The Hummer crawls to a stop in a Phnom Penh street. The uniformed driver hops from
the vehicle and crosses the road to buy a plastic bottle of petrol.
A Hummer parked outside Phnom Penh's new Paragon Cambodia shopping center. According to unofficial estimates there may be up to a dozen Hummers in the country, with sources suggesting they are imported "informally" from the US and are often "second-hand".
Motodops point and laugh as the driver tops up the empty tank. Inside the SUV, teenage
girls squirm in embarrassment.
The Hummer, Arnold Schwarze-negger's favorite auto and America's classic symbol of
conspicuous consumption, is the vehicle of choice for some of Phnom Penh's nouveau
riche - those families who have benefited most from the last decade of economic growth,
corruption or both.
In 2006, Cambodia enjoyed its third year of double-digit economic growth, continuing
a "robust" trend that makes it one of the best performing economies in
the region. Growth is set to continue this year, with 9 percent predicted.
Signs of wealth abound in Phnom Penh: modern apartment buildings rise out of bulldozed
squats; a new shopping center trades in luxury goods; even the one or twoLamborghini
- valued at $250,000 each - can be seen parked and heavily guarded outside night
clubs popular with the new elite.
It's sometimes easy to forget that 35 percent of the population live on less than
$0.45 per day, mainly because 92 percent of the poor live in rural areas - at the
end alongrugged, poorly maintained roads where the Hummers rarely go.
The laughter as the monstrous SUV ran out of petrol was a rare moment of equality
in a country increasingly marked by the opposite.
Poverty Reduction Slow
According to the World Bank, Cambodia enjoyed an average annual growth of 8.2 percent
over the decade from 1993 to 2004, but overall poverty decreased from 47 percent
to a mere 35 percent - just above 1 percent per annum.
Other experts claim that even this low assessment overstates the case.
Ear Sophal, a Cambodian development specialist, argued in the April edition of the
Asian Journal of Political Science, that there was "lack of robustness"
in the World Bank's findings and suggested a poverty reduction of 4 percent was more
In any case, as a large proportion of the population live marginally above the poverty
line, the figures are sensitive.
As Sophal noted, if the 2004 poverty line of 1,826 riel was increased by a mere 10
percent - just 183 riel - the poverty rate would jump from 35 percent to 41.6 percent.
What is clear is that poverty reduction has been painfully slow relative to economic
growth, and further, inequality has significantly increased.
The average per capita consumption of the richest 20 percent of the population -
the urban elite - has risen by 45 percent over the last ten years, compared to an
8 percent rise for the poorest quintile. Economic indicators of disparity make the
country one of the most unequal in the region.
The urban-rural divide has also widened. In Phnom Penh poverty fell by over half
from 11 percent to 5 percent in the decade to 2004, but rural poverty fell only 9
percent from 43 to 34 percent.
The three pillars of economic growth - the garment sector, tourism and construction
- are grounded in Phnom Penh and Siem Reap town, and according to the Cambodian Development
Resource Institute (CDRI), which will release a major report on the rural economy
next month, this concentration is causing a rural-urban drift that is changing rural
livelihoods - and not necessarily for the better.
"Opportunities for the rural poor in urban centers consist of mainly casual
unskilled jobs, usually during the dry season, such as construction, moto driving
or security guards" said Chan Sophal, senior researcher at CDRI. "As well
as women working in garment factories. These workers send remittances home - with
garment factory workers in particular sending a large proportion of their wages.
But these wages are not making a significant impact on rural development."
According to the CDRI study, which focused on ten villages across the country over
a three-year period, migrant labor was an increasingly significant aspect of rural
livelihoods, with some 13 percent of rural households receiving remittances from
family members in 2004.
This figure is likely to have increased in the last three years, with the continued
expansion of the urban economy and the limited economic opportunities of rural communities.
While many migrant workers continue to use jewellery stores, money-lenders and taxi
drivers, to remit their money, there's been significant growth in domestic bank transfers.
One of the Kingdom's leading banks, Acleda, has seen domestic transfers double each
year for the past six years. Last year, $565 million was transferred domestically.
This year the bank is projecting a billion dollars in transfers - or about 15 percent
According to Acleda, about 50 percent of the transfers flow in and out of Phnom Penh
- with 65 percent of those running out of the capital to the provinces and 35 percent
coming into the city. The remaining 50 percent flow between provinces.
Of the total number of domestic transfers through Acleda last year, about 37 percent
were less than $500 - which constituted about 3 percent of the annual dollar amount.
The remaining transfers were small to large business or corporate remittances.
Vann Sarouen, Acleda's Siem Reap provincial manager, said while the major flow of
transfers was from Siem Reap town to the capital for business, there had been a sharp
increase in small transfers, with about 30 percent of total outward remittances less
"These small amounts are from seasonal workers who live in other provinces,"
Sarouen said. "More people are beginning to trust the bank instead of using
Little "spillover" from money flow
Despite the increase in money flow, the CDRI study suggested there was limited "spillover"
to the 85 percent of the population who live in the countryside. Sophal said the
average annual remittance equated to about $80 per household, which is less than
10 percent of household consumption.
"The amounts being sent by migrant workers are not going to make a miracle -
$20 to $30 per month is not going to improve livelihoods significantly," Sophal
said. "In the large part it is simply aiding the subsistent lifestyles of the
dependent families. It's preventing them from falling deeper into poverty, which
is of course a positive thing -without the jobs they would be worse off - but it
rarely leads to sustainable improvements."
Sophal said of those living above the poverty line, about 30 percent were only marginally
above. For these families, sudden shocks such as theft, corruption, crop failure
- but particularly health problems - could quickly reduce them to destitution.
"It's these families who benefit most from remittances as the extra income enables
them to subsist and to cope with such shocks," Sophal said.
When two or three family members were selling their labor - for example, two daughters
working in garment factories - then families could be brought out of poverty and
even save, Sophal said.
But according to the CDRI study, only about 10 to 20 percent of families were able
to improve their situation through labor selling and remittances.
"Not everybody is able to save and for those that can the savings are either
used for security or for asset building: more livestock, a moto, a TV, bicycles and
especially home improvements. It's usually only the already well-off or upwardly
mobile families that use savings to establish small businesses," Sophal said.
To improve a thatch house - a sign of poverty - to a wooden house with a tin roof,
would take an average family up to seven years of saving, and remittances could contribute
to this, Sophal said.
"But while their living condition has improved, the family may not have diversified
their income source, which is the key to prosperity. It's not aiding long-term development.
In the main the incomes from remittances are not even a short-term solution to poverty
reduction, they are merely a stop-gap," Sophal said.
But remittances are often used to provide family members with an education.
Though educational attainment figures in Cambodia are some of the lowest in the region,
with only 18 percent of men and 9 percent of women in the work force with more than
a primary school education, primary enrolments in rural areas have increased by 50
percent in the past decade and lower secondary enrolments by 62 percent.
Despite the government's 2000 introduction of a universal free enrolment policy up
to Grade 9, the CDRI study found that "informal" payments for schooling
at all levels were a financial burden on many families.
Garment factory workers who spoke to the Post, proudly boasted they were helping
send their siblings to school.
Key Ratanak, 19, from Kompong Cham, lives in a tiny one-room apartment in Phnom Penh's
outskirts, with four other girls from her village. They all work in the same garment
factory and over a 60-hour week, including overtime, make about $60-70 per month.
They send about $20-30 home every two months through relatives or a taxi.
"The money makes life a little easier for my family as they can buy more food,"
Ratanak said. "And it helps keep my brothers and sisters in school."
But according to the CDRI study, poor households in rural areas have not been the
major beneficiaries of the garment sector's growth.
Most garment factory jobs require "informal" recruitment fees and literacy,
which excludes the poorest families, especially as it's girls who leave school first
to help their family. Over 70 percent of the Cambodia's entire female work force
are illiterate or have less than a primary school level education.
"The rapid growth of the garment sector has benefited many households, but these
have not necessarily been poor households and very rarely the poorest," Sophal
said. "Ultimately, there is very little linkage between growth in the urban
areas and growth in the rural areas. The wages earned in construction and garment
factories are not 'poverty reducing' wages - it simply isn't enough to make a significant
The CDRI study found that not only was urban growth and labor migration failing to
"spill over" into rural development, but there was rising inequality in
and between rural communities.
While communities in good locations with fertile soils and access to irrigation prosper,
isolated communities, without good roads and access to markets and other out of village
opportunities, are in decline.
Sophal said areas adjacent to the Tonle Sap and plateau and mountainous areas, including
Kratie and Kampong Speu, were suffering significantly higher levels of poverty than
the rest of the country, with rates of up to 56 percent.
The study also found significant inequality emerging within villages.
"A village study group told us that the rich keep on getting richer: they're
increasing the price of pots and jars they're trading. While the poor get poorer:
they keep on decreasing the price of charcoal and firewood they're producing,"
The poorer communities were previously reliant on natural resources as their 'safety
net', but with the degradation of forests and fishery stock through over exploitation
and the increasing concentration of land and resources in the hands of the rich,
these villages were now facing increasing poverty and destitution.
Sophal said in these villages the 'rich' are able to take control of the natural
resources in collusion with the authorities.
"The poor bear the brunt of weak governance and corruption, while the rich either
pay up or actively use corruption and impunity to their advantage, with natural resource
dependent communities the most affected," Sophal said.
Sophal said landlessness and land concentration were an increasing problem for rural
communities. In 2003, 70 percent of land was owned by the richest 20 percent of the
population. With that trend continuing, there are now large tracts of fenced off
land in rural areas owned by the wealthy for speculative purposes that remain uncultivated.
Poorly defined land laws mean absentee owners are reluctant to lease the land for
fear the lessees will later claim title.
With a lack of plots to cultivate, selling labor has become an increasingly important
source of income for the poor. The very poor sell labor within the village, often
for credit and then part payment, while those with the capacity migrate either to
the urban centers or the Thai border regions.
According to CDRI, an increasing number of rural Cambodians are crossing the Thai
border to work for one to two month periods or longer, in agriculture, construction
and other unskilled work. The migrants can earn up to $150 per month and can remit
about $100 to their families after several months work.
Other migrants are daily workers: either cart-pullers, who bring back goods from
Thai markets, smugglers, or laborers who cross in the morning and return late at
Exact figures on Thai migration are largely speculative as much of the movement is
informal but some estimate up to 200,000 or more migrants cross the border each year.
Of the villages studied in the CDRI report, about 70 percent of adults engaged in
wage labor outside of the village from March to September - including 14 percent
in the Thai border regions and 8 percent in Thailand. This figure fell to 37 percent
from October to March.
But Sophal said the migration within and without the country was more a consequence
of "push factors" - poverty, population growth, natural resource depletion,
unemployment, landlessness and land concentration - than the "pull" of
opportunity or demand.
"It's mainly a function of necessity not of choice and reflects the failure
of rural development strategies," he said.
Growth fails to reduce poverty
The failure of rural development and the consequent increase in migration has economists
According to the World Bank, Cambodia will not achieve its Millenium Development
goal target of halving the 1993 poverty rate by 2015 with its current growth rates
- unless more growth comes from agriculture.
Prime Minister Hun Sen, in his opening address to the Second Cambodian Economic Forum
(SCEF) on May 9, which focused on the rural economy and agricultural development,
highlighted the country's robust economic growth but said "improving Cambodia's
rural economy and livelihoods remains a daunting challenge."
But Hun Sen said the government had "multiplied its efforts to implement the
agenda for poverty reduction which is the core of all national policies and strategies."
Keat Chhon, Minister of Economy and Finance, said agricultural development was central
to the government's five-year Rectangular Strategy for development.
"Our economic policies aim at diversification of the economy with more emphasis
on agriculture and agro-industry," he said. "We need to modernize the agriculture
sector, improve productivity and increase value added of our agricultural products
through agro processing."
But panelists at the forum questioned the implementation of the government's rural
development policies and said greater urgency was needed.
Robert Glofcheski, the chief economist for UNDP in Cambodia, Laos and Vietnam, raised
the specter of uncontainable rural-urban drift as a result of failed rural development
policies and rising inequality.
"Land is becoming so concentrated so rapidly that vast numbers of rural poor
are beginning to seek life in the cities, but the economy has not had the chance
to develop the capacity to host them," he said. "70 percent of available
land is concentrated in the 20 percent of people who are better off and this is dangerous
in a society at this stage of development."
While a certain level of inequality is to be expected in the transition from a centrally
controlled, poor economy to one based on market principles, the forthcoming World
Bank Equity Report suggests that in conditions of sustained economic growth, inequality
should be paralleled by significant overall poverty reduction.
If rising inequality coincides with limited poverty reduction - as is the case in
Cambodia - then the lack of equity not only affects perceptions of the legitimacy
of governance, but can also function as a brake on economic growth, the draft notes
for the report stated.
The World Bank would not comment to the Post about the issues raised in the Equity
Report, but at the SCEF Nisha Agrawal, the World Bank's Cambodia country manager,
described the issue of rural development as the "hottest" in the Kingdom
and criticized the implementation of the governments rural development policy as
"I've been in Cambodia long enough to know when there is political will the
government can move very quickly," she said. "You simply cannot have this
rural urban drift happening without the necessary job creation."
While the incomes of garment factory workers and rice field workers rose last year,
the Economic Institute of Cambodia's (EIC) latest report stated that the wages of
the most vulnerable workers declined.
"Too many rural people are arriving in Phnom Penh looking for work," said
Neou Seiha, the author of the EIC's latest report. "There is an influx of labor
and not enough demand so incomes are falling. And the industrial sector is not providing
From 1993 to 2004 the industrial sector's share of the economy more than doubled
to 29 percent - driven by the garment sector and construction - but despite this
the sector still only employed about 8 percent of the work force.
The garment sector, which according to EIC produced a massive 91 percent of Cambodia's
exports in 2006, has enjoyed significant growth since the US and EU measure to restrict
China's exports was implemented in March 2005. But with that safeguard set to expire
next year, Seiha said it was likely the sector would slow.
"The garment sector is unlikely to grow and certainly not fast enough to provide
jobs for around 200,000-300,000 young Cambodians who enter the market each year,"
Seiha said. "It will remain in important industry but it will no longer be an
engine of growth."
Despite predicting further economic growth of 9 percent in 2007, Seiha said EIC were
less optimistic about the short-term future unless critical reforms were implemented
to diversify the economy.
"Garment factories import all their raw materials and all the profits go to
the Chinese owners," Seiha said. "The food that tourists eat is imported
from Vietnam, because Cambodia can't guarantee enough production - so are the materials
for construction. There's little linkage from these sectors to other industries that
would create more jobs, growth and poverty reduction."
The EIC report stated that while the industrial and services sectors continued to
grow, agriculture, which is central to the lives of the poor and accounts for 70
percent of the work force, declined significantly, from 13.4 percent growth in 2005
to 4.4 percent in 2006.
According to the World Bank, agriculture grew by a sluggish 3.4 percent over the
decade to 2004. Rice production, which accounts for 88 percent of crops harvested,
remains erratic and is subject to drought and flooding, with only 7 percent of arable
land irrigated - the lowest rate in South East Asia. Paddy yields, though increasing,
also remain the lowest in the region.
"The economy is at a critical stage of development. Land concentration and the
failure of rural development, particularly agriculture, is creating a drift to urban
areas, especially in the dry season," Seiha said. "But the new arrivals
cannot be absorbed. The need for diversification of the economy and a focus on agricultural
development has never been more pressing."