Trade, aid fail Cambodia's poor

The future is bleak for Cambodians and Burmese when corruption is rife.

BURMA and Cambodia occupy significant geopolitical positions in Asia. The West has an interest in controlling this area as a buffer against China's growing power. As a pawn in global politics, Cambodia is being controlled through international aid at the expense of its people.

Burma is possibly heading in the same direction. As Burma bows to pressure from the West to allow aid into the country after cyclone Nargis, critics argue the aid will come tied to economic liberalisation.

Cambodia and Burma share striking similarities: both are extremely poor and are governed by corrupt elites. But Cambodia is about 10 years ahead in accepting Western aid. Its present does not augur well for Burma's future.

The outcomes of Cambodia's development have been mixed: extremely beneficial for economic growth, the ruling elite and crony capitalism, and less advantageous for the poor. The development has been centred on trade liberalisation, with open markets for the country's timber and textile exports. The World Bank has reported that local corruption has impeded the country's development, particularly poverty reduction, but the real difficulty may be the porous state of Cambodia's economy.

Corruption is common in Cambodia. Transparency International's Corruption Perceptions Index ranks Cambodia at 162 out of 179 countries (Burma ranks at 179, the worst country along with Somalia). Some claim that much aid from the international community has gone to private pockets.

Since the Paris peace agreement of 1991, Cambodia has been subjected to the scrutiny of international donors, including the World Bank, the International Monetary Fund and the Asian Development Bank. Aid constituted more than 10% of gross national income in 2004, far more than the low-income country average of 2.8%. In 2006, the amount of aid reached $US595 million. Cambodia is also a fast-growing economy, with annual economic growth at nearly 11% in 2006. But poverty has fallen at a rate of only 1% a year. Two key features of Cambodia's National Strategy Development Plan 2006-10, funded by the World Bank, are trade liberalisation and the creation of export-processing zones.

Development projects have done little to limit corruption in Cambodia. The World Bank's Forest Concession Management and Control Pilot Project (FCMCPP) began in 2000, funded by a $US5 million Learning and Innovation Loan. In June last year, Global Witness published Cambodia's Family Trees, which detailed the intimate connections between the owners of logging companies and the Cambodian Government. Owners of the largest logging companies — Kingwood Industry, Everbright CIG Wood and Colexim Enterprise — are friends and relatives of Prime Minister Hun Sen. They have been repeatedly involved with extensive logging outside of their plantation areas, terrorising locals and exempted from paying royalties and taxes.

In 2002, under pressure from international donors, the Cambodian Government imposed a moratorium on harvesting in logging concessions, after the companies failed to submit forest management plans. The moratorium ended in December 2004, on the condition that logging was supervised to ensure no fresh logs entered the supply chain. But no measures were taken to prevent further illegal logging. The FCMCPP has grievously failed Cambodia.

International donors are quick to point to political corruption in Cambodia to explain its lack of progress in decreasing poverty, but such moral judgements ring rather hollow when $US600 million in Asian Development Bank funds are invested in offshore private equity funds, many domiciled in tax havens such as the Cayman Islands.

National institutions are required to divert money back into the country. Development policies focused on economic liberalisation will not foster them. Without the political will to create these institutions, any benefit will continue to be siphoned off into the hands of international business and corrupt local political and business elites. The future for the people of Cambodia and Burma is bleak without policies that focus on their wellbeing.

Joanne Knight worked for seven years as a consumer credit and housing adviser for the Brotherhood of St Laurence and the Victorian Government.