cambodia and the washington consensus
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CAMBODIA
AND
THE
WASHINGTON
CONSENSUS
Sophal
Ear*
Cambodia's
conomic
rogressrom
993 to the nd
of
1995,
though
limited
and
short-lived,
was
encouraging.
By
employing
n
analytical
ramework
dapted rom
John
Williamson's
iscussion
f
the
Washington
onsensus/'
examine en
spects f
Cambodia's
domesticconomic eformolicies uring he1993-95period. also
consider
the
country's
politico-economic osition
at that
time
relative
to the
ASEAN membernations.
It is
argued
that
the
Consensus
reforms,
ombinedwith Cambodia's
then-prospective
membership
n
ASEAN,
had the
potential
o boost not
only
the
country's
wn
economic
evelopment
ut also
that
f
the
proposed
ASEAN
FreeTrade
Area,
to be established
n the
year
003.
Finally,
I
suggest
thatCambodia
can still realize
the
reform oals
it had
during
he
eriod
nder onsideration.
Introduction:
ambodia
nd the
Washington
onsensus
In
1992,
following
ecades of
warfare nd
revolution,
he
Cambodian
government
egan normalizing
relationswith
the
developed
world
nd
acceptingarge
mounts faid
in
theform
f
grants
nd
loans
from ilateral
nd multilateralources ike
the
United
States
Agency
or nternational
evelopment
USAID),
the
World
Bank's
International
Development Agency,
and the
InternationalMonetaryFund (IMF). It did so with the idea of
becoming
ully
eintegrated
nto he
global
conomy
nd of
thereby
realizing
greatly
ncreasedrates of economic
growth.
nvariably,
however,
he
proffered
id
was conditioned
y
limits
n how the
Sophal
Ear was a
Masters andidate t the WoodrowWilson
School of
Public
nd
International
ffairs,
rinceton
niversity,
henhe wrote
his
article.
He
leftCambodia
n
1976and
subsequently
btained
Bachelor's
degree
n economics
nd
political
cience rom he
University
f
California
at
Berkeley.
He
spent
the Summer f 1996 as a research
ellow at the
Cambodiannstituteor ooperationnd Peace n Phnom hen,Cambodia.He nowworks s a consultantor heWorldBank.
Crossroads:
n
Interdisciplinary
ournal
f
outheast sian
Studies
11(2)73-97
Copyright
997
y
theCenter
or outheast sian
tudies,
Northern
llinois
niversity.
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Sophal
Ear
assistance unds ould be spent s well as bydirectives s to what
kinds of
economic
reform
he
Cambodian
government
must
undertake
to
qualify
for continued
support. Normally,
such
conditionalitymplies
he
mplementation
f
a
set of
U.S.-sanctioned,
internationally
dministered
tructural eforms ike
those first
introduced
n Latin
America
n
the
early
1980s
and
now known
collectively
s the
Washington
onsensus,
ollowing
conomist
John
Williamson's
se
of hat erm
n
his seminal 990
rticle,
What
Washington
Means
by
Policy
Reform. 1 fter atin
America,
he
Consensus
was
next
pplied
n
Eastern
urope
nd
the ovietUnion
as, one by one, thepost-communistra EasternBloc countries
privatized
heir
tate-owned
nterprises
SOEs).
Since
then,
herise
of
the
Newly
Industrializing
Countries and the attendant
adjustments
n their
conomies
as in effect
made
the
Washington
Consensus
he
mantra
f conomic eformersorldwide.
The Consensus
was as relevant
o Cambodia n the
arly
990s
as
elsewhere,
or
he hift
rom socialist tate-controlled
conomy
toward
a
capitalistic
market-controlledne had serious
political
ramifications
s old
party
adres
ought, uiterationally,
o
preserve
theirnfluence ithin leadership bliged oadaptto theheterodox
practices
f the
ncreasingly
owerful
ouveaux iche.
ertainly,
o
one
believed
the
country's
conomic
transformation ould be
smooth.
Still,
it
was
expected
that
with
successful
structural
adjustment
easures,
ambodia
would
realize nd sustain he ame
balanced
conomic
rowth
hat
ad
already
een achieved
y many
ASEAN
members.
henation's
ommitment
o reformanbe seen
n
the
government's
irm enial
that the Consensus
policies
were
imposed
on
it
by
the
various
ending
gencies
and
governments
concerned.
Cambodian
PrimeMinister
Norodom
Ranariddh,
or
instance,nsistedthat there wereno conditions o the aid, no
1
John
Williamson,
What
Washington
eans
y
Policy
eform,
n Latin
American
djustment:
ow
MuchHas
Happened?,
ohn
Williamson,d.,
7-20
(Washington,
C:
Institute
or
nternational
conomics,
990).
Williamson
was
actually
nly
ne of
a chorus
f
economists,
uch
as AnneO.
Krueger
and
Hernando
e
Soto,
o
engage
n
framing
ew
policy
olutions
or ld
policy
dilemmas.
ee,
for
nstance,
obert
H. Bates nd
AnneO.
Krueger(eds.),Politicalconomicnteractionsn Economicolicy eformOxford: asil
Blackwell,
993),
and
Hernando
de
Soto,
The Other
ath: The nvisible
Revolution
n
the
hirdWorld
New
York:
Harper
Row,
989).
74 Crossroads
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Cambodia nd the
Washington
onsensus
pressure.Donors asked for clarification nd we showed our
determination
to
nact he
eforms]/'2
Recent
events
in Cambodia have
eclipsed
the
economic
stabilization
fforts
fthe
arly
990s.
Nevertheless,
hose
ffortsre
important
n that
hey ignal
a radical and
progressive
eparture
from
he
tultifyingolicies
n
effect
rior
o that
ime,
n
addition o
which
hey
et
precedent
or
ossible
uture eform.
ndeed,
hould
Cambodia
finally ain
dmission
o
ASEAN,
nd
should he
urrent
domestic
urmoil
ubsidewithout
rreparableamage
o the
nation's
economy,
new
phase
of
capitalistic
eform ill
undoubtably
rise,
in which asethe essons earned arlierwillprove nvaluable.nthe
following
ections
f this
paper
will thereforeeview
Cambodia's
structural
djustment
ffortsrom 993
o
the
nd of
1995
n
terms f
the
policy
areas
outlined
by
the
Washington
Consensus,
with
comparisons
o
otherASEAN
member
ountries,
here
ossible.3
n
conclusion,
discuss
Cambodia'seconomic
erformance
s a
result
of
the
Consensus
eforms
nd touch n someconcerns
egarding
he
economic
ffects
f
rade iberalizationnd
policy redibility.
Cambodia's
mplementation
f
Washington
onsensus
tructural
djustments
By
definition,
tructural
djustmentolicies
re
administrative
instruments
meant
to create conditions onducive to sustained
economic
rowth.
he
focus n instrumentsere s
significant,
or t
implies
hecrucial
ssumption
hat he
prescribed
mechanisms ill
indeed
be
employed
n a manner onducive conomic
evelopment.
2
In
John
ollain,
Cambodian
remier
lays
Down Human
Rights
buses/'
Reuters ewsService,March16,1995.
3
ASEAN,
whosecurrent embersre the
Philippines,
ndonesia,
Malaysia,
Singapore,
hailand, ietnam,
nd
Brunei,
as
originally
reated s a non-
U.S.
led
security
mbrella
n
1967 to offset ommunist
ains
n
Vietnam,
Laos,
and Cambodia
during
he
1970s.
The
granting
f
membership
o the
socialist
epublic
fVietnam
n
1995marked he
beginning
f
new era
for
ASEAN.
n that ame
year,
ambodia nd Laos
gained
bserver
tatus;
nd
Laos
was
granted
ull
membership
n
1997,
s was
Burma.
Cambodia's
membership
s still
ending.
ee Reuters ews
ervice,
Cambodia nd
Laos
to
Join
ASEAN
by
1997/'
Dec. 25
(1995).
Mr.
Jeffrey
arten,
he
departing
U.S.
Undersecretary
orCommerce estified o the
global importance
f
ASEAN
by predicting
n
September
995 that
by
the turn f
the
century
ASEAN
would be theUnited tates' econd
argest rading artner
ext o
Mexico.See Kieran Cooke and PeterMontagnon,A LiberalPinch of
Eastern
pice:
South-EastAsian
Countries re
Opening
Up
for
Trade,
Financial
imes,
ct.
18,
1995,
8.
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Sophal
Ear
As Williamsonexplains, It is generally ssumed, at least in
technocratic
ashington,
hat he standard conomic
bjectives
f
growth,
ow
inflation,
viablebalanceof
payment,
nd an
equitable
income
distribution
hould determine he
disposition
of
such
instruments. 4
nother
mportant
haracteristicf the
Consensus s
its
dvocacy
f
private-sector
arket
mechanisms,
ince
hroughout
much
of
the
developing
world,
onggovernment
ntervention
n,
or
even
direct
wnership
f,
hecommercial
conomy
as resulted
n
tremendous
arket
nefficiencies,
nd therefore
luggish rowth.
As
defined
y
Williamson,
he
Washington
onsensuscalls
specificallyor tructuraldjustmentsf theeconomyn the ten
following
reas:
1. Fiscal
Policy
2. Public
Expenditure
riorities
3.
Tax
Policy
4. The
Privatization
f tate-owned
nterprises
5.
Interest
ate
Policy
6.
The
Deregulation
f
ndustry
7.Foreign irectnvestment
8.
Property
ights
9.
Exchange
ate
Policy
10.
Trade
Liberalization
and
Credibility)5
The
nclusion
f
redibility
s
a
policy
rea
under rade iberalization
(number
0
above)
s
my
own.
Thisaddition
eemsto me
necessary
because
the
relative
focus
of the
Consensus
on
policies
and
instruments
ather
han
bjectives
r outcomes
makes t difficultor
reforming
conomies
o
gain
foothold
n
the
global
marketplace.
t
is no meanfeat, or nstance,or developing ountryoestablish
and
maintain
redibility
hen
trefuses
n ts
policy-making
rocess
to
prioritize
uch
sacred-cow
economic
indicators
s rates of
inflation,
nemployment,
nd
growth.
n
theory,
herefore,
he
Consensus
prescriptions
re
tremendously hallenging
o
any
government
eeking
to
adopt
them.
Yet the
economic
uccesses
scored
n the
early
1980s
n Latin
America
nd later
n the Czech
Republic
nd
theAsian
NICs,
to
mention
ust
those
ew,
how
these
4Williamson,WhatWashingtoneans yPolicy eform/', talicsdded.
List
adapted
from
Williamson,
Democracy
nd the
Washington
Consensus/
orld
evelopment
1
8):
332-133
1993).
76
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Cambodia nd the
Washington
onsensus
sameadjustmentmeasures o be both feasible nd flexible.twas
therefore
ith
very
xpectation
f
succeeding
hat he
Cambodian
government
mbarked
pon
ts
own
process
f reformn
the
early
1990s.
How itfared
n this ndeavor s
discussed elow
with
pecific
reference
o the enConsensus
olicy
reas isted bove. n
each
case,
the
general
onsensus
rescription
s
given,
fter hich
Cambodia's
application
f he
prescription
s
assessed.
1. Fiscal
Policy
Consensusprescription:6udget eficits,roperlyistributed
among
provincial
overnments,
tate
enterprises,
nd
the
central
bank,
hould
be small
nough
o be
financed ithout
ecourse o an
inflation
ax. This
typicallymplies primary
urplus
that
which
exists
efore
dding
debt ervice
o
expenditure)
f
several
percent
ofGDP
and
an
operational
eficit
the
deficit
isregarding
hat
art
of
the
nterest ill
that
imply ompensates
or
nflation)
f
no
more
than
wo
percent
fGDP.
Situationn Cambodia:ContinuedRestraint ithQualified
Overruns.
Under
UNTAC
(the
United
Nations
Temporary
Administration
f
Cambodia),
Cambodia'sfiscal
udget
aw
itsfair
share
f
deficits
see
Table
2).
At 1.4
%
of
Gross
Domestic
roduct
n
1994,
however,
hedeficit as small
nough
o be
the
nvy
f other
developing
ountries,
nd one IMF
report
t the time
tated
that
fiscal
olicy
played
central ole n
maintaining
inancial
tability
[in
Cambodia]
during
1994 and
early
1995 and
that
[d]espite
significant
verruns
n
security
nd
defense
spending,
strong
revenue
erformance
nd
tight
ontrols ver
nondefense
pending
kept hecurrent iscal eficit o1-1/2percent fGDP in1994. 7 f
course,
his tatistic asks naccuraciesn
budget
measurements,
ut
the
Ministry
fFinance nd
Economy
egan
to
address
his
roblem
too
by encouraging
ll
ministrieso
report
he mounts
f
ncoming
and
outgoing
evenues o as to make
ssessments f
fiscal
rograms
easier
nd more ccurate.
6
The onsensus
rescriptions
ere
nd
n
he
ollowing
ine
olicy
reas
re
adoptedrom illiamson,WhatWashingtoneans yPolicy eform.
International
onetary
und,
IMF
Approves
econd
Annual
oan for
Cambodia
nder
ASAF,
ress
elease,
ept.
5, 995,
5.47.
Crossroads 1:2
77
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Sophal
ar
2. Public
Expenditure
riorities
Consensus
prescription:
Public
expenditure
should
be
redirected
way
from
administration,
efense,
ndiscriminate
subsidies,
nd
other
olitically
ensitive
reas that
ypically
eceive
more
funds
han
economic
eturns
ustify,
nd into uch fields s
primary
ealth
are,
education,
nd
infrastructurehathave
high
economic
eturns
nd the
potential
o
mprove
ncome istribution.
Situation
n Cambodia:
The Cambodianfiscal
budgets
for
1994 nd1995 Table1),therevenues orwhich ameprimarilyrom
foreign
id
and
tariffs,
how
that
armore
overnment
undswent o
defense
han
o
any
other
ector f the
public
economy.
his
gross
imbalance,
if
indeed
genuine,
is understandable
given
the
government's
ope
that
liminating
he
Khmer
Rouge
once and for
all
would
makethe
ountry
more
ttractive
o
foreign
nvestors. o
doubt
the
government
as
sensitive
o such
reports
s that
by
Reuters
aying
hat
Foreign
nvestors
ave
generally
hied
away
from
nvesting
n Cambodia's
rural sector
for
fear of
problems
related o theguerrillawar. 8We knowthatCambodia'sASEAN
neighbors
never
spent
half their
total
budgets
on
defense,
as
Cambodia
apparently
did
for the
period
1994-96;
but these
neighbors,
hough
ometimes
nvolved
n
wars,
were freeof the
intense
and
ongoing
nternal
trife
hat
threatened
ambodia's
national
ecurity
t this
ime.
Nevertheless,
Cambodia's
large expenditures
n
defense
necessarily
meant
inordinately
mall
appropriations
o several
areas
primary
ealth
are,
ducation,
ublic
works,
tc.
strongly
supported
by
the
Consensus.
In an
effort o
downplay
the
importancefthecivilwar,PrimeMinister anariddhmaintained
that
Cambodia's
biggest
roblem
was not
the
Khmer
Rouge
but the
difficulties
f
development
nd
reconstruction.9
he
government
therefore
educed
ts subsidies
o both
the
civil
service,
which
had
theretofore
bsorbed
whopping
0%
of
the state
udget,
nd the
officer
orps,
which
had at
one
time
had
thousands
f
phantom
military ersonnel
n
its
payroll.
he
budgets
or
ducation,
which
8
Maja
Wallengren,
Rubber-Rich
ambodian
Province
eeks
nvestors,
Reuters ewsService, ug. 10,1995.
*
Hardev
Kaur,
Cambodia:
Malaysia
Offers
o
Help
Cambodia,
Business
Times
Malaysia),
pr.
5,
1994.
78
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Cambodia nd
the
Washington
onsensus
Table 1: Current
xpenditure
y
Sector*
(in
billion f
riels)
1994
1995
1996
1997
Budget
Actual
Budget
Actual
Budget
Actual
Budget
Defense nd
Security
83.2
391.5
299.0
421.2
392.3
400.7
383.5
Education 63.8 61.0 73.4 72.4 83.8 80.5 87.9
Health 42.4
30.0
36.2
26.1
60.4
44.0
60.7
Agriculture
rural 14.9 12.4
17.2
15.3
20.8
18.7
24.4
development
TotalCurrent
Expenditure
585.6
662.3
652.7
731.7
751.0
793.9
870.0
(in
% of
otal
urrent
xpenditure)
1994
1995
1996
1997
Budget
Actual
Budget
Actual
Budget
Actual
Budget
Defense nd
Security
8.4
59.1
45.8
57.6
52.2
50.5
44.1
Education 10.9
9.2
11.3 9.9
11.2
10.1
10.1
Health 7.2
4.5
5.5
3.6
8.0
5.5
7.0
Agriculture
rural
2.5 1.9
2.6 2.1
2.8 2.4
2.8
development
Unaccounted 31.0
25.3
34.8
26.8
25.8
31.5
36.0
residual
*
Payment-order
asis.
Source:World
Bank,
Cambodia:
rogress
n
Recovery
nd
Reform
Washington,
D.C.: World
Bank,
East Asia
and
Pacific
Region,
Country
Department
1,1997),
0. Note:
he
unaccounted
esidual
udget
for
hese
years
was
not
explained.
This
does not
necessarily ose
a
problem
ince
the total
fiscal
budget
denominator
sed for
ach
year
s the
ame for
ach
category.
he
unaccounted
esidual
udget
might
e
considered
statistical
iscrepancy
in
measurement.
However,
this
presents
another
problem:
how
can
something
s
planned
nd
methodical
s a
budget
have
such
high
evelsof
unaccountedesiduall
unds?
grewonlymarginallyrom Y 1994to FY 1995, nd healthcare,
which hrunk
y
24%
in
terms
f
relative
hare of
overall
public
expenditures,
ere
reassessed or
ossible
ncreases.
hese
measures
Crossroads
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79
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8/25
Sophal
Ear
wereall consistent ithWashington onsensusprescriptions.s
Williamson
otes,
One of
the
egacies
fthe
Reagan
dministration
nd its
supply-side
llies has been to
create
preference
n
Washington
for
reducing expenditures
atherthan
increasing
ax revenues.
. .
Military
xpenditures
re
sometimes
rivately
eplored,
ut
in
general hey
re
regarded
as the
ultimate
prerogative
f
sovereign
governments
nd
accordingly
ff imits o nternational
technocrats. . . Subsides, especially ndiscriminate
subsidies
including
ubsidies o cover he ossesof tate
enterprises)
re
regarded
as
prime
candidates for
reduction
r
preferably
limination.
. .
Education nd
health,
n
contrast,
re
regarded
s
essentially
roper
objects
f
government
xpenditure.10
Spending
on
agriculture
nd rural
development tayed
bout the
same
from
994
o 1995
increasing arginally
n 1996
o 2.4% ofthe
budget) while thaton public works a subject on which the
Washington
onsensus
s
equivocal
was
nearly
alved from 994
to
1995.11
3
. Tax
Policy
Consensus
Prescription:
he tax
base should be broadened
and
marginal
ax
rates ut so
as to
sharpen
nvestment
ncentives
and
improve
horizontal
equity
without
lowering
realized
progressivity.
mproved
administration
as been
an
important
aspectofbroadeninghetaxbase in LatinAmerica. axing nterest
assets
held
abroad
flightapital )
hould
be another
riority
n
the
coming
ecade.
Situation
n
Cambodia:
Taxation,
which
goes
hand-in-hand
with
spending,
equired
ittle mmediate
eform
n
Cambodia,
at
least
with
respect
o
income,
ales,
property,
lat r
poll
taxes.The
tax
base
in
Cambodia
s small:
GDP
per
capita
was
only
220
n
1994
10Williamson,WhatWashingtoneans yPolicy eform/'1.
11
See
Raoul
ennar,
Cambodge:
Qui
Profite
a Reconstruction?emain:
Le
monde,
:13-15.
80
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9/25
Cambodia nd
the
Washington
onsensus
and $250 in 1995.12 et improvedtax and customscollections
resulting
rom he ntroductionf
better
ookkeeping rocedures
and
computerized ccounting
ystems
llowed the
government
o
cut
costs
and
keep
track f
delinquent
ommercial
ax
accounts.13
Another
top
priority
was that
of
compiling
an
inventory
f
government
properties
so as to
make
possible
the
accurate
accounting
f
rent ncome
rom
roperties
eased to
foreign
irms.14
In
February
995,
he
government
lso
looked
nto
value-added ax
of
2
to 3%
to offset
planned
reduction
n
customs
uties,
which
t
the
time accounted for
30%
of
state
revenues.15
s
collection
proceduresmprove,ncreased evenueswill
help
ease
prevailing
budget
eficits
0.8%
n
1996).
4.
Privatization
f
State-owned
nterprises
Consensus
Prescription:
tate
enterprises
hould
be
privatized.
Situation
n
Cambodia:
Soft
Privatization
nd
Long-term
Leasing of Assets. In an interview n Juneof 1995,Cambodian
Minister f
ndustry,
nergy,
nd
MinesPou
Sothirak
aid:
We
[the
Royal
Cambodian
Government]
irmly
elieve he
private
ector an
much
betterkickstart
he
economic
development
ecause
foreign
investors
ave the
capital.
t's
quite
obvious
that he
tate
does
not
have
enough money. 16
othirak's
tatement s
consistent
with
Williamson's
haracterizationf
the
Consensus as
calling
for
the
privatization
f
state-owned
nterprises
n
the
belief
hat
private
industry
s
managed
more
fficiently
han
tate
nterprises,
ecause
of themoredirect
ncentives aced
by
a
manager
who
either
as a
12
United tates
Government,
ambodia
ountry
ommercial
uide
FY1996
(Washington,
.C.:
Government
rinting
ffice,
996).
All
$
are in
U.S.
dollars nlessnoted
therwise.
13
Formerly,
he
procedure
f
collecting
axes
nvolved
egotiations
etween
the
axpayer
nd
tax
collector,
ince
records f
transactions
ere
purposely
poorly ept.
Harish
Mehta,
Cambodia:
Jungle
conomy
merging
rom
he
Woods,
Business imes
Singapore),
arch
2,
1995.
15Bangkokost,Cambodia:KhmersyeStockMarket, eb.24,1995.
As interviewed
y Maja
Wallengren,
Interview
Cambodia
Plans
Industry
eforms,
euters
ews
ervice,
une
1,
1995.
Crossroads
1:2
81
-
8/12/2019 Cambodia and the Washington Consensus
10/25
directpersonalstake in theprofits f the enterprise r else is
accountable
o those
who
do. 17
The
plan
Cambodia
devised for
privatization,
ased on the
idea
of
soft
privatization,
was
unlike those
in
the
Eastern
European
countries,
here schemes
uch as vouchershave
been
employed.
Soft
rivatization
ostpones
he
elling
f
tate-owned
enterprises
or n
extended
eriod
f
time,
ay
25 to 30
years.
Using
this
cheme,
heCambodian
overnment
nitially
made
47
factories
available
to
foreign
nvestors,
with
11
more
following hortly
thereafter.18
scheme
f
onger
erm
easesof
up
to
70
years
or and
was provided for in November 1994. In some industries
privatization
roceeded
articularly
uickly,
s
in
the tate-owned
rubber
lantations
n Ratanakiri
rovince.
5.
nterest
ate
Policy
Consensus
Prescription:
he ultimate
bjective
s
to institute
market-determined
nterest
ates.
Experience
as
shown,however,
that
when
nvestor
onfidence
s
low,
market-determined
ates an
become o high s tothreatenhefinancialolvency fcommercial
enterprises
and,
ultimately,
the
government.
Under those
circumstances,
sensible
nterim
measure
s
to abolish
preferential
interest
ates
for
privileged
orrowers
n favor
of a
moderately
positive
eal
nterest
ate.
Situation
in Cambodia:
Due to
widespread
financial
indiscretions
n the
Central
ankof
Cambodia
s
well as to therise
of
a
dollar-based
omestic
conomy
nd
the bsence
f
tock,
ond,
and
treasury
ill
markets,
heCambodian
eil
was
closely egged
to
theU.S. dollar.Thiswas goodin at leastone sense:evenwhenthe
volume
of
circulating
iels
hanged
ramatically,
ommodity
rices
in
dollars
remained
he
same.
However,
the
situation
endered
Cambodian
monetary olicy
otally
neffective
s an
instrument
or
controlling
nflation,
nemployment,
nd
interest
ates.
With
help
from
he
MF,
the
government
oped
to
reissue
reasury
ills
by
the
end
of
1995.
According
o
the
MF,
these
bills
would
be used to
establish
market-determined
nterest
ate
for he
riel[,]
which s
17
Williamson,
What
Washington
eans
by
Policy
Reform/'
6.
18
As
interviewed
y
Wallengren,
Interview.
82
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8/12/2019 Cambodia and the Washington Consensus
11/25
Cambodia nd
the
Washington
onsensus
lackingbecause of thehighdollarizationn theeconomy nd the
very
imited
se of henational
urrency
n
the
anking ystem. 19
As
with he
regulation
f
ndustry
see
item
),
which
eemed
to
have
gone
awrythroughout
ostof
Latin
America,
he
ack of
interest
ate
egulations
n
Cambodia
rightened
oreign
nvestors.
6.
Deregulation
f ndustry
Consensus
Prescription:
Governments
should
abolish
regulations
that either
restrict
competition
or
impede
the
establishmentf new firms. ll regulationshouldbe justified y
such criteria
s
safety,
nvironmental
rotection,
nd
the
prudent
supervision
f
financial
nstitutions.
Situation
n
Cambodia:
Deregulation
imsto
reduce he
maze
of
regulatory
ailures hat tifle
nd
impair
he
private
ector. n
the
American
nd Mexican
contexts,
o name
but
two,
this
s
sound
strategy.
rucking
n
both ountries
as
heavily
egulated
or
many
years,
nd consumersncurred
millions f
dollars f
added
expense
due to the ack ofcompetitionnd themonopolizationfroutes. n
the
U.S.,
railroads oowere
regulated
ntil
heCarter
dministration
deregulated
oth
ndustries,
hereupon
onsumer
avings
ncreased
dramatically.
American
onsumershave
also
saved
millions of
dollars
from irline
deregulation.20
n
Cambodia,
however,
the
problem
s neither
verregulation
f
private
ndustry
or
regulatory
failure
ut thechaos of no
regulation
t all.
For
example,
lthough
the
ountry
ad 29
registered
anks s of
June
995,
he
icenses
eld
by
these
bankswere
highly
uspect,
aving
been
issued
during
n
unregulated
renzy
f
registration
n
thefinal
ays
of
the
Vietnam-
backedHun Sengovernmentn1993.21 any banks were nfact
merely
ronts or
unscrupulous
money-launderingperations
nd
consisted
f ittlemore than n
office,
desk,
and a
fax
machine.
Even more
disturbing
as the
well-known
act
hat
many
banks
laundered
money
nd
gave
loans
only
to
members f
their
wn
board
ofdirectors.
19
International
onetary
und,
IMF
Approves
econd
nnual
oan.
DennisW.Carlton
nd
Jeffrey
.
Perloff,
odern
ndustrial
rganization,
2nd d. NewYork: arperollins ollegeublishers,994),01-904.
Mark
Dodd,
Cambodian
anking
ndustry
aces
Reform/'
euter
Textline,
une
,
1995.
Crossroads 1:2
83
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8/12/2019 Cambodia and the Washington Consensus
12/25
Likeotherocialistndformerlyocialistconomies,or long
time
Cambodia
had
no commercial
anking
nfrastructurend
thus
no
need
for
banking
egulations.
With he
country's
eentry
nto
global
economic
ffairs,
owever,
he need for
regulations
rose
quickly.
Gregory
Root,
president
f Thomson
BankWatch, nc.,
reminded
he
developing
world that he creditworthinessf
any
national
economy
n
the
eyes
of
private
nvestors nd
lending
institutions
epends
n the xtent
o which
overnmentlays
role
in the
banking
system
hrough egulation
nd
controls. 22 he
National
Bank
ofCambodia
NBC)
therefore
egan nvestigating
he
nearly30 banks thatopened duringtheperiodof unregulated
licensing
n 1993
and
taking
action
against
those that
proved
illegitimate.
espite
these
measures,
owever,
nd at a timewhen
the
ASEAN
countries
ere
enjoying
rulympressive
redit
atings
(Salomon
Brothers'
ice President
eter lautcalled
Malaysia
one
of
the
developing
orld's
most table
emocracies
. .
and
one
ofthe
most
apidly
eveloping
conomies 23),
ank
icensing
n
Cambodia
remained
problemmatic
nd
crippling.24
hat little
regulatory
success
he
government
ad was not
n
banking
ut
n
gambling.
1994deal withtheAristn ompanyMalaysia)to build the$1.3
billion
loating aga
Casino,
or
xample,
ed
to a crackdown n 300
illegal
asinos
nd
gaming
ouses
n Phnom
enh.25
7.
Foreign
irect
nvestment
Consensus
Prescription:
arriers
mpeding
he stablishment
of
foreign
irms hould
be
abolished;
foreign
nd
domestic irms
should
be allowed
o
compete
n
equal
terms.
22
As
quoted
n Toni
Reinhold,
USA: Southeast
Asia Growth
rospects
Robust-
US
Analysts,
euter
extline,
eb.
24.
23
Reinhold
USA:
Southeast
sia Growth
rospects.
24
The
deputy
overnor
f
theNBC
put
the
matter
uccinctly
n
saying
hat
whether
r
not
bank
was
awarded
license
was
not
matter f
quantity
[of
lready
icensed
anks].
fAmerican
xpress
amehere
omorrow
e'd
be
quite
happy
to
give
t a
banking
icense.
But this s
a vicious
circle
American
xpress
s
not
going
o
comehere
f here
re 30 banks.
Qtd.
n
Dodd,
Cambodian
ankingndustry
acesReform.
25
Reuter
extline,
Cambodia:
Cambodian
Government
rders
GamblingCrackdown,
May
12,1995. t shouldbe notedthatwiththe end of the
crackdown,
unregulated
gambling
reappeared
in
many backalley
operations.
84
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13/25
Cambodia nd the
Washington
onsensus
SituationnCambodia:CDC a One-stop-shop.oreign irect
Investment
FDI),
a
major omponent
fthe
Washington
onsensus,
was
a
qualified
success
for
Cambodia,
where
investors
from
Singapore,
hailand,
Malaysia,
nd other
ASEAN
member
ountries
bought up
large
shares
n
the
country's
irline,
elephone,
nd
gambling
ndustries.
1994
nvestmentaw taxed
orporations
t a
rate
of
9%,
much
ower han
Malaysia's
30% rate.Other
nvestment
incentives
ncluded
ax
holidays
f
up
to
eightyears,
he
carrying
forward
f losses
for five
years,
full
importduty
exemptions,
allowances
or he
repatriation
f
profits
t no
charge, rovisions
or
theuse ofpublic andsfor p to 70years,ndthe bsence ltogether
of
export
axes,
withholding
axes n
dividends,
nd
nationalization
policies.26
ambodia's
investment
egulations
n
fact
followed
he
Consensus
quite
closely
n
the
sense that
foreign
nd
domestic
investors
were treated
qually
in all
respects
xcept
that
foreign
investors
ould
notown
and.
To increase
FDI
further,
he
government
created the
Cambodian
nvestment
oard
CIB),
a
one-stop gency
for
foreign
investors.
Falling
under the
auspices
of
the Council
for
the
DevelopmentfCambodia CDC) and chaired yFinance ecretary
ofState
Chanthol
un,
theCIB took
harge
f
very
arge
nvestment
projects,
uch
as Ariston's
roposed
five-star
asinooff he
coast of
Cambodia
at Sihanoukville.27
ecretary
un
reportedly
aid
that
investments
ere still
oming
n
strong
nd that
US$375
million f
FDI was
approved
during
he
first ive
months f 1995
28
While
actual
investment
was
invariably
ess than
that
pledged,
these
numbers
re still
mpressive.29
he
CDC
did,
alas,
create
perverse
incentives
or ome
unscrupulous
ndividuals
onnected
with
the
agency,
ut there
werealso
positive
eviews f the
convenient
ne-
stop-shop ature ftheCIB.The Cambodiaountryommercialuide
for 996 tated
hat
[w]hile
nvestors
ccasionally
eport
hat
hey
experience
elays
n
application
pprovals
nd
must
visit
dditional
ministries,
hey
lso
say
that
Cambodia
requires
omparatively
ess
26
Bangkok
ost,
Cambodia:
Khmers
ye
Stock
Market/'
27
The casino
had
yet
o see
groundbreaking
s of
Summer
996,
when
the
author
isited he ite.
28
Reuters ews
Service,
Cambodia
Economy
aid
Heading
n
the
Right
Direction,
ug.
21,
1995.
Indonesia,
long-time
ember fASEAN, ook n$2.4billion n
approved
FDI in
1994,
ompared
o
Cambodia's official
2
billion
the
figure
or
Cambodia ncludes nitial
nvestmentsn
theAristn
aga
Casino
project).
Crossroads 1:2
85
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8/12/2019 Cambodia and the Washington Consensus
14/25
Sophal
Ear
red tape thanother ountries n theregion. 30ambodiahoped
eventually
o
open
a stock
xchange
o direct
avings
oward
more
productive
nds.
Speaking
at
the
time,
Secretary
un
said the
Exchange
would
be
yet
nother eviceto
help
Cambodia
establish
financial
redibility,
ince
companies
would then
be
able
to invest
directly
in the
private
sector without
going
through
the
government.31
Nor
were
nvestors carce.
Reuters
uoted Singapore's
Trade
Development
oard s
saying
hat t would
stepup
its
promotional
activities
in Cambodia
in
1995
and
send several business
development missions there to follow up on business
opportunities
hat
had arisen
ince the
beginning
f
the
country's
readjustment
rocess.32
he
same
report peculated
hat he recent
liberalization
f
nvestment
egulations
nd
[the]
etting p
of the
Council
Development
f Cambodia
has
sped up
the
process
of
approving
nvestment
pplications
n the
country,
which for
Singapore
were
valued
at
$260
million.33
he BusinessTimes f
Singapore
oined
n this
ptimism,
xplaining
hat
IfMcCannEricksonaysCambodia s thegreatest lace
in the
world
to invest
in,
businessmen
will
understandably
ake
hat tatement
ith
pinch
f salt
because
McCann
is Cambodia's
official
dvertising
agency.
.
.
But when stiff-collared
ultinationals
nd
hard-nosed
usinessmen
ay
the ime
as come o
nvest
in
Cambodia,
other
investors
who
stayed
on the
sidelines
ave
a
tendency
o
perk
p
and
takenotice.
y
investing
n
Cambodia,
major
Asian
firms
ikeDBS
land,
Petronas,
nd
multinationals
ike
Coke,
Pepsi
and Shell
have senta signalthat here s money o be made in
Cambodia.
Morgan
tanley
trategist
arton
iggs
has
also
begun
saying
nice
things
about
Cambodia,
a
country
e feels
s
open
for usiness
rimarily
ecause
t
is
among
handful
f Asian
economies
o
emerge
s a
30
United
tates
Government,
ambodia
ountry
ommercial
uide.
31
Chanthol
un
as
quoted
n Business
ietNam,
Cambodia's
Biggest
asino
Yet,
ept.
995.
32Reuter extline,Singapore imsto BoostTradewithCambodia n 95/'
Jan.
9,
1995.
33
Reuter
extline,
Singapore
ims o Boost
rade.
86
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15/25
Cambodia nd the
Washington
onsensus
promising new area for investments. Analysts are
correct
when
they say
that a chunk
of the
world's
investment
resources worth
some US
$40
billion
this
year
is
likely
to
go
into
economies such as
China,
India,
Vietnam,
ndonesia and Cambodia
-
collectively
known
as the
new frontier or
nvestments.34
8.
PropertyRights
Consensus
Prescription:
The
legal system
should
provide
secure
property
ights
without xcessive cost
and should
make
those
rights
available to
all
sectors of the
economy,
including
that
currently perating
n an under
the table or
black
market
asis.
Situation
in
Cambodia: The
security
of
private
property
s
guaranteed
in
the Cambodian
Constitution s
follows:
Article60
Khmer citizens shall have the
right
o sell their
own
products.
The
obligation
to sell
products
to the
State,
or
the
temporary
se of
State
or propertiesshall be prohibitedunless authorized by law under
special
circumstances. 35 ince law
enforcement s
weak,
however,
the
legal system
has never become
fully
instated,
and the
only
security
or
privateproperty
was
(and
remains)
that
provided
by
the
barrel
of a
gun
or
by
what
influential
persons
one
knows.
No
limitations
were
placed
on
foreign
and
domestic
businesses
in
Cambodia,
except
for the
proviso
that
only
Cambodian
citizens or
domestic
businesses could
own
land. Laws
were
drafted
regarding
intellectual
property,
nd
the
government
ratified
bilateral
trade
agreement
with the
United
States to
establish
standards
for
intellectual roperty ights.36
9.
Exchange
Rates
Consensus
Prescription:
Countries need
a
unified
exchange
rate
(at
least for
trade
transactions),
et
at a level
to
induce
rapid
growth
in
non-traditional
exports
and
managed
so
as to
insure
continued
competitiveness.
34
Mehta, Cambodia: ungleconomymerging/'35
Williamson,
What
Washington
eans
by
Policy
Reform/'
5.
United tates
Government,
ambodia
ountry
ommercial
uide.
Crossroads 1:2
87
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8/12/2019 Cambodia and the Washington Consensus
16/25
Sophal
Ear
Situation
n Cambodia:
Floating
nd
Appreciating.
onetary
policy
in
Cambodia
remained oo
weak for the
government
o
effectively
manage
the
exchange
rate,
which in
1996
stood at
approximately
300
riel to
US$1.
During
1992 and
1993,
the
rate
dropped
to as low
as 5000 riel to
US$1,
but then
stabilized
at
between
2500
and 2600
riel to
US$1
in 1994.
According
o
the
Cambodia
ountry
ommercial
uide,
heNationalBankof
Cambodia
regulated
oreign
xchange y
way
of n auction
ystem,
hich
kept
the
pread
between
he fficialnd freemarket ates elow
2
percent
in 1993 nd ess than percentfter uly994 7Advisedbythe MF,
the
CBC
issued
treasury
ills o stabilize nterestates nd
circulated
higher
enomination
otes o as to de-dollarize
he
conomy
nd
gain
better
ontrol
of the
money supply.
The
impact
of
these
measures
were
relativelylight,
owever,
n
face of the
country's
political
rises.
Thus,
whereasrestrictive
onetary olicies
n
the
aftermath
f the
1980s
global
oil crisis
helped
Thailand
tabilize ts
economy
nd
devalue
hebaht
by
8.7%
n 1981 nd
by
another
4.8%
in
1984,
he ituation
n
Cambodia's
never eached he
point
where
monetaryevaluation aspossible.38
10.
Trade
iberalization
nd theMaintenance
fCredibility
Consensus
Prescription:
uantitative
rade estrictionshould
be
replaced
y
tariffs,
nd
tariffshouldbe
progressively
educed o
a
uniformly
ow
rate
f
pproximately
en
percenttwenty ercent
t
the
most).
There
s some
disagreement
bout how
rapidly
ariffs
should
be reduced
with
recommendations
f between3 and 10
years)
and
about
whether he
process
should be slowed
when
macroeconomiconditionsre adverse as during imes frecession
or
payment
eficits).
Concern
ver
credibility,
r
the ack
thereof,
evelops
only
indirectly
rom
Williamson's
onsensus,
ut
f
one considers
rade
liberalization
n realistic
erms,
s
Joshua
izenman
oes,
credibility
37
United
States
Government,
ambodia
ountry
ommercial
uide.
38
Data
for
hailand
re
from
anya
Sirivedhim,
Comment
to
Fiscal
nd
Monetary
Policy
in the GrowthProcess) in StrategiesorStructural
Adjustment:
he
Experience
f
Southeast
Asia,
Ungku
A.
Aziz,
ed.
(Washington,
.C.:
nternational
onetary
und,
990),
0.
88
Crossroads
1:2
-
8/12/2019 Cambodia and the Washington Consensus
17/25
Cambodia nd
the
Washington
onsensus
becomes n importantspectofanystructuraldjustmentolicy.39
With
espect
o nterest
ates,
Williamson
alks fthe
hronic
ackof
confidence
that
plagues
developing
countries and
leads
to
intolerably igh
and
unproductive)
atesof
nterest.
his
further
lessens
credibility
nd
discourages
nvestment,
s
happened
when
Mexican
dollar-indexed
esobonos
bonds)
peaked
at a
near
25%
interest
ate nd the
Central ank
was
forced o
devalue
the
peso.
Certainly,
f
a
government
ishes
to
minimize
uch
problems
s
excessive
nflationr lack of
consumer nd
investor
onfidence,
ts
credibility
ust e sound.
Situation
in
Cambodia:
Trade
liberalization
s a
natural
component
f the
Washington
onsensus and
was
practiced
by
many
of Cambodia's
ASEAN
neighbors
ia
export-led
rowth.
ut
the
experience
f ASEAN
suggests
hat
Cambodia's
best
strategy
may
have been to
practice
mport
ubstitution
o
fill
domestic
demandand
then,
nce
domestic
emand
was
filled,
move
toward
the
doption
f
xport-oriented
trategies
or
evelopment.
Cambodiahas a
mixed
ecord
or
ffortso
bolster
redibility.
Some failures re due simply o communicationversights. or
example,
heCambodian
overnment
as
expected
o
ift
tsban
on
rice
exports y
the end of
1995,40
et
prospective
xporters
were
given
no
signals,
ther han
National
Voiceof
Cambodia
broadcast
stating
hat removal
of the ban
would be in
line
with a
signed
understanding
etween he
Cambodia and
the
MF,
that
his
rade
policy
would
ever
become
permanent.
In
other
ways,
the
government
eserves
more
praise.
No
doubt
partly
o
increase
economic
redibility,
t et
bout
onstructing
highway
esigned
o
bisect he
ountry
astto
west,
hereby
inking
hnom
enh
with
he
capitals fVietnam, aos,andThailand.41lso,a $10million rant
39
Joshua
Aizenman,
Trade
Reforms,
redibility,
nd
Development,
Journal
fDevelopment
conomics,
9
1992):
63-187.
orbert
unke
xplains
that
credibility
apses
when
private
xpectations
bout
future
policies
deviate rom
he
government's
xplicit
r
mplicit
nnouncement.
orbert
Funke,
Timing
nd
Sequencing
f
Reforms:
ompeting
iews
nd
the
Role
of
Credibility/KYKLOS
6
1993):
43.
National
Voiceof
Cambodia,
Cambodia:
Government
o
Allow
Export
f
Rice
Beginning
st
December,
euters
extline,
ay
3,
1995.
Such a
project
s consistent ithAizenman's
uggestion
hatnvestments
by
the
Mexican
government
n
highways,
telecommunications,
nd
infrastructure
n
Tijuana
nd
along
he
Mexican
order
with
California
may
Crossroads
1:2
89
-
8/12/2019 Cambodia and the Washington Consensus
18/25
Sophal
Ear
fromGermanywas slated for he ayingof a telephoneand line
from heCambodian
apital
o
Thailand.42iven
he
ombination
f
Cambodia's
move toward
reater ublic
nvestmentnd
Thailand's
high
national ncome nd
commitmento tariff
eductions
to
less
than5%
by
the
year
2003,
hedeadlinefor
heASEAN
Free
Trade
Area
[AFTA]),
his mminant
onnection etween
he
wo
countries
made
Cambodia
more
ttractivehan ver
o outside
nvestors.
With
espect
o theUnited
tates nd
Cambodia,
he
Cambodia
Country
ommercial
uide
onfirmed hat
trade
between
the
two
countries
was low
during
1994,
totaling
nly
$1.8
million
of
exports oand$7.4million f mportsrom heU.S.43MostFavored
Nation
rade tatus
or ambodia
remained
ending,44
ut
the
Guide
did
anticipate
ncreased
mport ctivity
n
the
following
ectors:
)
architecture,onstruction,
nd
engineering
ervices;
)
agricultural
machinery
nd
equipment;
)
used cars and
automotive
arts
nd
services;
nd
4)
drugs
nd
pharmaceuticals.
efore
980,
Cambodia
was
an unwelcome
rading artner
n
theWestdue to
ts tatus s a
subject
ation
f he
Republic
fVietnam. he economic
uccesses f
ASEAN
countries
ike
Thailand,
ingapore,
nd
Malaysia,
however,
whopracticedxport-ledrowth evelopmenttrategies,rovided
convincing
recedents
or
ossibilities
n
Cambodia should
similar
policies
be
implemented
here.
ingapore,
which ike
Cambodia s
very
small
relativeto
its
neighbors
nd
must look to external
markets
o achieve
ven minimum conomies
f
scale,
provided
n
especially
itting
odel f
development.45
Conclusion:
General
Assessment of
Washington
Consensus
Reforms
n
Cambodia
Critics ave arguedthat hestructuraldjustment olicies
called
for
y
the
Washington
onsensus
re too
harsh
n
developing
generate
ositive
xternalities.
izenman,
Trade
eforms,
redibility,
nd
Development/'
9.
42
Renters
ews
ervice,
German
id
for
ambodia-Thailand
hone
ine,
Dec.
8,
1995.
43
United States
Government,
ambodia
ountry
ommercial
uide.
44
The
U.S.
granted
ambodia
MFN status
n ate1996.
45
For a detailed
discussion
of
Singapore'sdevelopmenthistory,
ee
BernardoM.
Villegas,
Economics
djustment,inancing,
ndGrowth, n
Strategies
or
tructural
djustment:
he
Experiencef
outheast
sia,
Ungku
A.
Aziz,
ed.
Washington:
nternational
onetary
und,
990),
7.
90
Crossroads
1:2
-
8/12/2019 Cambodia and the Washington Consensus
19/25
Cambodia
nd
the
Washington
onsensus
countries nd thatWashingtontselffrequently iolates them.
Williamson,
or
nstance,
writes that
My
term
s a
misnomer
because
the
Washington
onsensus' s
being
mplemented
n
every
capital
of the
hemisphere
bar
Washington. 46
evertheless,
Cambodia's
effortso revitalizets
economy
rogressed
emarkably
well
during
he 1993-95
eriod.
n
1993,
he
MF
approved
a
$41
million
nhanced tructural
djustment
acility
oan in
support
f
the
Government's
995-96macroeconomicnd
structural
djustment
program. 47
year
ater,
n
May,
1994,
he
MF
affirmedhat
[t]he
anchor
for
financial
tabilityduring
the
period
of
the ESAF-
supported
program
will continueto be
tight
financial
policies
designed
o avoid
monetary
inancing
fthe
budget.
As a
result,
he
growth
n
liquidity
will be
curtailed
nd
inflation
eld
in
check,
which
will
help
support
ncreased
tability
f the
exchange
ate. 48
The
national
udget
held
a
deficit f
only
bout
6% ofGDP in
1995,
and
inflationell rom
high
of
112%
n
1992 o under
10%
n
1995-
96.
Although
herevitalization
rocess
was still n
ts
early
tages
n
1996,
he
MF that
yearfavorablynalyzed
he
country's
uccess
n
instituting
range
f structural
eforms,
ncluding
he
privatization
of state-ownedenterprisesSOEs), the creationof a body of
regulatory
tatutes,
nd the
downsizing
f the
military
nd
civil
service
ectors.
able
2,
which rawson
data
reported y
the
World
Bank,
hows
an
unmistakablerend oward
undamental
conomic
stability
n
a number f areas that
ccording
o
Consensus
wisdom
arecrucial
o a nation's conomic
well-being.
Of
course,
oth he
MF
and the
WorldBank
rely
pon
official
government
tatistics,
he
accuracy
of which
must
be
seriously
questioned.49
till,
that
fact that all
economic
indicators
were
pointing
n the ame direction
increased eal
GDP
growth
ate
nd
decreased nflationince 1994 was encouraging.n addition, he
IMF and the
World Bank
reported
that
from 1994
to
1995
government
pending
decreased as a
percentage
f
GDP
while
46
Williamson,
Democracy
nd the
Washington
onsensus/
329.
International
onetary
und,
IMF
Approves
econdAnnual
oan.
48
PRNewswire,
USA:
IMF
Approves
SAF
Credit
or
Cambodia,
May
6,
1995.
Other ourcesmake omewhat
ifferent
rojections
rom
hose
given
n
Table2. The Cambodiaountryommercialuide utsCambodia'srealGDP
growth
n1994 t 5.2%.The ame
guide
placed
he nflationate t 14.8% or
1994 and 13.8% for 1995.
United
States
Government,
ambodia
ountry
Commercial uide.
Crossroads
1:2
91
-
8/12/2019 Cambodia and the Washington Consensus
20/25
Sophal
Ear
foreign exchange revenues increased from$115 million to $146
million.
Exchange
volatility
was
especially
pronounced
during
UNTAC,
but
throughout
996 the riel
remained
below
the
1994
high
mark of
2,585
riel to the
dollar a
small but
definite
ign
of
economic
stability.
Although
otherASEAN
countries ared
more or
less
as well
as
Cambodia
with
respect
to
GDP
growth
rates
during
these
years
(Table
3),
Cambodia's structural
djustment
rose
from
distinctly
different ontext.
As
already
stated,
the
problem
with
the
economy
was
neither
an excess of
regulation
nor
government
failure but
ratherthe absence of effective
egulation
due to decades of war,
revolution,
nd
foreign ccupation.
Cambodia's
civil
service as
well
as
much of
the
military
was
throughout
his
period
controlled
y
the
country's
formerMarxistrulersunder the
guise
of
the
re-christened
Cambodian
People's
Party
(CPP),
and
this
hold-over
from
the
socialist
past
embodied little that was
useful to
Cambodia's
democratically
elected
government
as it tried
to effect
national
recovery.
ome
government
actions
incerely
ttempted
fiscal
and
monetary
restraint,
ut
they
did so
largely
n
vain.
The
continuing
low-level war along the Thai border againstMaoist KhmerRouge
guerrillas
who
controlledCambodia from1975 to
1978 and
turned
the
economy
into an
agrarian
collective)
was a
significant
actor
n
this
failure.
Still,
the
analysis
shows that the
Consensus
policies
were
clearly ustified
n all
areas
except deregulation,
nterest
ates,
and
exchange
rates,
where too little
development
had
yet
taken
place
to
warrant
nvesting
valuable
human, financial,
nd material
resources
in reform
fforts.
s Cambodia
anticipated
admission into
ASEAN,
it
planned
to
unilaterally
educe its tariffs o less than
5% within a
few years of AFTA's establishment, ecure in the belief that the
economic
integrationresulting
from the reductions would
render
sizable
financial
gains
well into the next
century
and this
despite
the
fact
that customs
duties
comprised
a
major
and
increasing
portion
of the
Royal
Cambodian
Government's revenues
(30%
in
1995).50
There remained
difficulties,
f course.
For one
thing,
lthough
ASEAN
planned
to remove
non-tariff rade
barriers,
including
customs
regulations,
specifications,
and
subsidies,
beginning
January
1,
1996,
by
the end
of that
year
most such
barriers
50
Bangkok
ost,
Cambodia: hmers
ye
StockMarket.
92
Crossroads
1:2
-
8/12/2019 Cambodia and the Washington Consensus
21/25
Cambodia
nd the
Washington
onsensus
Table 2:
Key
Macroeconomic
ndicators
1991
1992
1993
1994
1995
1996
Real GDP
Growth 7.6
7.0
4.1
4.0
7.6
6.5
(%
change)
Consumer
rice ndex
150.4
112.5
41.0
17.9
3.5
9.0
(final
uarter
asis,
(%
change)
Gross fficialeserves - 30 71 100 182 234
(months
f
mport
f
goods
nd
services,
(in
millions f
US$)
Current
udget
eficit
-3.0
-3.3
-1.5
-1.4
-0.6
-0.8
(cash
basis,
xcl.
grant)
(%ofGDP)
Source:World
Bank,
Cambodia:
rogress
n
Recovery
nd
Reform
Washington,
D.C.: World
Bank,
astAsia and
Pacific
egion,
ountry
epartment
,
997),
4.
Table 3: GDP Growth
ates,
Cambodia nd
her
ASEAN
neighbors
1989 1990
1991
1992
1993
1994
1995
1996
(Percentage
hange)
Cambodia 3.5
1.2
7.6 7.0
4.1
4.0
7.6
6.5
Indonesia
9.1
9.0
8.9
7.2
7.3 7.5
8.2
7.8
Malaysia
9.2 9.6 8.6 7.8 8.3 9.2 9.5 8.2
Philippines
6.2
3.0
-0.6
0.3 2.1
4.4
4.8
5.5
Thailand
12.2
11.6
8.1
8.2
8.5
8.9
8.7
6.4
Vietnam 7.8
4.9
6.0
8.6 8.1
8.8
9.5
9.5
Singapore
9.6 9.0
7.3 6.2
10.4 10.1
8.8
7.0
Source: nternational
Monetary
Fund,
World
conomic
utlook:
Survey
y
the
Staff f
he nternational
Monetary
und
October
997,
World
Economic
and
FinancialurveysWashington,.C.: Internationalonetary und, 997),
148,155.
Crossroads
1:2
93
-
8/12/2019 Cambodia and the Washington Consensus
22/25
Sophal
Ear
remained.51nfact,onsideringhatASEANhaspromotedree rade
continuously
ince
1967,
t
had achieved
ery
ittle
n
that
rea.
One
anonymous
nternationalrade
conomist as
quoted
s
saying
hat
ASEAN
has been aroundfor
long
time,
nd
they
eally
haven't
done
anything. 52
utthis
ritique
eems
rather oo
harsh,
or
he
organization
id
serve,
nd continues o
serve,
useful
unctionn
economic
development,
nd
Cambodia's
inclusion in
ASEAN
promised
o
greately
trengthen
oththe
nation's
conomy
nd
its
credibility
s a
regional
rading artner.
ow
that
membership
as
been
indefinitelyostponed, erhaps
the
hoped
for
benefitswill
follow fthegovernmentraspstheopportunityow tomake a
concerted
econd
ffortt
nstituting ashington
onsensus eform
before
he
1998 lections.
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oshua
1992
Trade
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nd
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ost
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ye
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ay
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