreign trade. The investment law offers a number of guarantees to foreign investors, including allowing them to remit foreign currencies abroad. Fiscal incentives are also available, such as corporate income tax of 9% and tax holidays of up to eight years. The shift to reform has seen concerted efforts to improve public finances and make monetary policy more effective, but progress has been slow. Central control over revenue is weak and the government depends on foreign aid for nearly 70% of capital expenditure. Reflecting the legacy of planning the government remains reliant on tax receipts from state utilities, although this is declining. Customs duties also provide a large portion of the total tax take. In January 1999 the government introduced a value-added tax, and this has boosted revenue. The ability of the National Bank of Cambodia (the central bank) to fine-tune the economy by using monetary instruments is weak. This reflects dollarisation and the fact that Cambodia is still largely a cash economy. Nevertheless, gradual progress has been made. All domestic interest rates have been completely liberalised and reserve requirements are in operation in the banking system. (See Reference table 3 for historical data on government finances; Reference table 4 gives historical data on money supply and credit.) EIU Country Profile 2001 The Economist Intelligence Unit Limited 2001

23 Cambodia 19 The government promises further reforms Trade liberalisation is in prospect Administrative capacity is a constraint The government recognises that foreign aid and investment will remain crucial to economic development for the foreseeable future. It is in this context that it has pledged to introduce reforms in a range of areas, including streamlining the civil service, reducing the size of the armed forces and introducing a more sustainable forestry policy. In addition, the government has announced radical plans to privatise key state utilities. In addition, the IMF is working with the government to privatise the Bank for Foreign Trade by the end of 2001, although this may be delayed. In terms of external trade, most quantitative restrictions on imports have been removed but tariff barriers remain high. In 1999 Cambodia joined the Association of South-East Asian Nations (ASEAN). Since becoming a member, the government has reiterated its commitment to lowering tariff barriers in line with membership of the ASEAN free-trade area (AFTA). This will require tariffs on a wide range of goods to be lowered to below 5% by The government has also signalled its desire to join the World Trade Organisation (WTO) at the earliest opportunity. This will require additional liberalisation of Cambodia s trade and investment regime. The government is less weighed down by the ideological baggage that plagues policymaking in neighbouring Vietnam and Laos. Since the present coalition government came to power in November 1998, greater political stability has enabled it to pay more attention to economic development. However, weak administrative capacity, including rivalry between institutions, and corruption remain a major drag on policy implementation. By 2001 this had resulted in delays in most areas where the government has pledged reform, including privatisation, demobilisation, public administration and forestry. Relations with international donors In 2001 reports in the media suggested that the international donor community was becoming impatient at the gulf between the government s pro-reform rhetoric and reality. In particular, an Asian Development Banksponsored report produced by a local think-tank, the Cambodian Development Resource Institute (CDRI), suggested that greater attention should be paid to reform implementation as a condition for future aid. In August 2001 the US ambassador, Kent Wiedemann, provoked strong criticism from the government after accusing officials of making excuses for delays in the reform programme. Given the importance of donor funding to the country s development, greater conditionality could have a devastating impact on the government s plans. However, while it is clear that, behind the scenes, donors are concerned at the lack of reform in some areas the continued disrespect for the rule of law and corruption have particularly been remarked on they are by no means ready to cut off or even reduce aid. In the run-up to the annual Consultative Group meeting, held in Tokyo in June 2001, many of the public comments by multilateral institution representatives about the government were extremely favourable. Moreover, aid pledges were higher than in previous years. Nevertheless, more difficult relations between the government and foreign donors could lie ahead. The Economist Intelligence Unit Limited 2001 EIU Country Profile 2001