The downside to foreign presence in Cambodia

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UN in CambodiaCambodia has undergone magnificent economic transformation in recent years despite a tumultuous history characterised by French colonisation, the extended Vietnam war, the following brutal Khmer Rouge regime and Vietnamese troops’ presence until 1989.

Today, Cambodia exists without foreign political interference. However, Cambodia’s trajectory has been defined by overseas development aid (ODA), non-governmental organisations (NGOs), foreign direct investment (FDI) and tourism. Whilst positive effects cannot be denied — from 1998 to 2008 gross national income per capita doubled — ample foreign presence has had repercussions.

ODA to Cambodia has been some of the highest worldwide. For more than 10 years following the 1991 Paris Peace Agreements, ODA made up at least 10 per cent of the country’s GDP.  According to Cambodian-American political economist Sophal Ear, the most telling statistic is that between 2002 and 2010, for each US dollar the Cambodian government spent, it received — on average — more than 94 cents in net foreign aid.

Yet ODA comes with a price, one example being conditionality agreements. Beyond that, ODA overflow has resulted in weaker government institutions. Instead of efficiently allocating funds, Cambodian ministries argue over who gets what. Moreover, copious aid makes it easy to not collect taxes or perform other duties.

Alongside ODA came NGOs. It is estimated that Cambodia has the largest presence of foreign NGOs per capita in the world. In 2011, around 3,000 NGOs were registered with the Ministry of Interior. Their presence prompted some government talent to flee, seizing better paid positions at NGOs. Additionally, extensive NGO presence has enabled domestic institutions to disregard certain responsibilities.

Furthermore, Cambodia receives vast FDI. A KPMG study found that since Cambodia shifted to a free economy in 1989, it has received over $25 billion in FDI. Generally, FDI is viewed as favourable, but investment in Cambodia is concentrated on cities like Phnom Penh and Siem Reap. Meanwhile rural progress lags, adding to inequality and a bleak human development outlook.

Benefiting from FDI is the service sector with restaurants and hotels proliferating, triggering a tourism boom. On the surface tourism seems like a win-win situation, yet a recent article published by Forbes on Cambodia’s orphanage tourism industry reveals otherwise. The article states that Cambodia’s 250 per cent increase in tourism since 2005 and its 75 per cent increase in orphanages during the same period is no coincidence. Many of these newfound orphanages are a scam, charging foreigners to “volunteer” for even just a day. Tuk tuk drivers can direct tourists to an “orphanage,” where most of the children in fact have parents. As long as the price is paid, anyone is let inside.

Cambodia’s debilitated government has made it one of the most corrupt countries in the world, enabling operations, like these orphanages, to function. In 2012 Transparency International’s Corruption Perceptions Index ranked Cambodia 157 out of the 176 countries assessed, or the third-most corrupt in ASEAN.

Although GDP growth since the 1990s has been impressive, it is set on a stage with rising inequality, poor human development and corruption. In order to achieve a middle-income level economy, strong governance is essential. One way for Cambodia’s government to regain relevance is with less foreign presence.

 

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Reading Time: 2 minutes

Cambodia has undergone magnificent economic transformation in recent years despite a tumultuous history characterised by French colonisation, the extended Vietnam war, the following brutal Khmer Rouge regime and Vietnamese troops’ presence until 1989.

Reading Time: 2 minutes

UN in CambodiaCambodia has undergone magnificent economic transformation in recent years despite a tumultuous history characterised by French colonisation, the extended Vietnam war, the following brutal Khmer Rouge regime and Vietnamese troops’ presence until 1989.

Today, Cambodia exists without foreign political interference. However, Cambodia’s trajectory has been defined by overseas development aid (ODA), non-governmental organisations (NGOs), foreign direct investment (FDI) and tourism. Whilst positive effects cannot be denied — from 1998 to 2008 gross national income per capita doubled — ample foreign presence has had repercussions.

ODA to Cambodia has been some of the highest worldwide. For more than 10 years following the 1991 Paris Peace Agreements, ODA made up at least 10 per cent of the country’s GDP.  According to Cambodian-American political economist Sophal Ear, the most telling statistic is that between 2002 and 2010, for each US dollar the Cambodian government spent, it received — on average — more than 94 cents in net foreign aid.

Yet ODA comes with a price, one example being conditionality agreements. Beyond that, ODA overflow has resulted in weaker government institutions. Instead of efficiently allocating funds, Cambodian ministries argue over who gets what. Moreover, copious aid makes it easy to not collect taxes or perform other duties.

Alongside ODA came NGOs. It is estimated that Cambodia has the largest presence of foreign NGOs per capita in the world. In 2011, around 3,000 NGOs were registered with the Ministry of Interior. Their presence prompted some government talent to flee, seizing better paid positions at NGOs. Additionally, extensive NGO presence has enabled domestic institutions to disregard certain responsibilities.

Furthermore, Cambodia receives vast FDI. A KPMG study found that since Cambodia shifted to a free economy in 1989, it has received over $25 billion in FDI. Generally, FDI is viewed as favourable, but investment in Cambodia is concentrated on cities like Phnom Penh and Siem Reap. Meanwhile rural progress lags, adding to inequality and a bleak human development outlook.

Benefiting from FDI is the service sector with restaurants and hotels proliferating, triggering a tourism boom. On the surface tourism seems like a win-win situation, yet a recent article published by Forbes on Cambodia’s orphanage tourism industry reveals otherwise. The article states that Cambodia’s 250 per cent increase in tourism since 2005 and its 75 per cent increase in orphanages during the same period is no coincidence. Many of these newfound orphanages are a scam, charging foreigners to “volunteer” for even just a day. Tuk tuk drivers can direct tourists to an “orphanage,” where most of the children in fact have parents. As long as the price is paid, anyone is let inside.

Cambodia’s debilitated government has made it one of the most corrupt countries in the world, enabling operations, like these orphanages, to function. In 2012 Transparency International’s Corruption Perceptions Index ranked Cambodia 157 out of the 176 countries assessed, or the third-most corrupt in ASEAN.

Although GDP growth since the 1990s has been impressive, it is set on a stage with rising inequality, poor human development and corruption. In order to achieve a middle-income level economy, strong governance is essential. One way for Cambodia’s government to regain relevance is with less foreign presence.

 

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