Norton University Assignment of Care English

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

II/ Cambodia’s Economic Crisis

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

2-Textile Sector and Construction Sector

In the textile sector, competition is increasing and profits drop as people cut their spending
worldwide. And competition from countries like Vietnam and China is increasing. We are facing

Taught by lecturer: Key Soka

Bachelor of Language and art
Compiled by: Soem Fazin
Norton University Assignment of Care English

tough times and already factories are closing. Moreover, shrinking demand from the US and Europe
markets has already forced 60,000 job losses in the garment sector. Anyway, about construction
sector, it is slowing down too, due to the consequences of the crisis on Korea who had until now
been acting as a locomotive for the Cambodian construction sector. Reduced foreign direct
investment has seen a further 25,000 jobs lost in construction. Early indications show that many
unemployed workers are returning to their villages, where livelihood opportunities outside
subsistence agriculture are severely limited. To survive, more and more Cambodian women and
children may find themselves in the informal economy for lower wages, poorer conditions, and
greater risk of sexual exploitation and trafficking.

3-Tourism Sector
A slowdown in tourist arrivals was noticeable in the first six months of 2008. In fact, the
global financial crisis has affected Cambodia’s tourism industry, especially in Siem Reap, site of the
world famous tourism attraction- Angkor Wat Temple, with tourist arrivals falling. As a matter of
fact, tourist arrivals to Siem Reap fell by more than 16 percent in the first quarter of 2009
compared to last year. Consequently, some luxury hotels temporarily shut down so that there are
low occupancy rates meaning that staff members are taking unpaid leave or have been temporarily
laid off in many hotels.

The Cambodian tourism has been directly affected by weaker global economy on the one
hand and the border disputes with Thailand on the other hand. So, in Cambodia, the people such as
taxi drivers, tourist guides, tourist bus drivers, etc who earn money and have jobs related to
tourism sector are losing their incomes or losing their jobs.

III/ How to Tackle Cambodia’s Economic Crisis

1-Solution to Agriculture Sector Problem
To tackle Cambodia’s economic crisis in agriculture sector, Cambodian government had
better quickly implement measures and mechanisms aimed at supporting and stabilizing
agricultural prices, so as to protect and guarantee farmers’ revenue and living conditions

Taught by lecturer: Key Soka

Bachelor of Language and art
Compiled by: Soem Fazin
Norton University Assignment of Care English

nationwide. How to do this kind of strategy is to plan to spend approximately US$1 billion this year
to buy farm products such as tapioca, rice, maize and palm oil under the agricultural intervention
scheme. Under this purchase of farm products, government should pledge to buy them with
pledging price to increase by 20% per month until one point of time or the next few months. Then
the government might be able to export all agricultural products bought under the intervention
scheme in a bid to prop up domestic prices.

By the way, about heavy indebtedness of hundreds of thousands of farmers who are unable
to pay their debts in the present situations and whose lands or properties will be confiscated due to
giving their lands as collaterals to banks and other creditors, the government must take
appropriate and urgent measures to prevent banks and other creditors from seizing farmers’ lands
or properties while our farmers are suffering from the present crisis. There must be a debt
moratorium. In the meantime, interest rates and payments must be reduced pending negotiations
for a comprehensive resolution of the debt problem.

On the other hand Cambodian policymakers ought to enact work-for-food schemes that
guarantee employment, encourage poor people to grow private gardens rather than rely solely on
income, and establish common property rights over water. All these strategies will drive
Cambodia’s agriculture development and guarantee Cambodian farmers’ living conditions.

2-Keeping the Garment Sector in Good Health

As described in such a context above, Cambodia bound to lose its market shares in the
United States since demand will clearly be reduce. The Kingdom will then be force to seek new
markets.

Cambodia must boost its competitiveness and must be one of the country’s priorities by
facilitating trade, offering fiscal stimulus and dealing with labor-related conflicts. Moreover, the
government has to promote and encourage foreign direct investment in a more appropriate way by
combating corruption because investors are complaining about corruption and they are going to

Taught by lecturer: Key Soka

Bachelor of Language and art
Compiled by: Soem Fazin
Norton University Assignment of Care English

other countries. So, Cambodia has to attract legitimate investors, but also high-quality investors
with technical expertise, and that will diversify industries.
For factories or enterprise having financial problems, Cambodia must dare implementing
slightly more ambitious, expenditure policies to pay the debts of those factories in order to prevent
them from going bankrupt so as to gaurantee employment of Cambodian workers.

3-Creating New Jobs

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

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

&Y'

Taught by lecturer: Key Soka

Bachelor of Language and art
Compiled by: Soem Fazin
Norton University Assignment of Care English

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

Taught by lecturer: Key Soka

Bachelor of Language and art
Compiled by: Soem Fazin