The end of an NGO era in Cambodia

By Craig Guthrie

PHNOM PENH - With an overwhelming electoral mandate, robust economy and a potential bounty of oil and gas revenues, Cambodian Prime Minister Hun Sen feels in a strong enough position to move against the non-governmental organizations (NGOs) which have been a perennial thorn in the strongman's side since he took power more than two decades ago.

In late September he called for the revival of a controversial law which would require the country's more than 2,000 associations and NGOs to complete a complex registration process and submit to stringent financial reporting requirements. The draft law is expected to be passed by Hun Sen’s Cambodia People's Party (CPP)-dominated National Assembly in the coming months.

"Cambodia has been heaven for NGOs for too long," he said in a speech broadcast on national radio on September 26, adding that he had given up hope of reading any positive reports written by international or local NGOs. "The NGOs are out of control ... they insult the government just to ensure their financial survival."

By enacting the law, Hun Sen could recalibrate the government's terms of engagement with the Western-led aid community, on which his government has heavily relied for decades to finance its budget. The move comes as private-led foreign investment has fueled the country's economic rise, led in the main by China and South Korea.

"Many of the services provided by NGOs today will one day either be privatized or the revenues of the government will grow to such an extent that the functions currently being done by NGOs will be taken over by the government," said Brett Sciaroni, chairman of Cambodia's International Business Association.

The NGO law's enactment would be a symbolic power shift between Hun Sen's CPP-led government, further emboldened by its landslide victory in this year's general election, and the Western-backed NGOs which have long chastised it over human-rights abuses and corruption allegations.

International aid agencies have for decades held the purse strings on the aid which has sustained the national economy since it emerged from the horrors of the Khmer Rouge, the ultra-Maoist regime which systematically attempted to transform Cambodia into an agricultural utopia between 1975 and 1979, and a subsequent decade-plus of civil war.

Some contend it was the Khmer Rouge's economic failures, including a devastating countrywide famine that killed many and stalked the regime's traumatized survivors, which set the stage for Cambodia's now decades-long dependence on foreign aid.

The British aid agency Oxfam began programs soon after the Khmer Rouge's 1979 ouster, despite incurring the wrath of the United States and the United Kingdom governments for helping the Hanoi-sponsored regime put in place by the invading Vietnamese.

Jacques Beaumont from the United Nations Children's Fund, and Francois Bugnion from the International Red Cross (IRC), who both arrived in Phnom Penh in 1979, were pivotal players in that humanitarian effort. They finally persuaded the IRC, which was fearful of being seen as compromising its political neutrality, into launching what turned into its most significant relief operation since World War II.

But the comprehensive aid experiment did not begin in earnest until after the signing of the 1991 Paris Peace Accords, which by and large ended the country's debilitating civil war. Since then myriad NGOs have come to Cambodia to work on everything from demining to microfinance, orphanages to agri-business, public health issues to snaring globe-trotting pedophiles.

The demining NGOs in particular made great progress, clearing an estimated 25,000 hectares of mined territory between 1992-2003. Cambodia has also been hailed as a global success story in fighting HIV/AIDs transmission, led by NGO-organized education programs and health aid. Prevalence rates have fallen by nearly half, from 3% in 1997 to 1.6% in 2006.

Fractious relations
But Hun Sen's government's relationship with NGOs and international aid agencies has often been fractious, epitomized by its tumultuous interactions with the environmental watchdog Global Witness over its consistent accusations of high-level government links to illegal logging, and with the UK-based rights lobby Amnesty International for its criticism of state-sponsored forced evictions across the country.

The World Bank also suspended US$11.9 million in funds in 2006 for seven sanitation projects when it found evidence of rampant extortion, bribe-taking, bid-rigging and procurement manipulation, leading Hun Sen to claim the multilateral lender was trying to tarnish his government's credibility. The bank only agreed to unfreeze the projects' funding in 2007 after the government promised to strengthen anti-corruption measures.

Despite Cambodia's recent economic boom, including a skyrocketing average 11% gross domestic product (GDP) growth over the past three years, a sizable portion of the nation's real income still derives directly from donor nations in amounts wrangled out each year at annual Consultative Group meetings.

The meetings were for years characterized by vague promises from the Cambodian government in response to weak demands by donors for reform, including the long-delayed adoption of an anti-corruption law. But in the past two years these demands have become less relevant with the surge in aid from China, which typically has less good governance or transparency conditions attached.

While Chinese aid is generally funneled through vast infrastructure projects - including hydropower and road projects - usually contracted to Chinese companies, Western nations' share of the average US$600 million in annual aid arrives through international aid agencies and NGOs. The process has been widely cast as a corrupt, inefficient gravy train, giving some traction to Hun Sen's complaints.

"In the 1980s, there was a popular T-shirt satirizing US Army recruitment commercials with the slogan, 'Join the army. Travel to exotic, distant lands. Meet exciting, unusual people. And kill them'," Brad Adams, executive director for Human Rights Watch's Asia Program, was quoted saying to Action Aid in 2005. "In the new millennium, it could be rephrased, 'Join the aid community. Travel to exotic, distant lands. Meet exciting, unusual people. And make a killing'."

This is still the case in Cambodia, Adams told Asia Times Online. "You can start with all the foreign consultants making more than $10,000 per month, almost always tax free. This is a huge drain on the aid budget for Cambodia and in many cases the consultants produce nothing of value for the country."

Many analysts and expatriates agree that NGOs and their workers suffer from an image crisis among the Cambodian public, partly due to their comparatively high salaries and lifestyles, which are far adrift from the 35% of the population which lives on less than $0.50 a day.

Country directors for prominent international aid agencies typically receive a $250,000 annual package, which includes a spacious villa in the capital's upmarket "NGO-ville" area, a four-wheel-drive vehicle - usually emblazoned with the logo of their donor agency or charity - and fees paid for the capital's better international schools.

The aid watchdog Action Aid estimated in 2005 that the 700 or so international consultants working for NGOs in the country earned more than Cambodia's 160,000 civil servants put together. "In 1993, yes, 99% of foreign consultants were justified; now, 5% are justifiable. The others are embedding and enabling the mentality of dependency," Center of Social Development director Theary Seng said in June.

Arne Sahlen, a founding member of the Cambodia Support Group, a 25-year-old volunteer organization, echoes Hun Sen's comments that fundraising has overtaken the focus on the actual progress of several NGO projects. According to Sahlen, "vast" resources are being swallowed up on pursuing donors that could be invested on direct project needs. "The need to please donors has warped the focus to not necessarily what is best for the project but what may look best on an application," said Sahlen.

Others contend that several NGOs are actually impeding the development of a self-sustaining private sector, mainly through the alleged abuse of their not-for-profit status to pursue business opportunities. That status helps them avoid taxes and other unofficial costs that private businesses pay, giving non-profit an unfair competitive advantage in the market, they say.

Cambodians now understand the word NGO, especially in the local context, to be a for-profit enterprise, said Sophal Ear, the author of The Political Economy of Cambodia, Aid and Governance. "It's all a business and this is just another way to avoid taxes," he said. "When not covered by donors, capital costs for NGOs have largely been privatized, through an extensive network of 'donations' to the ruling party by Oknhas [politically connected tycoons] politicians, and civil servants."

Discretionary powers
The NGO law, known formally as the Law on Organizations, was first written over a decade ago and aims to address such complaints. It would require NGOs to submit for government approval documents detailing their structure, goals, funding resources, properties and even logos. It also entails fines and imprisonment for any NGO which fails to submit annual reports to the Ministry of Economy and Finance.

Many fear the discretionary powers the law will give the government in monitoring and sanctioning NGOs - rather than vice versa. Hun Sen no doubt had his one good eye on the anticipated bounty of future oil and gas revenues when calling for the controversial law's revival. Chevron, the US energy giant, discovered oil off Cambodia southwestern coast in 2005 and analysts have predicted the find could generate anywhere between $200 million and $2 billion in annual revenues for the government when full-scale production begins in 2010.

The government is still awaiting a key assessment from Chevron of the supposed find, and both sides have more recently played down expectations. Nonetheless, NGOS are already warning of a possible "resource curse" similar to places like Nigeria, where corrupt governments pilfered and wasted earnings derived from energy exports.

"NGOs are trying to tell us how to use the oil money, but this is of no interest to us. What is important is how to make our resources profitable," Hun Sen said in a recent radio broadcast speech.

Despite his criticisms, there are reasons for concern. A new NGO coalition has begun work to oversee the transparency of the management of future oil funds. Led by the NGO Forum, it has given little information on its structure, but has said it plans to ensure the potential financial benefits from the windfall are managed in a socially responsible manner, and that benefits filter down to the impoverished grassroots.

The World Bank, which also aims to monitor the government's oil revenue management, noted in May that international aid is often poorly managed in key sectors, with the problem of "fragmented" assistance especially acute in health and education.

In the health sector, 22 donors are currently working with over 100 NGOs to deliver $110 million in Official Development Assistance (ODA) per year through 109 projects - yet use of the national system remains at just between 13% to 18%, said the bank. The vast majority of rural Cambodians are forced to use an expensive yet rudimentary private healthcare system which is more reminiscent of poorer African than neighboring Asian nations.

The education system is also beset by severe underfunding, with thousands of graduates churned out from poorly regulated "international" universities with degrees that often leave them ill-prepared to enter the job market. Until now, the only paying option for many graduates was to work in donor agencies and international NGOs. But if Chinese and South Korean private investment flows hold up and the country's hoped-for energy bonanza is realized, that may all soon change if Hun Sen has his NGO-curbing way.


Craig Guthrie is a former reporter for the Mekong Times newspaper in Phnom Penh. He has covered Cambodian affairs since 2004.