Washington: International Monetary Fund, 2014. v, 154 pp. (Tables, figures.) US$25.00, paper. ISBN 978-1-47556-078-7.
This slim volume is a concise and quite accessible public document, produced by a team of IMF researchers led by Unteroberdoerster, deputy director for Asia Pacific at the IMF in Washington, who has specialized in linkages between financial systems and overall macroeconomic performance in developing economies. He was IMF Mission Chief for Cambodia during the preparation of the paper. Several analysts, most of them from South and Southeast Asia, have set out to justify the optimistic title. Given the fractious history of relations between Cambodia and the IMF through the early 2000s, that is a positive development.
The paper follows a standard format: it is divided into two sections, the first largely descriptive, the second offering prescriptive models, synthesized over several years based on IMF experience in a number of developing countries. The objective is to promote continuing and effective fiscal and monetary policies and practices. While correctly noting that Cambodia has enjoyed a decade of extraordinary economic growth—averaging close to nine percent a year—the study still raises a number of questions with regard to weak infrastructure and poor fiscal management, e.g., a failure to establish an adequate taxation system, and overdependence on a dollarized economy. As befits an official document produced by an intergovernmental body, it stops short of the kind of objective in-depth criticism that academic researchers have levelled at the country, e.g., Sophal Ear’s excellent Aid Dependence in Cambodia: How Foreign Assistance Undermines Democracy.
The prescriptive formulae suggested in order for Cambodia to pursue growth in a more stable and systematic way seem, therefore, to be somewhat theoretical. The 21 years since the new constitution was proclaimed in 1993 have assuredly seen positive growth in indigenous capacity, especially in business and financial services. The public service, however, still lacks professional skills and is seriously undercompensated. Education and health services are scarce in the countryside, where some 70 percent of Cambodians still work.
In order to deal with shortcomings in Cambodia’s economic governance, the authors suggest a number of measures for “creating and safeguarding fiscal space” (87). These include managing public debt more effectively and strengthening financial management, with the objective of “anchoring” macroeconomic stability. Near- and medium-term fiscal challenges are identified, crucially highlighting Cambodia’s failure to improve the collection of direct tax revenues and perhaps overly generous tax incentives to investors. De-dollarization is considered a priority for the medium term to shield Cambodia during periods of international economic instability. Specific recommendations to the Royal Government are prioritized into “achievable and well-sequenced measures” (104).
As unexceptionable as they are, the recommendations of the study underline just how far Cambodia still has to go to join the “tigers” of Southeast Asia. The most important are summarized in the opening chapter, and include (1) creating and safeguarding fiscal space, including letting the Cambodian riel play a greater part in the economy; (2) addressing financial stability challenges; and (3) modernizing the role of government by, inter alia, strengthening coordination among ministries and agencies. One might also add getting a stronger grip on anti-corruption measures countrywide, e.g., putting an end to massive deforestation. The question one must ask is just how capable is the Royal Government to implement any of the IMF’s proposals, even if it should accept them in their entirety.
And there remain other nagging issues: to begin with, in keeping with the requirement for international organizations to maintain a dispassionate face, the contributors have been reluctant to comment at any length on Cambodia’s political and social governance. Since the paper was prepared prior to the controversial National Assembly elections of 2013, it could obviously not take into account that, for the first time in 20 years, there is emerging, perhaps faster than one might have guessed, a genuine popular appetite for political change. In a country with Cambodia’s tragic history, in which the ruling party has been entrenched for 30 years, this has the potential to be extremely destabilizing, both in political and economic terms. After a full year of bitter confrontations, punctuated by an estimated 500 demonstrations, occasional violence and a half-dozen deaths, the recent agreement by the opposition party finally to take their seats in parliament is welcome, but is by no means the end of the story. The National Assembly has never been a major player in setting economic or social policy in Cambodia, but a large and feisty opposition may try to change that in due course, especially if Hun Sen should keep his promise to make policy making more “transparent.” No IMF paper is likely to affect the political process to any discernable degree; we can only wait and see how this quite practical, but, again, theoretical set of recommendations will play over time in the formation of policy by the current Royal Cambodian Government.
D. Gordon Longmuir
The University of British Columbia, Vancouver, Canada
pp. 735-737