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Class : Year-2, Semester 2


Department : Economic Science
Subject : English
Group : E2A41
English Assignment: 
 

Taught by lecturer: Chhour Laymeng


Compiled by:
-Sak Khmao
-Kong Sotheara
Royal University of Law and Economics    English Assignment
   
 

Preface
At the time of the very beginning of the financial crisis in the US, some economists claimed that
Cambodia would not be much affected by the world financial crisis because Cambodian economy has not
had specific relations with the relations with the regional and international economy. On the contrary, in
Cambodia now, homes have been lost; jobs shed; businesses shut and our health care is too costly because
of the financial crisis in the US and no effective measures. That’s why we the year-2 students studying
Economic Science in Royal University of Law and Economics have made a small group to research and
address the crisis and solution to it in order to make a book entitled “Cambodia’s Economic Crisis and the
Ways to Tackle It” so as to know what is going on and to learn about how the world is changing.

We hope that this book will be an important document for the students next generation. We
believe that this book may contain some mistakes because we do not have enough experience to consider
perfectly. We are happy to be criticized by all readers in order to have better book next time.

Phnom Penh, 28/05/2009

Sak Khmao and Kong Sotheara

 
Year-2 Student, Semester 2    Kong Sotheara & Sak Khmao
 
Royal University of Law and Economics    English Assignment
   
 

Content
I/ Introduction ............................................................................................................................................... 1

II/ Cambodia’s Economic Crisis ................................................................................................................... 1

1-Agriculture Sector................................................................................................................................ 1

2-Textile and Construction Sector .......................................................................................................... 1

3-Tourism Sector .................................................................................................................................... 2

III/ How to Tackle Cambodia’s Economic Crisis ......................................................................................... 2

1-Solution to Agriculture Sector Problem .............................................................................................. 2

2-Keeping Garment Sector in Good Health ............................................................................................ 3

3-Creating New Jobs ............................................................................................................................... 3

IV/ Conclution .............................................................................................................................................. 3

References ..................................................................................................................................................... 4

 
Year-2 Student, Semester 2    Kong Sotheara & Sak Khmao
 
Royal University of Law and Economics    English Assignment
   
 
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 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
 
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Royal University of Law and Economics    English Assignment
   
 
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 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

 
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Royal University of Law and Economics    English Assignment
   
 
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 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.
 

 
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Royal University of Law and Economics    English Assignment
   
 

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]

 
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