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Cambodia - ECONOMY




Cambodia - The Economy

THE ECONOMY OF CAMBODIA in the late 1980s was dominated by subsistence agriculture; the industrial sector was still in its infancy. After it came to power in 1979, the new, Vietnameseinstalled government in Phnom Penh set restoration of the nation's self-sufficiency in food, a situation that the country had enjoyed throughout prewar times, as a major goal. A persistent guerrilla war and a ravaged infrastructure impeded the achievement of this goal and of economic recovery in general, however. At the Fifth Party Congress of the Kampuchean (or Khmer) People's Revolutionary Party (KPRP), held in Phnom Penh from October 13 to October 16, 1985, General Secretary Heng Samrin laid claim to some "important successes in agricultural production" in his political report. At the same time, he acknowledged that the country's "backward and unbalanced" economy still faced tremendous difficulties, including shortages of fuel, spare parts, raw materials, skilled labor, and a cadre of professionals possessing technical expertise and economic management skills. In short, the country's material and technical bases had not been restored to prewar levels. Prior to its adjournment, the KPRP Congress adopted the First Five-Year Program of Socioeconomic Restoration and Development (1986-90), hereafter referred to as the First Plan.

In 1987 there were signs that reforms legalizing private enterprise were revitalizing the country's economy. Small industrial enterprises reopened, and transportation and telecommunication systems were partially restored. As private market activities resumed, the population of Phnom Penh grew from 50,000 in 1978--the last year of the Pol Pot regime--to 700,000. Economic revitalization also occurred at Kampong Saom (formerly known as Sihanoukville), Cambodia's only seaport and its second largest city, which resumed its pre-1975 industrial and shipping activities.

Economic rehabilitation has been precarious and has been plagued by uncontrollable factors, such as adverse weather and serious security problems. In 1987 a severe drought in Southeast Asia reduced Cambodia's rice production. According to a senior official of the Ministry of Agriculture, estimated production of milled rice fell that year to approximately 1 million tons, about 300,000 tons below the level of fiscal year 1986. (Cambodia needs at least 1.9 million tons of rice annually for a population of 6.5 million).

The prospects for Cambodia's economic revitalization were poor in the late 1980s. The country's infrastructure was both weak and unstable. Factories and workshops, lacking electricity and supplies, operated only intermittently and at low capacity. The economy relied heavily--and almost completely after 1980--on foreign aid from communist countries, particularly the Soviet Union and the Socialist Republic of Vietnam (Vietnam); Western nations, Japan, and China had terminated economic assistance to Cambodia in 1980 to protest the presence of Vietnamese troops in that country. According to General Secretary Samrin, Cambodia would require "dozens of years" to restore its economy and to accomplish "a gradual passage toward socialism." Internationally, Cambodia in the future may have the option of joining the Council for Mutual Economic Assistance (CMEA, CEMA, or Comecon--see Glossary). If the Vietnamese troops leave, the country also may be offered some form of economic cooperation by other Asian and Western nations. In either case, however, Cambodia is very poor, produces little, and is not likely to prove an enticing economic partner. For this reason, in the forging of new economic links with the East and with the West, the country is likely to be relegated to a passive role, and the initiative will probably belong to the larger states, who will decide on what terms to share their largesse with Cambodia.

Because of insufficient and inconsistent--and therefore unreliable--data, analysis of Cambodia's war-torn economy can only be tentative. In the late 1980s, key economic indicators were missing or were difficult to reconcile, particularly for the Pol Pot period (1975-78). Since 1979 government economic publications have been scarce, and official statistics represent targets and estimates spelled out in the country's economic development plans rather than actual figures.

Cambodia - ECONOMIC SETTING

Seasonal monsoons and diverse topography significantly influence Cambodia's economy . The southwest monsoon brings the rainy season (May to October), which is suitable for planting and growing the rice seedlings, and the northeast monsoon sends back dry air (November to March), which makes possible the paddy harvest.

The country's lakes and rivers also affect the economy. They are an abundant source of fish, a mainstay of the Cambodian diet, and they make possible irrigated agriculture, on which the country depends for its livelihood. The principal waterway, the Mekong River, is an important trade route and avenue of communication. Since ancient times, the Tonle Sap (Great Lake), the Tonle Sab and the Mekong rivers, and their tributaries have been centers of economic and political power. Phnom Penh--the site of the royal residence, the administrative capital, and, in general, the locus of power, of culture, and of business--is situated at the junction of the Tonle Sab and the Mekong.

Cambodia - Natural Resources

Metals and Minerals

In general, Cambodia's mineral resources appear to be limited. In the late 1950s and throughout the 1960s, however, exploration by Chinese experts in Kampong Thum Province disclosed commercially exploitable deposits of iron ore amounting to about 5.2 million tons. Western sources indicated possible reserves of high-grade iron ore, ranging from 2.5 million to 4.8 million tons, in the northern part of the country. Chinese explorations also revealed manganese ore reserves, estimated at about 120,000 tons, in Kampong Thum Province.

Deposits of phosphate, limestone, and clay of exploitable quality and quantity have also been reported. A few thousand tons of phosphate are extracted annually in Kampot Province and are processed locally or at a small plant in Batdambang Province. In addition, salt and coal also may be present in Cambodia's geological strata. Rubies, sapphires, and zircons have been mined since at least the late 1800s, mostly at Ba Kev, Stoeng Treng Province, and at Pailin, Batdambang Province. Limited gold and silver deposits have been reported in several parts of the country.

Hydroelectric Power

The country's hydroelectric generating potential is considerable, especially from the swift current of the middle Mekong River where it flows through Stoeng Treng and Kracheh provinces. Other sites of minor importance are on rivers in the highlands of the northeastern and north-central parts of the country. Although the Tonle Sap is Cambodia's dominant hydraulic feature, the rivers flowing into this great lake have little or no exploitable potential. In general, development of the country's water potential appears to be more important for the expansion of irrigation than for the production of electricity.

Petroleum

In late 1969, the Cambodian government granted a permit to a French company to explore for petroleum in the Gulf of Thailand. By 1972 none had been located, and exploration ceased when the Khmer Republic fell in 1975. Subsequent oil and gas discoveries in the Gulf of Thailand and in the South China Sea, however, could spark renewed interest in Cambodia's offshore area, especially because the country is on the same continental shelf as its Southeast Asian oil-producing neighbors. Forestry

Another natural resource is the forests, which cover approximately 70 percent of the country and which potentially constitute a second pillar of the economy in addition to the primary one, agriculture. A survey in the 1960s disclosed that Cambodia had more than 13 million hectares of forests that contained many species of tropical growth and trees but not teak or other valuable sources of hardwood. Some destruction of the forest environment undoubtedly occurred in the war that followed in the 1970s, but its extent has not been determined. Most of the heavy fighting took place in areas uncovered by dense tropical jungle. As of late 1987, forest resources had not yet been fully exploited because of poor security in the countryside and a lack of electrical and mechanical equipment, such as power tools and lumber trucks. Nevertheless, the Cambodian government reportedly has discussed with Vietnam the possibility of coordinated reforestation programs.

Timber and firewood are the main forest products. Timber is considered one of the four economic initiatives of the government's First Plan. Timber production was projected to reach a peak of 200,000 cubic meters in 1990.

Cambodia - Labor Force

Cambodia ranks among the least populated Asian nations with an estimated 1987 population of only about 6.3 million to 6.4 million. Its density of approximately 36 persons per square kilometer is about one-fifth of Vietnam's population density of 187 persons per square kilometer. The First Plan set the population growth rate at 2.8 percent per year, up from the average annual growth rate of 2.3 percent for the 1978 to 1985 period.

In 1987 observers estimated that about 34.5 percent of the population was under 15 years of age and that 3 percent was 62.5 or older. An estimated 63 percent of the population (or about 4 million people) were between the ages of 15 and 64. The economically active segment of the population, the work force, was probably around 3 million people, or 46 percent of the total population. This estimated percentage of the labor force remained relatively constant from 1962--when the census showed a work force of 2.5 million people out of a total population of 5.73 million--until the 1980s.

In 1983 all public-sector employees, including state employees, armed forces personnel, industrial workers, artisans, teachers, and party cadres, accounted for approximately 8 percent of an economically active population of between 2.5 million and 3 million. Approximately 80 percent of the work force was engaged in agriculture, in forestry, and in fishing.

A critical shortage of qualified and professional personnel emerged as technicians, engineers, skilled workers, and trained managers either fled the country or fell victim to executions under the Pol Pot regime. In 1980 the Ministry of Agriculture had only 200 technicians, down from a total of 1,600 in 1975.

Moreover, the continuing conflict diverted part of the work force to combat zones or to security-related projects. In March 1984, the government initiated a forced-labor program, employing civilians in "national defense work" to seal the 830 kilometers of frontier with Thailand. This project, code-named K-5, diverted from the labor force a number of conscripts (aged 18 to 45) ranging from 25,000 to 30,000 for each province, or as high as 3,000 for each district of Cambodia. The labor shortage constituted a major impediment to economic progress, a point stressed by Heng Samrin at the Fifth Party Congress when he said that "Labor...is scattered at present in order to face the needs of the struggle," adding that the "lack of qualified labor and specialized cadres...has prevented us from ensuring that current works satisfy the requirements for development."

Cambodia - ECONOMIC DEVELOPMENTS AFTER INDEPENDENCE

The predominance of agriculture and the lack--or neglect--of real industrial development have characterized Cambodia's modern economy since independence in 1953. Wet rice cultivation traditionally has played a key role in peasant subsistence, in national self-sufficiency in food production, in trade relations with other states, and in governmental revenues for national development. Conversely, the government has made few attempts to industrialize the nation.

After Cambodia became independent in 1953, the country's economic policies were shaped by the succession of governments that followed. Prince Sihanouk opted for unconditional aid from the East and from the West, and the nation made modest strides. The Lon Nol government would have adhered to a laissez-faire doctrine, but it was overwhelmed by the war around it. The Khmer Rouge adopted a fanatical and doctrinaire self-reliance, and the Cambodian people and nation were ravaged by it. The post-1979 government of the People's Republic of Kampuchea (PRK), with its Vietnamese mentors, acquiesced to a pragmatic combination of socialism and small-scale capitalism, and the country achieved some limited rehabilitative goals. In the late 1980s, government policies fundamentally relied upon the nation's own sparse resources--chiefly agriculture, a nascent industrial base, and modest foreign aid from Comecon countries and nongovernmental international organizations.

Cambodia - Sihanouk's Peacetime Economy, 1953-70

Sihanouk's political neutrality, which formed the cornerstone of his foreign policy, had a significant effect on Cambodia's economic development. Sihanouk insisted that the economic dimension of neutrality meant either total rejection of international aid (as practiced by Burma under Ne Win) or acceptance of foreign economic assistance from all countries without strings attached. Indeed, during the first decade that he was in power in newly independent Cambodia (1953-63), the prince carefully practiced his "purer form of neutrality between East and West" in seeking foreign economic assistance for development.

In 1963 however, Cambodia's economy started to stagnate when Sihanouk decided to link his economic neutrality policy to the country's territorial integrity and border security. He rejected further assistance from the United States, because Washington supported the Republic of Vietnam (South Vietnam), and from Thailand, with which Cambodia had continuous frontier disputes. In a related move, Sihanouk nationalized trading companies, banks, insurance, and major industries, thereby causing economic deterioration between 1963 and 1969. The 1967 Samlot (Batdambang) revolt and the February 1970 government decision to demonetize (or exchange) the old 500 riel banknotes were crucial events contributing to the end of the Sihanouk era.

During his tenure after independence, Sihanouk used the country's ill-defined constitution to monitor all government activities of any consequence and to bend the government's decision-making process to his advantage. During the course of nation building, political aims often prevailed over strictly economic objectives. For example, prior to 1967, the government assigned higher priority to social improvements, such as health and education, than it did to national economic growth. The government later gave higher priority to the productive sectors of agriculture and industry in economic plans for the 1968-72 periods; however, because of war, the government did not implement these plans.

Nonetheless, between 1952 and 1969, Cambodia's gross national product (GNP) grew an average of 5 percent a year in real terms, with growth higher during the 1950s than during the 1960s. In addition, the service sector played an important role in Sihanouk's mixed economic system in contrast to its position under the regimes of Pol Pot and of Heng Samrin, who considered the service sector insignificant and "unproductive." In 1968 the service sector accounted for more than 15 percent of gross domestic product (GDP), agriculture accounted for 36 percent, and manufacturing for 12 percent.

Agriculture developed under a degree of paternalism from Sihanouk, who donated farm equipment to various villages and, in return, received respect and affection from the peasants. In general, however, Cambodian agriculture subsisted without much help from the government. In 1969 approximately 80 percent of rice farmers owned the land they cultivated, and the landholding for each family averaged slightly more than two hectares. The farmers used simple and rudimentary implements that were well suited to their needs and to the light weight of their draft animals. Overall, the peasants were remarkably self-sufficient.

Farmers began to cultivate more land, causing rice production to increase from an average of 1.4 million tons in 1955 to 2.4 million tons in 1960. Production remained at that level throughout the 1960s. Rice yield per hectare, however, remained low--less than 1.2 tons per hectare--during the 1952-69 period little was done to increase yield through the use of irrigation, chemical fertilizers, or improved seeds and implements. Average yields in Batdambang and Kampong Cham provinces, however, were 50 percent higher than the national average because of better soil fertility and, in the case of Batdambang, larger average landholdings and greater use of machines in cultivation.

Industrial and infrastructural development benefited from foreign economic assistance. In general, the government avoided ambitious plans and focused on small enterprises to meet local needs and to reduce foreign imports. In June 1956, the Chinese provided Phnom Penh with US$22.4 million in equipment as part of an ongoing program of industrial economic assistance. In addition, they helped build a textile mill and a glass plant in the 1960s. During this period, other nations contributed through aid programs of their own. Czechoslovakia granted loans for the construction of tractor assembly plants, tire-production facilities, and a sugar refinery. Other aid donors were the Soviet Union, Yugoslavia, France, the Federal Republic of Germany (West Germany), Japan, and Australia. United States economic assistance to Cambodia amounted to more than US$350 million for the 1955 to 1962 period, and it was invested mostly in the areas of public health, education, and agricultural development. To avoid the appearance of undue dependence upon foreign aid, Cambodia insisted upon "project sharing," that is, participation of its own in specific enterprises, such as the French-sponsored oil refinery and truck assembly plant at Sihanoukville. This stipulation imposed by Phnom Penh also had the effect of holding down the scale of many aid projects and the amounts of loans extended to the Cambodian government.

The government also used foreign assistance to expand the country's transportation and communication networks. France helped to develop Sihanoukville, Cambodia's second largest port, which opened in 1960, and the United States constructed a highway linking the port to Phnom Penh. In addition, the Cambodians, with French and West German assistance, built a railway from Sihanoukville to the capital.

Despite Sihanouk's claims of economic progress, Cambodia's industrial output in 1968 amounted to only 12 percent of GNP, or only one-third of agricultural production. Rice and rubber were the country's two principal commodity exports and foreign-exchange earners during the Sihanouk era.

Cambodia - The Wartime Economy, 1970-75

The war that engulfed the rest of Indochina spread to Cambodia in April 1970, shortly after the coup that deposed Prince Sihanouk. Wartime conditions had a major impact on the country's economy, especially on the export sector. Production and export of virtually all commodities dropped sharply, as insecurity spread throughout the countryside. Intense combat in the nation's most densely populated farming areas caused a large segment of the peasant population to flee to cities and to towns. By 1975 the population of Phnom Penh had swollen to 2 million, from just 50,000 in 1955. Moreover, the war seriously dislocated the economic system. Food shortages arose as insurgents interrupted the transportation of crops from the countryside to the main marketing centers. Increasing budgetary expenditures, skyrocketing inflation, shrinking export earnings, and a rising balance-of-payments deficit plagued the war-torn economy.

The war's most damaging effect was on rice production. In 1972 Cambodia needed to import rice (from Japan and from Thailand) for the first time since independence. Fighting reduced the amount of land under rice cultivation to fewer than 800,000 hectares in 1972, far less than the approximately 3 million hectares that had been under cultivation in 1969. The 1972 rice harvest amounted to only 26.8 percent of the 1969 harvest. Exports of natural rubber, the country's second leading foreign-exchange earner, ceased shortly after hostilities began in 1970. The war destroyed extensive rubber plantations and damaged rubber-processing facilities.

In late 1970, Lon Nol, who succeeded Sihanouk, continued to liberalize the economy in an effort to save the country from economic disaster. This endeavor was a continuation of the policies he had enacted as head of the government of "national salvation" in August 1969. Under Lon Nol's direction, Phnom Penh limited the control and the authority of the state export-import agency (Société nationale d'exportation et d'importation--SONEXIM), which had been established in 1964 to administer foreign trade, to denationalize banks and industries, to encourage private foreign investments, and to allow greater private participation in the economy. The new economic policies of the Khmer Republic gradually reversed the pattern of state socialism that had formed the keystone of Sihanouk's domestic policies.

On October 29, 1971, the government implemented a comprehensive program of reforms to stabilize the economy. These reforms included increased import taxes on all nonessential commodities; increased interest rates on bank deposits and on commercial loans; elimination of credit to state enterprises and to public utilities; introduction of a flexible currency exchange system; and simplification of the import system to facilitate the movement of goods. The emphasis of the program was to restore monetary stability in the face of rising inflation, financial speculation, black markets, and other economic problems caused by the war. In a change of policy, the government also moved toward greater involvement with international and with regional organizations and sought support from the World Bank, the International Monetary Fund), and the Asian Development Bank.

As the war progressed, Lon Nol's government aimed major economic measures mainly at improving the overall food supply situation and at maintaining public confidence in the continued availability of essential consumer items. To ensure adequate domestic supplies, in November 1971 Phnom Penh suspended grants of export licenses for major export commodities, such as rice, corn, and cattle. Although the move helped maintain stocks of essential commodities in the capital and in provincial centers, supplies were small relative to demand.

The Lon Nol government had earlier declared in principle that it maintained a policy of "strict neutrality" and would accept foreign assistance from "all countries which love peace and justice." As early as April 20, 1970, Cambodia formally requested military and economic aid from Washington to help cope with growing war expenditures and with an increasing budgetary deficit. As military activity in the country intensified, the United States became Cambodia's largest donor and supplier. Moscow, however, sent medical equipment and, in October 1971, the Soviets renewed a financial agreement with the republican regime. The Economic Support Fund, to which the United Nations (UN), the United States, Britain, Japan, New Zealand, Thailand, and Malaysia pledged their contributions, provided US$21 million in auxiliary relief. Other nations, including Italy, Israel, West Germany, and Switzerland, provided funds mostly to assist war victims. France earmarked its aid for the maintenance of French educational programs and cultural institutions. Nevertheless, these palliative measures fell far short of what was needed. By 1975 the economy had collapsed, and the country was surviving mainly on imported food financed by the United States government.

Cambodia - The Economy under the Khmer Rouge, 1975-79

Under the leadership of the Khmer Rouge, Cambodia underwent a brutal and radical revolution. When the communist forces took power in Phnom Penh in April 1975, their immediate goals were to overhaul the social system and to revitalize the national economy. The economic development strategy of the Khmer Rouge was to build a strong agricultural base supported by local small industries and handicrafts. As explained by Deputy Premier Ieng Sary, the regime was "pursuing radical transformation of the country, with agriculture as the base. With revenues from agriculture we are building industry which is to serve the development of agriculture." This strategy was also the focus of a doctoral thesis written by future Khmer Rouge leader Khieu Samphan at the University of Paris in 1959. Samphan argued that Cambodia could only achieve economic and industrial development by increasing and expanding agricultural production. The new communist government implemented the tenets of this thesis; it called for a total collectivization of agriculture and for a complete nationalization of all sectors of the economy.

Strict adherence to the principle of self-reliance constituted the central goal of the Khmer Rouge regime. A Phnom Penh radio broadcast in early May (about a month after the Khmer Rouge arrived in the capital) underscored the importance of Cambodian self- reliance and boasted that during the war the Khmer Rouge had used scrap iron and wrecked military vehicles to manufacture their own bullets and mines. The statement made it clear that the policy of self-reliance would continue in peacetime. In another move aimed at reducing foreign influence on the country, the regime announced on May 10 that it would not allow foreigners to remain in Cambodia but that the measure was only temporary; and it added, "We shall reconsider the question [of allowing foreigners to enter the country] after the re-establishment of diplomatic, economic and commercial relations with other countries." Although Cambodia resumed diplomatic relations with a number of nations, the new government informed the UN General Assembly on October 6, 1975, that it was neutral and economically self-sufficient and would not ask for aid from any country. On September 9, however, the Chinese ambassador arrived in Cambodia, and there were soon reports that China was providing aid to the Khmer Rouge. Estimates of the number of Chinese experts in Cambodia after that time ranged from 500 to 2,000. The policy of self-reliance also meant that the government organized the entire population into forced-labor groups to work in paddies and on other land to help the country reach its goal of food self-sufficiency.

The Khmer Rouge, as soon as it took power on April 17, 1975, emptied Phnom Penh (of its approximately 2 million residents) as well as other cities and towns, and forced the people into the countryside. This overnight evacuation was motivated by the urgent need to rebuild the country's war-torn economy and by the Khmer Rouge peasantry's hostility toward the cities. According to a Khmer Rouge spokesman at the French embassy on May 10, the evacuation was necessary to "revolutionize" and to "purify" the urban residents and to annihilate Phnom Penh, which "Cambodian peasants regarded as a satellite of foreigners, first French, and then American, and which has been built with their sweat without bringing them anything in exchange." The only people who were not ordered to leave the city were those who operated essential public services, such as water and electricity.

Other Khmer Rouge leaders rationalized the evacuation as a matter of self-reliance. They told the Swedish ambassador in early 1976 that "they didn't have any transportation facilities to bring food to the people, and so the logical thing was to bring the people to the food, i.e., to evacuate them all and make them get out into the ricefields." Indeed, when the evacuees reached their destinations, they were immediately mobilized to clear land, to harvest rice crops, to dig and restore irrigation canals, and to build and repair dikes in preparation for the further expansion of agriculture. The rice crop in November 1976 was reported to be good in relation to earlier years. At the same time, plantations producing cotton, rubber, and bananas were established or rehabilitated.

While the Khmer Rouge gave high priority to agriculture, it neglected industry. Pol Pot sought "to consolidate and perfect [existing] factories," rather than to build new ones. About 100 factories and workshops were put back into production; most of them (except a Chinese-built cement plant, a gunnysack factory, and textile mills in Phnom Penh and in Batdambang) were repair and handicraft shops revived to facilitate agricultural development.

Cambodia's economic revolution was much more radical and ambitious than that in any other communist country. In fact, Khmer Rouge leader Premier Ieng Sary explained that Cambodia wanted "to create something that never was before in history. No model exists for what we are building. We are not imitating either the Chinese or the Vietnamese model." The state or cooperatives owned all land; there were no private plots as in China or in the Soviet Union. The constitution, adopted in December 1975 and proclaimed in January 1976, specifically stated that the means of production were the collective property of the state.

The Cambodian economic system was unique in at least two respects. First, the government abolished private ownership of land. The Khmer Rouge believed that, under the new government, Cambodia should be a classless society of "perfect harmony" and that private ownership was "the source of egoist feelings and consequently social injustices." Second, Cambodia was a cashless nation; the government confiscated all republican era currency. Shops closed, and workers received their pay in the form of food rations, because there was no money in circulation.

On August 12, 1975, fewer than four months after the Khmer Rouge had taken power, Khieu Samphan claimed that, within a year or two, Cambodia would have sufficient food supplies and would be able to export some of its products. To achieve this goal in record time, large communes comprising several villages replaced village cooperatives, which had formed in the areas controlled by the Khmer Rouge in 1973 and which had spread throughout the country by 1975. Unlike China and Vietnam, which had introduced collectivization gradually over several years, Cambodia imposed the system hastily and without preparation.

The Khmer Rouge, in line with the slogan, "If we have dikes, we will have water; if we have water, we will have rice; if we have rice, we can have absolutely everything," organized the workers into three "forces." The first force comprised unmarried men (ages fifteen to forty) who were assigned to construct canals, dikes, and dams. The second force consisted of married men and women who were responsible for growing rice near villages. The third force was made up of people forty years of age and older who were assigned to less arduous tasks, such as weaving, basket-making, or watching over the children. Children under the age of fifteen grew vegetables or raised poultry. Everyone had to work between ten and twelve hours a day, and some worked even more, often under adverse, unhealthy conditions.

On September 27, 1977, in a major speech celebrating the anniversary of the Kampuchean (or Khmer) Communist Party (KCP), Khmer Rouge leader Pol Pot asserted that, "Our entire people, our entire revolutionary army and all our cadres live under a collective regime through a communal support system." He then listed the government's achievements in rebuilding the economy and concluded that, "Though not yet to the point of affluence, our people's standard of living has reached a level at which people are basically assured of all needs in all fields."

Measuring the economic performance of the Khmer Rouge regime was impossible because statistics were not available, and no monetary transactions or bookkeeping were carried out. The economic life described by foreign diplomats, by Western visitors, and by Cambodian refugees in Thai camps ranged from spartan to dismal. Phnom Penh became a ghost town of only about 10,000 people. There were no shops, post offices, telephones, or telegraph services. Frequent shortages of water and of electricity occurred in all urban areas, and the government prohibited movement across provincial borders, except for that of trucks distributing rice and fuel.

Conditions in the cooperatives varied considerably from place to place. In some areas, cooperative members had permission to cultivate private plots of land and to keep livestock. In others, all property was held communally. Conditions were most primitive in the new economic zones, where city dwellers had been sent to farm virgin soil and where thousands of families lived in improvised barracks.

Cambodia made progress in improving the country's irrigation network and in expanding its rice cultivation area. Phnom Penh radio claimed that a network of ditches, canals, and reservoirs had been constructed throughout the country "like giant checkerboards, a phenomenon unprecedented in the history of our Cambodia." Still, rice production and distribution were reported to be unsatisfactory. Rice harvests were poor in 1975 and 1978, when the worst floods in seventy years struck the Mekong Valley. Even after the better harvests of 1976 and 1977, however, rice distribution was unequal, and the government failed to reach the daily ration of 570 grams per person. (The daily ration of rice per person actually varied by region from 250 to 500 grams.) Party leaders, cadres, soldiers, and factory workers ate well, but children, the sick, and the elderly suffered from malnutrition and starvation. There also were reports that the government was stockpiling rice in preparation for war with Vietnam and exporting it to China in exchange for military supplies. This diverted rice could have been one explanation for the people's meager rice ration.

At the end of 1978, when Vietnamese troops invaded Cambodia, the ensuing turbulence completely disrupted the nation's economic activity, particularly in the countryside, which once again became a war theater traversed by a massive population movement. Agricultural production was again a major casualty, with the result that there was a severe food crisis in 1979.

Cambodia - ECONOMIC ROLE OF THE KPRP

After the fall of Pol Pot and the establishment of the People's Republic of Kampuchea in January 1979, the Kampuchean (or Khmer) People's Revolutionary Party (KPRP), led by General Secretary Heng Samrin, set Cambodia's economic development policies. Party congresses adopted these policies at meetings in January 1979, May 1981, and October 1985. A new Constitution, which the National Assembly approved in June 1981, defined Cambodia's new socialist direction and the role of the state in economic affairs. Then, after six more years of struggling with an economy of survival and subsistence, KPRP leaders presented their First Plan, which represented a systematic and rational party effort at centrally planning and improving the economy.

New Economic Policy and System

In contrast to Pol Pot's radical, doctrinaire approach to economic development, Heng Samrin and the leaders of the Kampuchean (or Khmer) National United Front for National Salvation (KNUFNS), the umbrella group of anti-Pol Pot forces sponsored by Hanoi, sought to rally public support by formulating a policy that would be pragmatic, realistic, and flexible. In an eleven-point program promulgated shortly before the Vietnamese invasion of Cambodia, the front articulated the economic guidelines that would mark its tenure in power. These guidelines advocated a gradual transformation to socialism; a "planned economy with markets"; the restoration of banks, of currency, and of trade; the abolition of forced labor; the introduction of an eight-hour workday; and pay based on work performed.

The KPRP socialist economy accepted the private sector. At a May 1980 agriculture conference, Samrin reviewed the effectiveness of the solidarity groups (krom samaki), production units of seven to fifteen families, united in a common endeavor to raise food or to produce goods. These production units had been organized in line with the policy of moving toward socialism. He affirmed that each member of these groups would receive at least one hectare of land to cultivate for communal purposes, plus a private plot not exceeding a quarter of a hectare on which to grow vegetables or to graze livestock. Also, a July 1980 planning conference called for a policy of "simultaneous development of family (private) economy and national (socialized) economy." The conference also decided that the state should buy agricultural products from the peasants and should sell them manufactured goods at free-market prices.

The KPRP further clarified its economic policy at its Fourth Party Congress (its first since taking power in Phnom Penh) from May 26 to May 29, 1981. It declared that the nation's economic system had three main parts--the state economy, the collective economy, and the family economy, and that each of these parts "had its own significant role."

The state economy covered large-scale agricultural production, all industrial production, the communications and transportation networks, finance, and domestic and foreign trade. To facilitate economic transactions nationwide, the state restored the banking system in November 1979, and it reintroduced currency in March 1980. The KPRP acknowledged that the state economy was small and said that it should be expanded. The party leaders, however, aware of the pitfalls of central planning, warned against "over-expansion and disregard for real needs, production conditions, management ability, and economic capability."

The collective economy--the largest of the three elements--was assigned an important role in agricultural rehabilitation and development. It consisted of solidarity groups in agriculture, fishing, forestry, and handicrafts. These groups also assumed the task of collective purchase and sale.

The family-run economy included the home economies of the peasants, most retail businesses, individual artisans, handicrafts, repair shops, and small trade. Although the 1981 Constitution stated that the land and other natural resources were state property, it gave the citizens usufruct rights to land allotted for a house and garden by the state. In some cases, agricultural workers were also allowed to borrow an extra plot of land from the state, to produce food on it, and to keep the harvest for their own consumption.

Private enterprise also made a modest beginning under Cambodia's hybrid economic system. Citizens were allowed to buy and to sell agricultural produce and handicrafts. The law guaranteed workers the right to keep their wages, their other income and their property. Encouraged and protected by the state, hundreds of small shops and factories, each employing a few workers, opened for business in Phnom Penh and in other urban areas.

This inchoate private sector played such an important role in the national economic recovery that party leaders urged its official recognition, at the Fifth Congress in October 1985, as a means of mitigating the weaknesses of the state-run economy. Thus, the government added a fourth component--private economy--to the economic system and legitimized it with a constitutional amendment in February 1986.

First Plan, 1986-90

The First Five-Year Program of Socioeconomic Restoration and Development (1986-90), or First Plan, originated in February 1984, when the heads of the state planning commissions of Vietnam, Laos, and Cambodia met in Ho Chi Minh City (formerly Saigon) and agreed to coordinate their 1986 to 1990 economic plans. Heng Samrin formally announced Cambodia's plan in his political report to the congress.

The plan was intended to open a new phase of the Cambodian revolution; it gave highest priority to agricultural production, calling it "the first front line," and focused on the four sectors of food, rubber, fishing, and timber. It set production targets for each sector. During the plan period, food production was to increase 7 percent a year to keep up with a targeted 2.8 percent annual population growth rate, which did not seem to have been reached by 1987. The plan projected that by 1990, rubber farming would expand to 50,000 hectares in order to produce 50,000 tons of latex; timber production would reach 200,000 cubic meters; jute production would increase to 15,000 tons; and fish production would amount to 130,000 tons. As in the past, the plan labeled agriculture and forestry as the real force of the national economy.

The plan was less specific for the industrial sector. It did not set industrial production targets, except that for electrical output, which was projected to reach 300 million kilowatt hours per year in 1990. The plan called attention to the need for selective restoration of existing industrial production capabilities and for proposed progressive construction of a small to medium industrial base, which would be more appropriate to the country's situation.

The plan placed increased emphasis on the distribution of goods. Trade organizations were to be perfected at all levels, and socialist trading networks were to be expanded in all localities. In particular, the trade relationship between the state and the peasantry was to be improved and consolidated in accordance with the motto, "For the peasantry, selling rice and agricultural products to the state is patriotism; for the state, selling goods and delivering them directly to the people is being responsible to the people."

The plan also required that investment be directed toward the improvement of the infrastructure, particularly toward the reconstruction of communication lines and waterworks. Road, inland waterways, and railroad networks had to be restored to serve the national economy and defense.

Last, but not least, the plan cited "export and thrift" (without elaboration), as the two primary policies to be followed in order to solve the national budget deficit. The plan implied that, into the 1990s, exports would have to consist principally of agricultural and forestry products, to which some value might be added by low-technology processing. "Thrift," although undefined, could, in the future, include some kind of government savings plan, with incentives for small depositors, to absorb surplus riels generated by Cambodia's considerable free-market and black-market sectors.

Heng Samrin, like his predecessors, Sihanouk and Pol Pot, urged Cambodians to undertake the task of economic restoration "in the spirit of mainly relying on one's own forces." Unlike Sihanouk and Pol Pot, however, the KPRP leader stressed economic and technical cooperation with Vietnam. He believed such cooperation would be "an indispensable factor" in the development of agriculture and of forestry in Cambodia. Heng Samrin also advocated better economic cooperation with the Soviet Union and with other socialist countries.

Cambodia - AGRICULTURE

Agriculture, accounting for 90 percent of GDP in 1985 and employing approximately 80 percent of the work force, is the traditional mainstay of the economy. Rice, the staple food, continued to be the principal commodity in this sector. Rice production, a vital economic indicator in Cambodia's agrarian society, frequently fell far short of targets, causing severe food shortages in 1979, 1981, 1984, and 1987. The plan's 1987 target for the total area to be devoted to rice cultivation was 1.77 million hectares, but the actual area under cultivation in 1987 amounted to only 1.15 million hectares. After 1979 and through the late 1980s, the agricultural sector performed poorly. Adverse weather conditions, insufficient numbers of farm implements and of draft animals, inexperienced and incompetent personnel, security problems, and government collectivization policies all contributed to low productivity.

Collectivization and Solidarity Groups

Collectivization of the agricultural sector under the Heng Samrin regime included the formation of solidarity groups. As small aggregates of people living in the same locality, known to one another, and able to a certain extent to profit collectively from their work, they were an improvement over the dehumanized, forcedlabor camps and communal life of the Pol Pot era. The organization of individuals and families into solidarity groups also made sense in the environment of resources-poor, postwar Cambodia. People working together in this way were able to offset somewhat the shortages of manpower, draft animals, and farm implements.

In 1986 more than 97 percent of the rural population belonged to the country's more than 100,000 solidarity groups. Unlike the large communes of the Khmer Rouge, the solidarity groups were relatively small. They consisted initially of between twenty and fifty families and were later reduced to between seven and fifteen families. The groups were a form of "peasants' labor association," the members of which continued to be owners of the land and of the fruits of their labor. According to a Soviet analyst, the solidarity groups "organically united" three forms of property--the land, which remained state property; the collectively owned farm implements and the harvest; and the individual peasant's holding, each the private property of a peasant family.

In theory, each solidarity group received between ten and fifteen hectares of common land, depending upon the region and land availability. This land had to be cultivated collectively, and the harvest had to be divided among member families according to the amount of work each family had contributed as determined by a work point system. In dividing the harvest, allowance was made first for those who were unable to contribute their labor, such as the elderly and the sick, as well as nurses, teachers, and administrators. Some of the harvest was set aside as seed for the following season, and the rest was distributed to the workers. Those who performed heavy tasks and who consequently earned more work points received a greater share of the harvest than those who worked on light tasks. Women without husbands, however, received enough to live on even if they did little work and earned few work points. Work points also were awarded, beyond personal labor, to individuals or to families who tended group-owned livestock or who lent their own animals or tools for solidarity group use.

Each member family of a solidarity group was entitled to a private plot of between 1,500 and 2,000 square meters (depending upon the availability of land) in addition to land it held in common with other members. Individual shares of the group harvest and of the produce from private plots were the exclusive property of the producers, who were free to consume store, barter, or sell them.

The solidarity groups evolved into three categories, each distinct in its level of collectivization and in its provisions for land tenure. The first category represented the highest level of collective labor. Member families of each solidarity group in this category undertook all tasks from plowing to harvesting. Privately owned farm implements and draft animals continued to be individual personal property, and the owners received remuneration for making them available to the solidarity group during the planting and the harvesting seasons. Each group also had collectively owned farm implements, acquired through state subsidy.

The second category was described as "a transitional form from individual to collective form" at the KPRP National Conference in November 1984. This category of group was different from the first because it distributed land to member families at the beginning of the season according to family size. In this second category, group members worked collectively only on heavy tasks, such as plowing paddy fields and transplanting rice seedlings. Otherwise, each family was responsible for the cultivation of its own land allotment and continued to be owner of its farm implements and animals, which could be traded by private agreement among members. Some groups owned a common pool of rice seeds, contributed by member families, and of farm implements, contributed by the state. The size of the pool indicated the level of the group's collectivization. The larger the pool, the greater the collective work. In groups that did not have a common pool of rice and tools, productive labor was directed primarily to meeting the family's needs, and the relationship between the agricultural producers and the market or state organizations was very weak.

The third category was classified as the family economy. As in the second category, the group allocated land to families at the beginning of the season, and farm implements continued to be their private property. In this third category, however, the family cultivated its own assigned lot, owned the entire harvest, and sold its surplus directly to state purchasing organizations. In the solidarity groups of this category, there was no collective effort, except in administrative and sociocultural matters.

The government credited the solidarity group system with rehabilitating the agricultural sector and increasing food production. The system's contribution to socialism, however, was less visible and significant. According to Chhea Song, deputy minister of agriculture, a mere 10 percent of the solidarity groups really worked collectively in the mid-1980s (seven years after solidarity groups had come into operation). Seventy percent of the solidarity groups performed only some tasks in common, such as preparing the fields and planting seeds. Finally, 20 percent of the agricultural workers farmed their land as individuals and participated in the category of the family economy.

Rice Production and Cultivation

In 1987 statistics on rice production were sparse, and they varied depending upon sources. Cambodian government figures were generally lower than those provided by the UN Food and Agriculture Organization (FAO) for the period from 1979 to 1985.

Political and technical factors account for the discrepancies. Data collection in the war-torn nation is difficult because of the lack of trained personnel. Moreover, representatives of international and of foreign relief organizations are not permitted to travel beyond Phnom Penh, except with special permission, because of security and logistics problems. In addition, international and Cambodian sources use different benchmarks in calculating rice production. FAO computes the harvest by calendar year; Cambodian officials and private observers base their calculations on the harvest season, which runs from November to February and thus extends over two calendar years. Last of all, a substantial statistical difference exists between milled rice and paddy (unmilled rice) production, compounding problems in compiling accurate estimates. In terms of weight, milled rice averages only 62 percent of the original unmilled paddy. Estimates sometimes refer to these two kinds of rice interchangeably.

Despite statistical discrepancies, there is consensus that annual unmilled rice production during the 1979 to 1987 period did not reach the 1966 level of 2.5 million tons. Nevertheless, since 1979, Cambodian rice production has increased gradually (except during the disastrous 1984 to 1985 season), and the nation in the late 1980s had just begun to achieve a precarious self-sufficiency, if estimates were borne out.

Cambodia's cultivated rice land can be divided into three areas. The first and richest (producing more than one ton of rice per hectare) covers the area of the Tonle Sap Basin and the provinces of Batdambang, Kampong Thum, Kampong Cham, Kandal, Prey Veng, and Svay Rieng. The second area, which yields an average of four-fifths of a ton of rice per hectare, consists of Kampot and Kaoh Kong provinces along the Gulf of Thailand, and some less fertile areas of the central provinces. The third area, with rice yields of less than three-fifths of a ton per hectare, is comprised of the highlands and the mountainous provinces of Preah Vihear, Stoeng Treng, Rotanokiri (Ratanakiri), and Mondol kiri (MondolKiri).

Cambodia has two rice crops each year, a monsoon-season crop (long-cycle) and a dry-season crop. The major monsoon crop is planted in late May through July, when the first rains of the monsoon season begin to inundate and soften the land. Rice shoots are transplanted from late June through September. The main harvest is usually gathered six months later, in December. The dry-season crop is smaller, and it takes less time to grow (three months from planting to harvest). It is planted in November in areas that have trapped or retained part of the monsoon rains, and it is harvested in January or February. The dry-season crop seldom exceeds 15 percent of the total annual production.

In addition to these two regular crops, peasants plant floating rice in April and in May in the areas around the Tonle Sap (Great Lake), which floods and expands its banks in September or early October. Before the flooding occurs, the seed is spread on the ground without any preparation of the soil, and the floating rice is harvested nine months later, when the stems have grown to three or four meters in response to the peak of the flood (the floating rice has the property of adjusting its rate of growth to the rise of the flood waters so that its grain heads remain above water). It has a low yield, probably less than half that of most other rice types, but it can be grown inexpensively on land for which there is no other use.

The per-hectare rice yield in Cambodia is among the lowest in Asia. The average yield for the wet crop is about 0.95 ton of unmilled rice per hectare. The dry-season crop yield is traditionally higher--1.8 tons of unmilled rice per hectare. New rice varieties (IR36 and IR42) have much higher yields--between five and six tons of unmilled rice per hectare under good conditions. Unlike local strains, however, these varieties require a fair amount of urea and phosphate fertilizer (25,000 tons for 5,000 tons of seed), which the government could not afford to import in the late 1980s.

Other Food and Commercial Crops

The main secondary crops in the late 1980s were maize, cassava, sweet potatoes, groundnuts, soybeans, sesame seeds, dry beans, and rubber. According to Phnom Penh, the country produced 92,000 tons of corn (maize), as well as 100,000 tons of cassava, about 34,000 tons of sweet potatoes, and 37,000 tons of dry beans in 1986. In 1987 local officials urged residents of the different agricultural regions of the country to step up the cultivation of subsidiary food crops, particularly of starchy crops, to make up for the rice deficit caused by a severe drought.

The principal commercial crop is rubber. In the 1980s, it was an important primary commodity, second only to rice, and one of the country's few sources of foreign exchange. Rubber plantations were damaged extensively during the war (as much as 20,000 hectares was destroyed), and recovery was very slow. In 1986 rubber production totaled about 24,500 tons (from an area of 36,000 hectares, mostly in Kampong Cham Province), far below the 1969 prewar output of 50,000 tons (produced from an area of 50,000 hectares).

The government began exporting rubber and rubber products in 1985. A major customer was the Soviet Union, which imported slightly more than 10,000 tons of Cambodian natural rubber annually in 1985 and in 1986. In the late 1980s, Vietnam helped Cambodia restore rubber-processing plants. The First Plan made rubber the second economic priority, with production targeted at 50,000 tons-- from an expanded cultivated area of 50,000 hectares--by 1990.

Other commercial crops included sugarcane, cotton, and tobacco. Among these secondary crops, the First Plan emphasized the production of jute, which was to reach the target of 15,000 tons in 1990.

Cambodia - Livestock

Animal husbandry has been an essential part of Cambodian economic life, but a part that farmers have carried on mostly as a sideline. Traditionally, draft animals--water buffalo and oxen-- have played a crucial role in the preparation of rice fields for cultivation. In 1979 the decreasing number of draft animals hampered agricultural expansion. In 1967 there were 1.2 million head of draft animals; in 1979 there were only 768,000.

In 1987 Quan Doi Nhan Dan (People's Armed Forces, the Vietnamese army newspaper) reported a considerable growth in the raising of draft animals in Cambodia. Between 1979 and 1987, the number of cattle and water buffalo tripled, raising the total to 2.2 million head in 1987. In the same year, there were 1.3 million hogs and 10 million domestic fowl.

Cambodia - Fisheries

Cambodia's preferred source of protein is freshwater fish, caught mainly from the Tonle Sap and from the Tonle Sab, the Mekong, and the Basak rivers. Cambodians eat it fresh, salted, smoked, or made into fish sauce and paste. A fishing program, developed with Western assistance, was very successful in that it more than quadrupled the output of inland freshwater fish in three years, from 15,000 tons in 1979 to 68,700 tons in 1982, a peak year. After leveling off, output declined somewhat, dipping to 62,000 tons in 1986. The 1986 total was less than half the prewar figure of some 125,000 tons a year. Saltwater fishing was less developed, and the output was insignificant--less than 10 percent of the total catch. According to the First Plan, fisheries were projected to increase their annual output to 130,000 metric tons by 1990.

Cambodia - INDUSTRY

Industry accounted for only 5 percent of Cambodia's GDP in 1985, down from 19 percent in 1969. Industrial activity continued to be concentrated in the processing of agricultural commodities, mostly rice, fish, wood, and rubber. Manufacturing plants were small, and they employed an average of fewer than 200 hundred workers. These plants aimed to produce enough consumer goods (soft drinks, cigarettes, and food items) and household products (soap, paper, and utensils) to satisfy local demand.

The extent of Cambodia's industrial rehabilitation could be gauged by a comparison of enterprises in prewar and in postwar times. In 1969 the last year before the country was engulfed in the war sweeping Indochina, a census disclosed 18 large industries countrywide (13 public and 5 mixed public-private sector) and 33,000 small and medium privately owned enterprises. About half the factories operating in 1969 were rice mills, or were otherwise engaged in rice processing. In 1985 the government news agency (Sarpodamean Kampuchea) announced that fifty-six factories had been renovated and had been put back into operation. In the capital itself, about half of Phnom Penh's prewar plants had reopened by 1985. Most industries were producing at far below capacity because of frequent power cuts, shortages of spare parts and of raw materials, and the lack of both skilled workers and experienced managers. Industrial revival continued to be difficult and extremely slow because it was based mainly on the use of limited local resources.

Major Manufacturing Industries

In early 1986, the major industrial plants in Phnom Penh included the Tuol Kok textile factory, the largest of six textile factories in the city (the factory was idle three days a week, however, because of power shortages). There were also four power plants, a soft drink plant, a tobacco factory, a ferro-concrete factory, and some other enterprises that produced consumer goods.

In the municipality of Kampong Saom and in neighboring Kampot Province, rice mills, lumber mills, small brick and tile factories, power plants, an oil refinery, a tractor-assembly plant, cement and phosphate factories, and a refrigeration plant for storing fish were reported to be in operation. In the important industrial center of Ta Khmau, Kampot Province, were a tire factory (possessing its own generator, but lacking rubber and spare parts), several mechanical workshops, and warehouses. Batdambang Province had shops for repairing farm implements, a cotton gin and textile mill, a jute-bag factory, an automobile and tractor repair plant, and a phosphate-fertilizer plant. In Kampong Cham Province, the former center for tobacco growing and for cotton garment making, there were a cotton-spinning textile factory, some silk-weaving operations, and an automobile tire and tube plant.

Handicrafts

Small family-run businesses and private enterprises specializing in weaving, tailoring (silk sampot and sarongs, the Cambodian national dress), and small manufactured products grew more rapidly than public industries, and they contributed significantly to economic recovery. According to official estimates, the output value of local and of handicraft industries together amounted to 50 percent of the value of production in state industries in 1984. In Phnom Penh alone, there were 1,840 handicraft shops whose output value rose from 14 million riels in 1981 to 50 million riels in 1984.

Cambodia - DOMESTIC COMMERCE

No information was available in 1987 on the volume of the domestic trade of locally manufactured products or of imported goods. Domestic commerce consisted essentially of contracts between agricultural producers and the state on the one hand, and the private free market on the other hand. Rice was the principal commodity sold to state purchasing agencies in exchange for farm implements, consumer goods, or cash. The state increasingly found itself in competition with private merchants for the procurement of rice. In order to force the peasants to sell rice to the state, the government prohibited private rice traders from transporting rice across provincial borders, a measure that had only limited success. In 1986 state rice procurement amounted to only 154,000 tons, or to just over half of the government's goal of 300,000 tons. Farmers believed that the state purchase price of 2.5 riels per kilogram of unmilled rice was less than the cost of production. In addition, because the government had insufficient supplies of goods such as fertilizer, cloth, and soap to be traded as payment, farmers had little incentive to sell their crops to state buyers. Consequently, in August 1987, the government raised the amount paid to farmers for monsoon-season (long-cycle) unmilled rice from 2.5 to 5.5 riels in an effort to narrow the gap between the official and the freemarket prices. At the end of 1987, peasants still complained that the price paid by the state was too low. For example, one kilogram of improved IR rice seeds was priced at between ten and fifteen riels on the free market, but it cost only six riels on the official market.

In contrast to shrinking state domestic trade, private trade continued to grow and to prosper with governmental approval and encouragement. Spouses of high party officials and cadres were actively engaged in petty trade to bring additional incomes to their families. Government workers also moonlighted by working in the private sector to augment low salaries and to make ends meet. Thousands of retail shops, private markets, and restaurants proliferated in Phnom Penh and in other cities. Shops and markets offered a variety of consumer goods, from gold and silver to bicycles and illegally imported consumer items, such as Seiko watches and Heineken beer.

Cambodia - FOREIGN TRADE

The government controlled all official foreign trade. In July 1979, the Ministry of Local and Foreign Trade set up the Kampuchean Export and Import Corporation (KAMPEXIM, the state trading agency) to handle exports, imports, and foreign aid. In addition, the National Trade Commission was created to be in charge of both internal and external economic coordination. In March 1980, the Foreign Trade Bank was formed to deal with international payments, to expand trade, to provide international loans, and to control foreign exchange. There were reports of special clearing arrangements for trade among the Indochinese countries and with some members of the Council for Mutual Economic Assístance (CMEA, CEMA, or Comecon--see Glossary).

Beginning in 1982, the government made serious efforts to promote foreign trade as a means of accelerating national reconstruction and development. The First Plan emphasized exports as a way to correct imbalances in the national economy, but it did not provide any commodity export target figures. In the late 1980s, Cambodian officials released information revealing the direction and the patterns of trade rather than specific numbers. Most official trade was being conducted with Comecon countries in the form of exchanges of commercial goods. In the absence of authoritative data, unofficial Western sources placed Cambodia's trade deficit at US$100 million to US$200 million annually from 1981 to 1987. According to the Asian Development Bank, the country's total external debt in 1984 was US$491 million, up from US$426 million in 1983, and US$368 million in 1982.

In an attempt to increase foreign exchange earnings, the Heng Samrin regime in 1987 encouraged expatriate Cambodians to remit money to relatives and to friends remaining in the country. Cambodia's Foreign Trade Bank provided the names of sixteen banks in Western Europe, Canada, and Australia that were authorized to handle such transactions. The list included the Moscow Narodny Bank in London and several capitalistic financial institutions, such as the Société Générale in France and the Union des Banques Suisses in Switzerland.

Composition of Trade

Since 1979 Cambodia's major imports have consisted of machinery, tractors, vehicles, fuels and raw materials for light industry, consumer goods, clothing, cement, and chemical fertilizers. According to government information, imports during the first 10 months of 1987 amounted to 97 percent of the plan target, an increase of about 130 percent over the 1986 figure.

The principal exports included natural rubber (latex), resin, maize, tobacco, soybeans, and timber. Private Western sources estimated Cambodia's 1985 export earnings at US$10 million. Other sources reported that they were $US3.2 million just one year later. In 1987 the government news agency reported that the volume of exports handled by the Kampuchean Export and Import Corporation in the first ten months of 1987 had increased tenfold over the corresponding period in 1979.

Cambodia - Major Trading Partners

Cambodia's major trading partners in the 1980s were Vietnam, the Soviet Union, and the countries of Eastern Europe, particularly the German Democratic Republic (East Germany), Czechoslovakia, Poland, Hungary, and Bulgaria. Cambodia also claimed to have trade relations with Japan, one of several countries that had recognized Sihanouk's Coalition Government of Democratic Kampuchea (CGDK) and had imposed a trade embargo on the Phnom Penh government of the People's Republic of Kampuchea (PRK).

Vietnam

In February 1979, Cambodia signed a Treaty of Peace, Friendship and Cooperation with Vietnam that formally strengthened "solidarity and cooperation" between the two countries. As part of the Vietnamese aid program to Cambodia, a joint scheme of pairing Cambodian provinces with Vietnamese "sister provinces" was inaugurated in the same year for the purposes of economic cooperation and of technical, educational and cultural exchange. Cambodia's Rotanokiri Province, however, was linked with two neighboring Vietnamese provinces--Nghia Binh and Gia Lai-Cong Tum. In addition, the municipality of Phnom Penh was paired with two Vietnamese cities--Ho Chi Minh City and Hanoi. Except for the municipalities of Hanoi and Haiphong, all of the Vietnamese participants in the scheme were located in former South Vietnam near their Cambodian counterparts.

The paired provinces were engaged mostly in barter trade the volume and value of which were unpublicized. Some observers argued that the system facilitated the integration of Cambodia's economy into Vietnam's. They pointed to the case of Batdambang Province, which sent tons of rice to its overpopulated and underfed Vietnamese sister province, Quang Nam-Da Nang, in exchange for bicycles and cement. In another case, Cambodia's Siemreab-Otdar Meanchey Province, supplied Vietnamese counterparts in Binh Tri Thien Province with unmilled rice and other agricultural products; in return, Vietnam supplied workers from Hue and its suburbs to help run the building industry in Siemreab-Otdar Meanchey This exchange came at the expense of Cambodian workers, who were assigned to find clay, while the new Vietnamese settlers produced bricks and tiles and made a good living. In Siemreab city, the Vietnamese also assumed control of the biggest fish-sauce factory.

According to a Cambodian official's evaluation of foreign cooperation, the pairing system worked successfully. The exchange of goods between the sister provinces and cities helped "meet the needs of the people promptly." Reportedly, the system also helped Cambodia fulfill all of its development targets for 1986. In February 1986, Cambodia and Vietnam signed an agreement to double their trade for that year.

Soviet Union

The first important trade agreement between Cambodia and the Soviet Union was signed in February 1983 and covered three years, 1983 through 1985. According to a Soviet source, Moscow's trade turnover with Cambodia during this period increased from 71.8 to 100.3 million rubles. Cambodian exports were mainly rubber, while imports from the Soviet Union consisted of refined petroleum products, textiles, and chemical fertilizers.

In July 1984, Cambodia--following the examples of Vietnam, Laos, and the East European countries--set up an Intergovernmental Commission for Trade, Economic, Scientific, and Technical Cooperation to manage its bilateral trade with the Soviet Union. The first session of the commission was held in January 1985. At its fourth meeting, in December 1987, protocols were signed regarding the restoration of rubber plantations and the development of some joint state enterprises.

On March 28, 1986, the two countries signed a five-year trade and aid agreement for the period 1986 to 1990 that would double the level of trade over that of the previous five-year period. The Soviet export package included tractors, fertilizer, petroleum products, machines, and raw materials. In exchange, Cambodia was to export raw rubber, timber, and plant-based industrial products such as lacquer. According to the Phnom Penh Domestic News Service, by the end of 1986 Cambodia had shipped 91 percent of its planned exports to the Soviet Union and had received 104 percent of its planned imports in return. During Cambodian Prime Minister Hun Sen's visit to Moscow in July 1987, the Soviet press reported that the volume of goods sold by the Soviet Union to Cambodia in the 1986 to 1990 period would increase one-and-one-half times over the previous five-year period, whereas goods sold by Cambodia would increase more than four times. In November 1987, the two countries concluded trade-payments agreement for 1988. Under the terms of this agreement, the Soviet Union was to ship vehicles, tractor equipment, and fertilizer and would receive in exchange "traditional export goods" from Cambodia. Trade turnover between the two countries was projected to reach nearly 80 million rubles in 1988.

East Germany

In 1986 the total trade between Cambodia and East Germany reached about 14 million rubles, a 17 percent increase over the 1985 total of 12 million rubles. Cambodia exported more than 12 million rubles worth of rubber to East Germany and an additional million rubles worth of other goods. Cambodia's imports from East Germany amounted in value to more than 965,000 rubles. Czechoslovakia

Trade between Cambodia and Czechoslovakia totaled to 4.4 million rubles in 1985. In 1986 Cambodia exported 800 tons of rubber, more than 400 cubic meters of timber, and 700 tons of soybeans to Czechoslovakia. Cambodian imports from Czechoslovakia consisted chiefly of medicine and cloth. The two countries signed a protocol in Prague on October 29, 1987, on the exchange of goods planned for 1988. Under the terms of the protocol, total trade would increase by 19 percent over the 1987 level. Cambodia was to export rubber, beans, and timber to Czechoslovakia and was to import tractors, diesel engines, and pharmaceuticals.

Poland

Cambodia's trade with Poland between 1982 and 1985 was estimated at 4.4 million rubles. Cambodia exported rubber, timber, and soybeans and imported Polish textiles, ship engines, and glassware. The two countries set a trade target for 1986 to 1990 amounting to 14.3 million rubles.

In 1986 the trade between Cambodia and Poland amounted to 2.1 million rubles. On February 18, 1987, the two countries negotiated a trade agreement for the year stipulating that Cambodia would export crepe rubber, timber, furniture, soybeans, sesame seeds, and farm products; it would import, in return, antitrust paint, soldering rods, sewing machines, boat engines, raw materials for medicine, and consumer goods.





CITATION: Federal Research Division of the
Library of Congress. The Country Studies Series. Published 1988-1999.

Please note: This text comes from the Country Studies Program, formerly the Army Area Handbook Program. The Country Studies Series presents a description and analysis of the historical setting and the social, economic, political, and national security systems and institutions of countries throughout the world.


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