What happened in Cambodia?

By Abe De Ramos
Far Eastern Economic Review (Hong Kong)

As the extent of the U.S.-led financial crisis unfolds globally, developing Southeast Asian countries are finding themselves in the position of suffering the collateral damage. While not directly hit by the liquidity crunch like their larger and wealthier neighbors, they’re also not immune to the slowdown, being part of the chain that supplies goods to consumers in the West who are now crimping on their spending. Indeed, the crisis highlights how developing economies in the Association of Southeast Asian Nations (Asean) are being reduced to a fringe role in the global economic landscape, and how they’re facing the hard truth that they won’t be able to regain the “tiger economy” status they once held without building a stronger domestic base.

On the surface, it seems as though the region will ride out the crisis relatively well. After all, the first economies to go into recession are those whose financial and industrial sectors are directly linked to the fortunes of the West. The liquidity crunch in Wall Street has weakened the financial hubs of Hong Kong and Singapore, while falling consumer confidence is hurting many Japanese companies reliant on exports to the United States and Europe. Projected declines in GDP growth rates for developing Asean nations this year also seem to be less severe than in China, the factory of the world, as well as Taiwan, Korea and India, which generate substantial revenues from exports of goods, services and technological expertise.

But the region is far from well and good. Being in the middle of the supply chain East Asia has created in the last 20 years—in which a computer is designed in Japan or Taiwan, its components made in Malaysia, Thailand or Indonesia, then assembled in China—developing Asean nations are seeing a mild slowdown now only because of the lag effect. The question is how quickly and how well it can recover when the full impact of the global slump finally hits home.

In the near term, countries like the Philippines and Vietnam have little leeway to boost domestic economic activity in order to offset falling external demand. With the crisis proving deeper than expected, Asian governments may need to provide stimulus packages and pursue easier monetary policies. However, most are already overstretched, with negative fiscal balances unsupported by a narrow tax base, and made worse by fiscal leakage through corruption. Those with the borrowing capacity such as Thailand and Malaysia can raise funds, but for much higher costs given the lack of liquidity and greater perception of risk.

What differentiates developing Asean nations from the rest of the region is a weak domestic economy. Private consumption expenditure as a component of GDP has barely budged since at least 1990. This would not necessarily be a negative factor if it were overshadowed by growth in state expenditure and capital formation through investments, as has happened in China and India. However, these indicators have also lagged across Southeast Asia, with the exception of Vietnam, a newcomer to liberalization.

It’s true that in the larger economies of Malaysia, Thailand and the Philippines, exports have grown and made significant contributions to their GDP growth over the period. It’s also true that in the Philippines, Cambodia, Indonesia and Vietnam, remittances from migrant workers have become an important revenue source and driver of domestic demand. But these trends only emphasize the troubling reality that developing Asean nations are struggling to create their own wealth within their respective boundaries.

In the long term, no country in the region is yet competitive enough to generate robust, sustainable growth without the spoils from their industrial neighbors and the West. This is a factor of their failure to innovate and create globally competitive domestic industries. While China has foreign investments and exports to thank for its growth, it used its newfound wealth to invest in knowledge and manufacturing technology, creating not just a virtuous cycle of job creation and more investments, but also national champions—companies that are taking on global giants. In India, it’s not the state but an enterprising private sector—encouraged by favorable demographics and an economy that’s opening up—that’s giving birth to the same virtuous cycle and homegrown multinationals. How many innovators and global companies from Southeast Asia can you name?

The problem is it may already be too late for developing Asean countries to attract the kind of foreign investments that will help them benefit from technology transfer. Multinationals that have the technology are putting it to use in China, investing only in the region to diversify geographic risk. Private investments, meanwhile, are constrained by capital limitations and a general lack of entrepreneurial spirit: companies are not borrowing, and banks are not lending. As a percentage of GDP, domestic credit from the banking sector in developing Asean nations, apart from Vietnam and Cambodia, is lower than 1995 levels. Domestic capital markets, an alternative funding source, are shallow: stock markets are small, bond markets even more so.

This situation isn’t likely to change soon. The Asian crisis of 1997 has forced both banks and investors to be conservative in lending and borrowing, and governments’ inclination to build up their foreign reserves has no doubt misallocated capital away from job-creating and industry-building initiatives. In other words, as developing Asean nations rebuilt themselves from their own crisis, they lost sight of the long term, in the process losing competitiveness to aggressive neighbors. This current crisis, as it washes on their shores, should challenge the region to reassess its vision for the future, perhaps towards a domestic economy able to dictate its own fate.

Abe de Ramos, an Associate Fellow of the Asia Society, is a Hong Kong-based financial editor and a former policy analyst at the CFA Institute’s Center for Financial Market Integrity. Read more!

Cambodian casinos out of luck as revenues take a hit

Written by Kay Kimsong

Local casino operators report fewer gamblers on both the Thai and Vietnamese borders, with across-the-board cost cuts planned for this year.

THE global economic crisis has hit Cambodia's gaming industry, with casinos on the Vietnamese and Thai borders announcing hefty cost cuts.

The local downturn comes amidst a global gambling slowdown affecting casinos worldwide - Macau's gaming industry posted a US$300 million drop in revenues in the last three months of 2008, while US gambling hotspot Nevada reported a 65 percent plunge in takings last year.

Cambodia is particularly susceptible: With about 30 casinos, it has more gambling venues than any country in Southeast Asia. Traffic at the Thai border is down sharply with casinos taking a triple hit from the global economic crisis, recent border tensions and a falling Thai baht.

At the Kings Crown Casino and Hotel - with locations in Cambodia on both the Thai and Vietnamese borders - the number of visitors has dropped sharply, leading to losses of $620,000 in the last quarter of 2008, the company said.

The company says it is cutting the work week for its more than 2,000 employees, a move designed to trim costs, said Cambodian Peoples' Party Senator and casino owner Phu Kok An.

He told the Post that his company was negotiating with employees to reduce their working month from 30 to 15 days.

"We are not laying off workers but they will get 15 days' salary. If your salary is $200 per month, you will get $100."

The company currently spends $300,000 a month on salaries, he added.

The casino has outlets in Poipet on the Thai border and Chrey Thom district, Kandal province, close to Vietnam.

"We are not earning enough income to spend on staffing, water and electricity. When people earn less money, they gamble less," Phu Kok An said.

He said that the number of gamblers fell sharply but that the business would remain open.


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we are not earning enough income to spend on staffing, water and electricity.

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"We earned some profit in early 2008 but made losses over three months [in September, November and December 2008], we employ a lot of workers - we are overstaffed - and we're overspending," he said. But Vann Sitha, vice president of New World Casino-Hotel in Bavet on the Vietnam border, said his company does not plan to lay off any of its 700 employees or reduce working hours. Although some staff had resigned, it would continue to recruit, he added.

"Our casino management has never laid off staff, but some like to move from job to job seeking a better salary offer," he said, adding his business had been less affected by recent events given its location on the Vietnamese border as opposed to the troubled Thai side.

Phat Bun Hour, assistant to Koh Kong Casino owner Ly Yong Phat, also a CPP Senator, declined to comment.

Chea Peng Chheang, secretary of state at the Ministry of Finance, is calculating the casino industry's total revenue for 2008, which he said will be completed this week. Revenues are expected to be lower than the $10 million generated in 2007. Read more!

Guarding Cambodia's giant turtles

Written by Brendan Brady
Sambor district, kratie

Wildlife officials use cash to entice Mekong residents in northeastern Cambodia to protect nesting grounds of Cantor's soft-shell turtles, believed extinct just two years ago.

LAST year, Mekong resident Su Pie sold the delicate eggs he unearthed to Chinese miners working in the area, banking around US$20. This year, he stands to make exponentially more by not laying a hand on any nests he discovers, as well as ensuring no one else does either.

The 59-year-old fisherman and farmer, whose home lies along the Mekong in a district called Sambor, about an hour from the city of Kratie, stands along the banks of the river with his wife and three children as he explains to Conservation International (CI) officials his mixed success this year in contributing to their project.

The good news was he found two nests. The bad news was he ate the eggs from one after he suspected it would be discovered by other local fishermen, given its visible location.

The conservation officials cringe as they hear this. They can count the number of meals that could push Cambodia's population of the endangered Cantor's giant soft-shell turtle to extinction. But the program employing locals to protect nests is in its first year, and they expected it to develop with hitches.

Cantor's can grow up to two metres in length and reach weights of more than 50 kilograms. The turtle's flat, soft shell is covered with rubbery skin and has been valued for use in post-natal traditional Khmer cures.

In 2007, wildlife experts found the super-sized freshwater turtle species, which was previously believed to have vanished from Cambodia. Until the discovery in May that year of an 11-kilogram female by a scientist working for the government and the global conservation group WWF - including her nesting grounds and hatchlings - the Cantor's turtle was believed by officials to exist only in very small numbers in Laos, and many feared the animal's extinction was imminent.

Since then, the wildlife groups planned to employ local villagers to protect the species' breeding grounds.

"I like helping protect them, but if I didn't get money, I would always take half of them and leave the other half," the fisherman said. "Other fishermen come around looking for eggs, also, so it can be difficult to do what I'm asked."

After verifying the location of the preserved nest, the conservation officials pay Su Pie $30 on the spot. The fisherman receives a net, which he is instructed to place over the nest to protect it from natural predators, such as monitor lizards, so the baby turtles can be caught and studied before they are released by the CI team, which will base itself in the area as the hatching period nears.

"Thirty dollars for finding the nest, plus $2 a day from the time we see the nest until it hatches, plus $2 per hatched egg," explained the program's head monitor, Kim Chamnan. Nests typically hold 20 to 50 eggs, which take more than 60 days to hatch.

"He can make a lot more by cooperating with us. He'll get more than $200 for this nest if they hatch," said Kim Chamnan.

Last year, CI officials were able to preserve four nests and held onto twelve hatchlings for a "Head-Start" program in which they allow them to mature in captivity before they are released at a size large enough to overwhelm any would-be natural predators.

A fragile youth
Sightings of adult Cantor's are rare, as they hug the muddy river bottom. Sonar is required to track the turtles, given the depths of as much as 40 metres they tend to inhabit.

"It buries itself in the sand and spends 95 percent of its time completely hidden out of sight with just its eyes and nose showing," said David Emmett, a wildlife biologist for CI based in Cambodia. "It feeds from this position, striking at fish and crabs."

But the creatures are especially vulnerable at birth as the mother, while armed with a bone-crunching bite, does not hang around the nest.

Kea Ratha, a graduate student at the Royal University of Phnom Penh whose research has centred on the feeding behaviour of hatchling Cantor's, says their high-mortality rate during pre-natal stages and as newborns places a premium on efforts to protect their nesting sites.

But "besides the Conservation International project, nothing is being done to protect this species, which faces many threats", she said.

Emmett says officials have not yet been able to survey the Cantor's population in Cambodia, but estimated it was on the decline, with only around a hundred breeding adults.

"Adults are being caught and sold, and nests are plundered by fisherman for eggs. The population is surely declining, but because they are capable of laying so many eggs - up to 50 in one nest - the population could recover very fast if the nests are protected."

Locals search for nests by looking for tracks from the mother. They poke a stick into the sand, and if it gives easily, it is a sign eggs may lie below.

Cambodian palettes are not especially drawn to turtle eggs, says Kim Chamnan, unlike the Chinese, for whom turtle holds a potent combined culinary and medicinal allure.

At rural markets in the area, an egg goes for around 1,500 riels (US$0.37 cents), so a nest's bounty is not likely to land much more than ten dollars. But that cash is still very attractive to local fishermen who are not aware of the conservation officials' much larger offer.

Trawling along the river in a thin, wooden vessel, the two-man Conservation International team approaches residents they see on or along the river, giving them a graphic laminated handout with a picture of a turtle nesting site and a number to call should they spot one. The hefty cash rewards get the attention of local residents, but it will take time for the campaign to spread awareness. In the meantime, officials will continue to find dug-up nests, like the handful spotted along the river's banks during the day's patrol.

Money talks
Like most of the riverine inhabitants, 31-year-old Ken Vy fishes and farms for a living. But he has stood out to Conservation International officials for his ability to sniff out nests.

Last year, he was informed of the project towards the end of the hatching season, so he got a late start, spotting one nest for which he was rewarded with a total of $200.

"I had already eaten or sold the eggs from two nests. I just came here to walk my cattle, and while I was here, I would look for nests," he said.

But with hundreds of dollars hanging in the balance, he now dedicates part of his time to searching for nests.

"Last night, I came at four in the morning with a headlamp to go searching. If I waited until later in the morning, I was afraid other fisherman would see me and search here, too."

He has staked out two nests on a small sand bank near his home. "I come here a few times every day to protect the nests, to make sure no one else is stealing the eggs."

In the presence of officials from the capital soliciting his help, Ken Vy becomes animated as he talks about his laborious routine to keep would-be egg snatchers at bay.

But he was clear it was the handsome cash reward that motivated him to rise in the dark hours of morning to hunt for nests he can protect - and the pragmatism of the wildlife team in understanding this could be the thrust behind the program's success if the endangered species is to be protected. Read more!

Cambodian mobile phone operators to expand services

PHNOM PENH, Despite the economic downturn and concerns over corporate investment, Cambodian mobile phone operators say their expansion plans are on schedule for 2009 as the industry continues to grow, national media reported Tuesday.

"Our expansion plans are on track," Adam Cabot, CEO of Star-Cell, was quoted by the Phnom Penh Post as saying.

The company has announced it was going to expand services to all of Cambodia's provinces for its 100,000 subscribers.

"Yes, (the crisis) will have an effect, but it is hard to say how much. We are still maintaining our position and doing well," he said.

Cambodia's mobile market has grown rapidly in the past five years, and companies are scrambling to gain a foothold as phones and the internet gain popularity.

Domestic mobile-phone usage surged 49 percent in 2007 but the national penetration rate remains a low 17 percent.

In contrast, neighboring Vietnam saw 75 percent growth with a 33 percent penetration rate in the same year, according to Budde Comm, an independent telecoms analyst.

Cambodia's low mobile penetration rate is a draw for many companies such as Vietnam-based mobile operator Viettel, which is launching a major drive to tap Cambodia's rural market and bring schools online.
Read more!