Economic History of Cambodia

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Economic history of Cambodia
Cambodia was a farming area in the first and second millennia BCE. States in the area engaged in trade in the Indian Ocean and exported rice surpluses. Complex irrigation systems were built in the 9th century. The French colonial period left the large feudal landholdings intact. Roads and a railway were built, and rubber, rice and corn grown. After independence Sihanouk pursued a policy of economic independence, securing aid and investment from a number of countries. Bombing during the Vietnam War damaged rice production. Lon Nol had a policy of liberalising the economy. This was followed by the victory of the Khmer Rouge and the emptying of the cities. After the defeat of the Khmer Rouge, a Five Year Plan was adopted, aiming to improve agriculture, industry and distribution, with a slogan of "export and thrift". Today, Cambodia remains a largely agricultural economy and industrial development is slow.

Wartime economy, 1970-75

The war that engulfed the rest of Indochina spread to Cambodia in April 1970, shortly after the coup that deposed Prince Sihanouk. Wartime conditions had a major impact on the country's economy, especially on the export sector. Production and export of virtually all commodities dropped sharply, as insecurity spread throughout the countryside. Intense combat in the nation's most densely populated farming areas caused a large segment of the peasant population to flee to cities and to towns. By 1975 the population of Phnom Penh had swollen to 2 million, from just 50,000 in 1955. Moreover, the war seriously dislocated the economic system. Food shortages arose as insurgents interrupted the transportation of crops from the countryside to the main marketing centers. Increasing budgetary expenditures, skyrocketing inflation, shrinking export earnings, and a rising balance-of-payments deficit plagued the war-torn economy. The war's most damaging effect was on rice production. In 1972 Cambodia needed to import rice (from Japan and from Thailand) for the first time since independence. Fighting reduced the amount of land under rice cultivation to fewer than 800,000 hectares in 1972, far less than the approximately 3 million hectares that had been under cultivation in 1969. The 1972 rice harvest amounted to only 26.8 percent of the 1969 harvest. Exports of natural rubber, the country's second leading foreign-exchange earner, ceased shortly after hostilities began in 1970. The war destroyed extensive rubber plantations and damaged rubber-processing facilities. In late 1970, Lon Nol, who succeeded Sihanouk, continued to liberalize the economy in an effort to save the country from economic disaster. This endeavor was a continuation of the policies he had enacted as head of the government of "national salvation" in August 1969. Under Lon Nol's direction, Phnom Penh limited the control and the authority of the state export-import agency (Société nationale d'exportation et d'importation—SONEXIM), which had been established in 1964 to administer foreign trade, to denationalize banks and industries, to encourage private foreign investments, and to allow greater private participation in the economy. The new economic policies of the Khmer Republic gradually reversed the pattern of state socialism that had formed the keystone of Sihanouk's domestic policies. On October 29, 1971, the government implemented a comprehensive program of reforms to stabilize the economy. These reforms included increased import taxes on all nonessential commodities; increased interest rates on bank deposits and on commercial loans; elimination of credit to state enterprises and to public utilities; introduction of a flexible currency exchange system; and simplification of the import system to facilitate the movement of goods. The emphasis of the program was to restore monetary stability in the face of rising inflation, financial speculation, black markets, and other economic problems caused by the war. In a...
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