ECONOMIC HISTORY OF CAMBODIA

ECONOMIC HISTORY OF CAMBODIA

The vast majority of Cambodians have traditionally been subsistence farmers and agriculture has traditionally dominated the economy. In the old days, economic institutions were largely feudal and colonial in their organization and administration. Even so, landlessness and absentee landordism were not widespread. Most peasant owned small amount of land for their own cultivation.

The Khmers have traditionally looked down on commerce and manual labor, which is one reason why the Chinese or Chinese-Khmers were able to control much of Cambodia’s trade and commerce in the past

The predominance of agriculture and the lack--or neglect--of real industrial development have characterized Cambodia's modern economy since independence in 1953. Wet rice cultivation traditionally has played a key role in peasant subsistence, in national self-sufficiency in food production, in trade relations with other states, and in governmental revenues for national development. Conversely, the government has made few attempts to industrialize the nation. [Source: Library of Congress, December 1987*]

After Cambodia became independent in 1953, the country's economic policies were shaped by the succession of governments that followed. Prince Sihanouk opted for unconditional aid from the East and from the West, and the nation made modest strides. The Lon Nol government would have adhered to a laissez-faire doctrine, but it was overwhelmed by the war around it. The Khmer Rouge adopted a fanatical and doctrinaire self-reliance, and the Cambodian people and nation were ravaged by it. The post-1979 government of the People's Republic of Kampuchea (PRK), with its Vietnamese mentors, acquiesced to a pragmatic combination of socialism and small-scale capitalism, and the country achieved some limited rehabilitative goals. In the late 1980s, government policies fundamentally relied upon the nation's own sparse resources--chiefly agriculture, a nascent industrial base, and modest foreign aid from Comecon countries and nongovernmental international organizations. *

Sihanouk's Peacetime Economy, 1953-70

Sihanouk's political neutrality, which formed the cornerstone of his foreign policy, had a significant effect on Cambodia's economic development. Sihanouk insisted that the economic dimension of neutrality meant either total rejection of international aid (as practiced by Burma under Ne Win) or acceptance of foreign economic assistance from all countries without strings attached. Indeed, during the first decade that he was in power in newly independent Cambodia (1953-63), the prince carefully practiced his "purer form of neutrality between East and West" in seeking foreign economic assistance for development. [Source: Library of Congress, December 1987 *]

In 1963 however, Cambodia's economy started to stagnate when Sihanouk decided to link his economic neutrality policy to the country's territorial integrity and border security. He rejected further assistance from the United States, because Washington supported the Republic of Vietnam (South Vietnam), and from Thailand, with which Cambodia had continuous frontier disputes. In a related move, Sihanouk nationalized trading companies, banks, insurance, and major industries, thereby causing economic deterioration between 1963 and 1969. The 1967 Samlot (Batdambang) revolt and the February 1970 government decision to demonetize (or exchange) the old 500 riel banknotes were crucial events contributing to the end of the Sihanouk era. *

During his tenure after independence, Sihanouk used the country's ill-defined constitution to monitor all government activities of any consequence and to bend the government's decision-making process to his advantage. During the course of nation building, political aims often prevailed over strictly economic objectives. For example, prior to 1967, the government assigned higher priority to social improvements, such as health and education, than it did to national economic growth. The government later gave higher priority to the productive sectors of agriculture and industry in economic plans for the 1968-72 periods; however, because of war, the government did not implement these plans. *

Nonetheless, between 1952 and 1969, Cambodia's gross national product (GNP) grew an average of 5 percent a year in real terms, with growth higher during the 1950s than during the 1960s. In addition, the service sector played an important role in Sihanouk's mixed economic system in contrast to its position under the regimes of Pol Pot and of Heng Samrin, who considered the service sector insignificant and "unproductive." In 1968 the service sector accounted for more than 15 percent of gross domestic product (GDP), agriculture accounted for 36 percent, and manufacturing for 12 percent. *

Agriculture developed under a degree of paternalism from Sihanouk, who donated farm equipment to various villages and, in return, received respect and affection from the peasants. In general, however, Cambodian agriculture subsisted without much help from the government. In 1969 approximately 80 percent of rice farmers owned the land they cultivated, and the landholding for each family averaged slightly more than two hectares. The farmers used simple and rudimentary implements that were well suited to their needs and to the light weight of their draft animals. Overall, the peasants were remarkably self-sufficient. *

Farmers began to cultivate more land, causing rice production to increase from an average of 1.4 million tons in 1955 to 2.4 million tons in 1960. Production remained at that level throughout the 1960s. Rice yield per hectare, however, remained low--less than 1.2 tons per hectare--during the 1952-69 period little was done to increase yield through the use of irrigation, chemical fertilizers, or improved seeds and implements. Average yields in Batdambang and Kampong Cham provinces, however, were 50 percent higher than the national average because of better soil fertility and, in the case of Batdambang, larger average landholdings and greater use of machines in cultivation. *

Industrial and infrastructural development benefited from foreign economic assistance. In general, the government avoided ambitious plans and focused on small enterprises to meet local needs and to reduce foreign imports. In June 1956, the Chinese provided Phnom Penh with US$22.4 million in equipment as part of an ongoing program of industrial economic assistance. In addition, they helped build a textile mill and a glass plant in the 1960s. During this period, other nations contributed through aid programs of their own. Czechoslovakia granted loans for the construction of tractor assembly plants, tire-production facilities, and a sugar refinery. Other aid donors were the Soviet Union, Yugoslavia, France, the Federal Republic of Germany (West Germany), Japan, and Australia. United States economic assistance to Cambodia amounted to more than US$350 million for the 1955 to 1962 period, and it was invested mostly in the areas of public health, education, and agricultural development. To avoid the appearance of undue dependence upon foreign aid, Cambodia insisted upon "project sharing," that is, participation of its own in specific enterprises, such as the French-sponsored oil refinery and truck assembly plant at Sihanoukville. This stipulation imposed by Phnom Penh also had the effect of holding down the scale of many aid projects and the amounts of loans extended to the Cambodian government. *

The government also used foreign assistance to expand the country's transportation and communication networks. France helped to develop Sihanoukville, Cambodia's second largest port, which opened in 1960, and the United States constructed a highway linking the port to Phnom Penh. In addition, the Cambodians, with French and West German assistance, built a railway from Sihanoukville to the capital. Despite Sihanouk's claims of economic progress, Cambodia's industrial output in 1968 amounted to only 12 percent of GNP, or only one-third of agricultural production. Rice and rubber were the country's two principal commodity exports and foreign-exchange earners during the Sihanouk era. *

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. [Source: Library of Congress, December 1987 *]

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 change of policy, the government also moved toward greater involvement with international and with regional organizations and sought support from the World Bank, the International Monetary Fund), and the Asian Development Bank. [Source: Library of Congress, December 1987] As the war progressed, Lon Nol's government aimed major economic measures mainly at improving the overall food supply situation and at maintaining public confidence in the continued availability of essential consumer items. To ensure adequate domestic supplies, in November 1971 Phnom Penh suspended grants of export licenses for major export commodities, such as rice, corn, and cattle. Although the move helped maintain stocks of essential commodities in the capital and in provincial centers, supplies were small relative to demand. *

The Lon Nol government had earlier declared in principle that it maintained a policy of "strict neutrality" and would accept foreign assistance from "all countries which love peace and justice." As early as April 20, 1970, Cambodia formally requested military and economic aid from Washington to help cope with growing war expenditures and with an increasing budgetary deficit. As military activity in the country intensified, the United States became Cambodia's largest donor and supplier. Moscow, however, sent medical equipment and, in October 1971, the Soviets renewed a financial agreement with the republican regime. The Economic Support Fund, to which the United Nations (UN), the United States, Britain, Japan, New Zealand, Thailand, and Malaysia pledged their contributions, provided US$21 million in auxiliary relief. Other nations, including Italy, Israel, West Germany, and Switzerland, provided funds mostly to assist war victims. France earmarked its aid for the maintenance of French educational programs and cultural institutions. Nevertheless, these palliative measures fell far short of what was needed. By 1975 the economy had collapsed, and the country was surviving mainly on imported food financed by the United States government. *

Economics and the Khmer Rouge

After the Khmer Rouge came to power it took control of all businesses and farms. Money, private property and private businesses were abolished; markets were closed. The central bank in Phnom Penh was blown up as part of their effort to create a cashless society. The population was organized into work teams and communes with collectivized ownership, production and distribution.

Under the leadership of the Khmer Rouge, Cambodia underwent a brutal and radical revolution. When the communist forces took power in Phnom Penh in April 1975, their immediate goals were to overhaul the social system and to revitalize the national economy. The economic development strategy of the Khmer Rouge was to build a strong agricultural base supported by local small industries and handicrafts. As explained by Deputy Premier Ieng Sary, the regime was "pursuing radical transformation of the country, with agriculture as the base. With revenues from agriculture we are building industry which is to serve the development of agriculture." This strategy was also the focus of a doctoral thesis written by future Khmer Rouge leader Khieu Samphan at the University of Paris in 1959. Samphan argued that Cambodia could only achieve economic and industrial development by increasing and expanding agricultural production. The new communist government implemented the tenets of this thesis; it called for a total collectivization of agriculture and for a complete nationalization of all sectors of the economy. [Source: Library of Congress, December 1987 *]

“Strict adherence to the principle of self-reliance constituted the central goal of the Khmer Rouge regime. A Phnom Penh radio broadcast in early May (about a month after the Khmer Rouge arrived in the capital) underscored the importance of Cambodian self- reliance and boasted that during the war the Khmer Rouge had used scrap iron and wrecked military vehicles to manufacture their own bullets and mines. The statement made it clear that the policy of self-reliance would continue in peacetime. In another move aimed at reducing foreign influence on the country, the regime announced on May 10 that it would not allow foreigners to remain in Cambodia but that the measure was only temporary; and it added, "We shall reconsider the question [of allowing foreigners to enter the country] after the re-establishment of diplomatic, economic and commercial relations with other countries." Although Cambodia resumed diplomatic relations with a number of nations, the new government informed the UN General Assembly on October 6, 1975, that it was neutral and economically self-sufficient and would not ask for aid from any country. On September 9, however, the Chinese ambassador arrived in Cambodia, and there were soon reports that China was providing aid to the Khmer Rouge. Estimates of the number of Chinese experts in Cambodia after that time ranged from 500 to 2,000. The policy of self-reliance also meant that the government organized the entire population into forced-labor groups to work in paddies and on other land to help the country reach its goal of food self-sufficiency. *

Khmer Rouge’s Radical Economic Revolution

The Khmer Rouge, as soon as it took power on April 17, 1975, emptied Phnom Penh (of its approximately 2 million residents) as well as other cities and towns, and forced the people into the countryside. This overnight evacuation was motivated by the urgent need to rebuild the country's war-torn economy and by the Khmer Rouge peasantry's hostility toward the cities. According to a Khmer Rouge spokesman at the French embassy on May 10, the evacuation was necessary to "revolutionize" and to "purify" the urban residents and to annihilate Phnom Penh, which "Cambodian peasants regarded as a satellite of foreigners, first French, and then American, and which has been built with their sweat without bringing them anything in exchange." The only people who were not ordered to leave the city were those who operated essential public services, such as water and electricity. [Source: Library of Congress, December 1987 *]

Other Khmer Rouge leaders rationalized the evacuation as a matter of self-reliance. They told the Swedish ambassador in early 1976 that "they didn't have any transportation facilities to bring food to the people, and so the logical thing was to bring the people to the food, i.e., to evacuate them all and make them get out into the ricefields." Indeed, when the evacuees reached their destinations, they were immediately mobilized to clear land, to harvest rice crops, to dig and restore irrigation canals, and to build and repair dikes in preparation for the further expansion of agriculture. The rice crop in November 1976 was reported to be good in relation to earlier years. At the same time, plantations producing cotton, rubber, and bananas were established or rehabilitated. *

While the Khmer Rouge gave high priority to agriculture, it neglected industry. Pol Pot sought "to consolidate and perfect [existing] factories," rather than to build new ones. About 100 factories and workshops were put back into production; most of them (except a Chinese-built cement plant, a gunnysack factory, and textile mills in Phnom Penh and in Batdambang) were repair and handicraft shops revived to facilitate agricultural development. *

Cambodia's economic revolution was much more radical and ambitious than that in any other communist country. In fact, Khmer Rouge leader Premier Ieng Sary explained that Cambodia wanted "to create something that never was before in history. No model exists for what we are building. We are not imitating either the Chinese or the Vietnamese model." The state or cooperatives owned all land; there were no private plots as in China or in the Soviet Union. The constitution, adopted in December 1975 and proclaimed in January 1976, specifically stated that the means of production were the collective property of the state. *

The Cambodian economic system was unique in at least two respects. First, the government abolished private ownership of land. The Khmer Rouge believed that, under the new government, Cambodia should be a classless society of "perfect harmony" and that private ownership was "the source of egoist feelings and consequently social injustices." Second, Cambodia was a cashless nation; the government confiscated all republican era currency. Shops closed, and workers received their pay in the form of food rations, because there was no money in circulation. *

On August 12, 1975, fewer than four months after the Khmer Rouge had taken power, Khieu Samphan claimed that, within a year or two, Cambodia would have sufficient food supplies and would be able to export some of its products. To achieve this goal in record time, large communes comprising several villages replaced village cooperatives, which had formed in the areas controlled by the Khmer Rouge in 1973 and which had spread throughout the country by 1975. Unlike China and Vietnam, which had introduced collectivization gradually over several years, Cambodia imposed the system hastily and without preparation. *

The Khmer Rouge, in line with the slogan, "If we have dikes, we will have water; if we have water, we will have rice; if we have rice, we can have absolutely everything," organized the workers into three "forces." The first force comprised unmarried men (ages fifteen to forty) who were assigned to construct canals, dikes, and dams. The second force consisted of married men and women who were responsible for growing rice near villages. The third force was made up of people forty years of age and older who were assigned to less arduous tasks, such as weaving, basket-making, or watching over the children. Children under the age of fifteen grew vegetables or raised poultry. Everyone had to work between ten and twelve hours a day, and some worked even more, often under adverse, unhealthy conditions. *

On September 27, 1977, in a major speech celebrating the anniversary of the Kampuchean (or Khmer) Communist Party (KCP), Khmer Rouge leader Pol Pot asserted that, "Our entire people, our entire revolutionary army and all our cadres live under a collective regime through a communal support system." He then listed the government's achievements in rebuilding the economy and concluded that, "Though not yet to the point of affluence, our people's standard of living has reached a level at which people are basically assured of all needs in all fields." *

Economic Policy During Khmer Rouge Rule

In its general contours, Democratic Kampuchea's economic policy was similar to, and possibly inspired by, China's radical Great Leap Forward that carried out immediate collectivization of the Chinese countryside in 1958. During the early 1970s, the Khmer Rouge established "mutual assistance groups" in the areas they occupied. After 1973 these were organized into "low-level cooperatives" in which land and agricultural implements were lent by peasants to the community but remained their private property. "High-level cooperatives," in which private property was abolished and the harvest became the collective property of the peasants, appeared in 1974. "Communities," introduced in early 1976, were a more advanced form of high-level cooperative in which communal dining was instituted. State-owned farms also were established. [Source: Library of Congress, December 1987 *]

Far more than had the Chinese communists, the Khmer Rouge relentlessly pursued the ideal of economic self-sufficiency, in their case the version that Khieu Samphan had outlined in his 1959 doctoral dissertation. Extreme measures were taken. Currency was abolished, and domestic trade or commerce could be conducted only through barter. Rice, measured in tins, became the most important medium of exchange, although people also bartered gold, jewelry, and other personal possessions. Foreign trade was almost completely halted, though there was a limited revival in late 1976 and early 1977. China was the most important trading partner, but commerce amounting to a few million dollars was also conducted with France, with Britain, and with the United States through a Hong Kong intermediary. *

From the Khmer Rouge perspective, the country was free of foreign economic domination for the first time in its 2,000-year history. By mobilizing the people into work brigades organized in a military fashion, the Khmer Rouge hoped to unleash the masses' productive forces. There was an "Angkorian" component to economic policy. That ancient kingdom had grown rich and powerful because it controlled extensive irrigation systems that produced surpluses of rice. Agriculture in modern Cambodia depended, for the most part, on seasonal rains. By building a nationwide system of irrigation canals, dams, and reservoirs, the leadership believed it would be possible to produce rice on a year-round basis. It was the "new people" who suffered and sacrificed the most to complete these ambitious projects. *

Although the Khmer Rouge implemented an "agriculture first" policy in order to achieve self-sufficiency, they were not, as some observers have argued, "back-to-nature" primitivists. Although the 1970-75 war and the evacuation of the cities had destroyed or idled most industry, small contingents of workers were allowed to return to the urban areas to reopen some plants. Like their Chinese counterparts, the Cambodian communists had great faith in the inventive power and the technical aptitude of the masses, and they constantly published reports of peasants' adapting old mechanical parts to new uses. Much as the Chinese had attempted unsuccessfully to build a new steel industry based on backyard furnaces during the Great Leap Forward, the Khmer Rouge sought to move industry to the countryside. Significantly, the seal of Democratic Kampuchea displayed not only sheaves of rice and irrigation sluices, but also a factory with smokestacks. *

First Hand Look at Khmer Rouge Economic Policy

Van Rith “ asserted that relying on heavy machinery was not an option because the people could not even drive cars or motorcycles, much less operate earthmoving vehicles. He said they would have wrecked such vehicles, incurring huge repair costs or thousands or tens of thousands of dollars per vehicle. Relying on machinery would have been a very dangerous path, Rith insisted, declaring that burrowing of money to purchase expensive machinery that no one knew how to operate was the reason for the collapse of socialism in Eastern Europe. Therefore, Pol Pot's policy of relying on national strength and rapid construction of water works to build the country quickly to preclude a Vietnamese invasion made sense, even though this policy entailed both good and bad aspects. Meanwhile, handicraft production continued, as did factory production, with veteran and new workers working alongside each other, Rith declared. [Source: Interview with Van Rith in Khpop commune, S'ang district, Kandal province, February 20, 2003 by Youk Chhang, Documentation Center of Cambodia <>]

“The idea of independence/self-reliance was that the people would feed themselves by farming the fields, relying on their age-old agricultural knowledge, then proceeding to export of paddy, which would be made possible in the first instance by construction of canals, dams and reservoirs, so that production would no longer be reliant upon the weather, but there would be no immediate need for science. This, according to Rith, was based on the same assumptions as Sangkum-era construction of dams in the late 1950s. Commerce funds were not used for the purchase of weapons. According to Rith, the story that export sales were used to finance the purchase of weapons, which in turn were used to kill people, is false. The supply of weapons was pursuant to separate agreements starting with GRUNK, which did not affect commercial transactions. <>

Rith said, the DK [Democratic Kampuchea, the Khmer Rouge] leadership was wrong to think only about producing and exporting paddy, and not about more lucrative and easy-to-grow export crops for which there was an established foreign demand. For example, in S'ang, the previous production of peanuts, sesame, green beans, etc, was halted, leaving the people only to farm paddy, even though people had no experience in paddy production. Similarly, the people in Loek Daek district, highly skilled at fishing and making fish sauce, were forced to learn how to grow paddy. The overemphasis on paddy production thus led to starvation. Instead of producing high value items that were simple to grow and sell, everybody had to concentrate on paddy, which requires enormous experience and skill to grow but did not fetch a good price. At the same time, local trade relations allowing specialization, such as between S'ang district of Kandal province and Bati and Prey Kabbas districts of Takaev province, were abolished, creating further hardship. So the bad aspect of the regime was that although the people were supposed to have enough to eat, they did not. <>

Khmer Rouge and Money

When Pol Pot realized it was impossible to run an economy without money, he ordered Khmer Rouge currency to be printed up. This money was so worthless street vendors used it for making paper bags (it is now sold on the streets of Phnom Penh as souvenirs). Gold was the only really reliable means of exchange, much of it earned by siphoning off American aid during the Lon Nol government.

Van Rith reported: “After the money was printed in China, brought to Cambodia via Hanoi and was about to be put into circulation, it was explained in meetings that this was in fact no simple matter, requiring zone and sector cadre with banking skills and an understanding of counterfeiting. There was also concern that these cadre would take advantage of their control of money to make themselves rich by stuffing it in their pockets. So it was decided not to go ahead. The intention was originally there, but the policy was reversed. [Source: Interview with Van Rith in Khpop commune, S'ang district, Kandal province, February 20, 2003 by Youk Chhang, Documentation Center of Cambodia **]

“In this regard, Rith said that although Democratic Kampuchea was supposed to have no rich and no poor, in fact there were super rich and super poor. The super rich emerged immediately after the war when some cadre accumulated material wealth, including by ripping off evacuees, something that happened to Rith's own older sibling, a schoolteacher, who was ultimately executed by an uneducated cadre. Such persons, Rith declared, could never have properly handled money.**

“Rith asserted that Koy Thuon was the ringleader of a traitorous plot involving money. According to Rith, Thuon was a link of Hâng Thun Hak, a Khmer Serei, and they conspired with Hing Kunthun, the director of the Khmer Commercial Bank, to get riels out of the country so that they could be spent once money was put back into circulation. Rith was told this by someone who said this plot was part of a larger plan by Koy Thuon and other North Zone elements to take power with Khmer Serei help. As evidence in support of this, Rith recalled that a false Front set up by Lon Nol had appeared at the Ministry of Information on 17 April 1975, maintaining that this implicated the North Zone forces that had seized the Ministry in such a plan. **

“Rith affirmed that Sar Keum Lamut in fact knew nothing about Democratic Kampuchea finances, the only person other than Rith who handled money being Ieng Sary. According to Rith, a Chinese official (La Mengqiang?) told him in April 1976 that Sary never deposited money in a Chinese bank or accounted for expenditures, but simply stuck cash in his pocket. Ieng Sary also gave him constant grief, opposing Rith's appointment as trade representative in Hong Kong because Sary wanted to appoint one of his own cronies. Sary continued to oppose him even though he was good at his job, getting results. **

Work Under the Khmer Rouge

The population was organized into work teams and communes with collectivized ownership, production and distribution. A typical worker was given one bowl or rice gruel to eat a day and forced to work for 18 hours digging canals and making dikes.

Seath Teng, who was separated from her family at age four, wrote in Children of Cambodia's Killing Fields , "We worked seven days a week...The only time we got off work was to see someone get killed, which served as an example to us." Youk Chang work spent three years at a cooperative. "I worked in the fields, planting and harvesting rice and digging irrigations works,” he said. “I was sick and hungry most of the time...We were forced to sleep outside in the fields.”

In 1976, we were assigned to work in a garment factory at Orussei in Phnom Penh. The factory was called Office K-9. My grandmother was assigned to work as a cook, while my grandfather was assigned to work as a blacksmith and sometimes as a mechanic. My aunt was assigned to sew clothes, and I was assigned to repair sewing machines in the Children’s Unit at Office K-9. We were not allowed to stay together as a family. Since I was living near my grandmother, every three nights I would ask my unit chief if I could spend the night with her. [Source: Sin Sinet, Documentation Center of Cambodia, d.dccam.org/Survivors/ ]

The 2.5 kilometer runway and airport in Kampong Chang , 60 kilometers from Phnom Penh, was built by Khmer Rouge forced labor. The laborers there worked from 4:00am to 9:00pm everyday, with only brief breaks for lunch and dinner. At night they slept in primitive huts with palm leaf roofs. One survivor said, “Their goal was to kill everyone. They gave us a little bit of porridge, enough to survive and work until the project was finished.”

An estimated 10,000 to 50,000 workers died during the construction of the airport. Most of them were Cambodian soldiers accused of being disloyal to the Khmer Rouge. Some starved to death. Some were dispatched with a whack to the neck or the head with a bamboo pole. Most of the killing took place when the airport was almost finished. In some cases, a ditch was dug with a bulldozer and workers were pushed in by the bulldozer and buried alive.

Evaluating the Economic Performance of the Khmer Rouge

Measuring the economic performance of the Khmer Rouge regime was impossible because statistics were not available, and no monetary transactions or bookkeeping were carried out. The economic life described by foreign diplomats, by Western visitors, and by Cambodian refugees in Thai camps ranged from spartan to dismal. Phnom Penh became a ghost town of only about 10,000 people. There were no shops, post offices, telephones, or telegraph services. Frequent shortages of water and of electricity occurred in all urban areas, and the government prohibited movement across provincial borders, except for that of trucks distributing rice and fuel. [Source: Library of Congress, December 1987 *]

Conditions in the cooperatives varied considerably from place to place. In some areas, cooperative members had permission to cultivate private plots of land and to keep livestock. In others, all property was held communally. Conditions were most primitive in the new economic zones, where city dwellers had been sent to farm virgin soil and where thousands of families lived in improvised barracks. *

Cambodia made progress in improving the country's irrigation network and in expanding its rice cultivation area. Phnom Penh radio claimed that a network of ditches, canals, and reservoirs had been constructed throughout the country "like giant checkerboards, a phenomenon unprecedented in the history of our Cambodia." Still, rice production and distribution were reported to be unsatisfactory. Rice harvests were poor in 1975 and 1978, when the worst floods in seventy years struck the Mekong Valley. Even after the better harvests of 1976 and 1977, however, rice distribution was unequal, and the government failed to reach the daily ration of 570 grams per person. (The daily ration of rice per person actually varied by region from 250 to 500 grams.) Party leaders, cadres, soldiers, and factory workers ate well, but children, the sick, and the elderly suffered from malnutrition and starvation. There also were reports that the government was stockpiling rice in preparation for war with Vietnam and exporting it to China in exchange for military supplies. This diverted rice could have been one explanation for the people's meager rice ration. *

At the end of 1978, when Vietnamese troops invaded Cambodia, the ensuing turbulence completely disrupted the nation's economic activity, particularly in the countryside, which once again became a war theater traversed by a massive population movement. Agricultural production was again a major casualty, with the result that there was a severe food crisis in 1979. *

Economy After the Khmer Rouge

After the fall of Pol Pot and the establishment of the People's Republic of Kampuchea (PRK) in January 1979, the Kampuchean (or Khmer) People's Revolutionary Party (KPRP), led by General Secretary Heng Samrin, set Cambodia's economic development policies. Party congresses adopted these policies at meetings in January 1979, May 1981, and October 1985. A new Constitution, which the National Assembly approved in June 1981, defined Cambodia's new socialist direction and the role of the state in economic affairs. Then, after six more years of struggling with an economy of survival and subsistence, KPRP leaders presented their First Plan, which represented a systematic and rational party effort at centrally planning and improving the economy. [Source: Library of Congress, December 1987 *]

In contrast to Pol Pot's radical, doctrinaire approach to economic development, Heng Samrin and the leaders of the Kampuchean (or Khmer) National United Front for National Salvation (KNUFNS), the umbrella group of anti-Pol Pot forces sponsored by Hanoi, sought to rally public support by formulating a policy that would be pragmatic, realistic, and flexible. In an eleven-point program promulgated shortly before the Vietnamese invasion of Cambodia, the front articulated the economic guidelines that would mark its tenure in power. These guidelines advocated a gradual transformation to socialism; a "planned economy with markets"; the restoration of banks, of currency, and of trade; the abolition of forced labor; the introduction of an eight-hour workday; and pay based on work performed. *

The KPRP socialist economy accepted the private sector. At a May 1980 agriculture conference, Samrin reviewed the effectiveness of the solidarity groups (krom samaki), production units of seven to fifteen families, united in a common endeavor to raise food or to produce goods. These production units had been organized in line with the policy of moving toward socialism. He affirmed that each member of these groups would receive at least one hectare of land to cultivate for communal purposes, plus a private plot not exceeding a quarter of a hectare on which to grow vegetables or to graze livestock. Also, a July 1980 planning conference called for a policy of "simultaneous development of family (private) economy and national (socialized) economy." The conference also decided that the state should buy agricultural products from the peasants and should sell them manufactured goods at free-market prices. The KPRP further clarified its economic policy at its Fourth Party Congress (its first since taking power in Phnom Penh) from May 26 to May 29, 1981. It declared that the nation's economic system had three main parts--the state economy, the collective economy, and the family economy, and that each of these parts "had its own significant role." *

The state economy covered large-scale agricultural production, all industrial production, the communications and transportation networks, finance, and domestic and foreign trade. To facilitate economic transactions nationwide, the state restored the banking system in November 1979, and it reintroduced currency in March 1980. The KPRP acknowledged that the state economy was small and said that it should be expanded. The party leaders, however, aware of the pitfalls of central planning, warned against "over-expansion and disregard for real needs, production conditions, management ability, and economic capability." *

The collective economy--the largest of the three elements--was assigned an important role in agricultural rehabilitation and development. It consisted of solidarity groups in agriculture, fishing, forestry, and handicrafts. These groups also assumed the task of collective purchase and sale. The family-run economy included the home economies of the peasants, most retail businesses, individual artisans, handicrafts, repair shops, and small trade. Although the 1981 Constitution stated that the land and other natural resources were state property, it gave the citizens usufruct rights to land allotted for a house and garden by the state. In some cases, agricultural workers were also allowed to borrow an extra plot of land from the state, to produce food on it, and to keep the harvest for their own consumption. *

Private enterprise also made a modest beginning under Cambodia's hybrid economic system. Citizens were allowed to buy and to sell agricultural produce and handicrafts. The law guaranteed workers the right to keep their wages, their other income and their property. Encouraged and protected by the state, hundreds of small shops and factories, each employing a few workers, opened for business in Phnom Penh and in other urban areas. This inchoate private sector played such an important role in the national economic recovery that party leaders urged its official recognition, at the Fifth Congress in October 1985, as a means of mitigating the weaknesses of the state-run economy. Thus, the government added a fourth component--private economy--to the economic system and legitimized it with a constitutional amendment in February 1986. *

Khmer Rouge and Trade with Thailand

The Khmer Rouge remained alive in 1980s and 1990 with money from trade through Thailand. Gems and timber were transported into Thailand, as part of secret trade that has brought in millions of dollars for the Khmer Rouge and a select of group of Thai businessmen and army officers. In early 1995, it was believed that 16 Thai gem-mining companies were digging in Khmer Rouge-controlled territory in Cambodia. A Khmer Rouge defector said, "The Thai support the Khmer Rouge 100 percent. They are like an artery that provides blood to the Khmer Rouge."

One Thai gem merchant told Philip Shenon of the New York Times, "I think the world lies about the Khmer Rouge—they are really good people." While holding a beautiful star ruby he said was sold to him by the Khmer Rouge, he added, "Why should I care about the internal problems of Cambodia. That is not my country."

"For the Thai Army," wrote Shenon, "Pol Pot is the best sort of business partner—reliable and publicity shy." A former Thai army commander has reportedly ordered to Pol Pot as a "good man, a very misunderstood man."

Even though the Thai government banned trade with the Khmer Rouge the government still authorized permits for Thai companies to import timber from taken from Khmer Rouge-controlled areas of Cambodia. The brutal Khmer Rouge leader Ta Mok had the calendars of Thai banks in his house.

In 1994, Thai police stopped a Thai truck with weapons on their way to the Khmer Rouge. The Thai army the admitted that the weapons came from its warehouses, but said they had been taken without authorization, and explanation many diplomats found hard to believe. [Source: Philip Shenon, New York Times]

Five Year Plan from 1986-90

The First Five-Year Program of Socioeconomic Restoration and Development (1986-90), or First Plan, originated in February 1984, when the heads of the state planning commissions of Vietnam, Laos, and Cambodia met in Ho Chi Minh City (formerly Saigon) and agreed to coordinate their 1986 to 1990 economic plans. Heng Samrin formally announced Cambodia's plan in his political report to the congress. The plan was intended to open a new phase of the Cambodian revolution; it gave highest priority to agricultural production, calling it "the first front line," and focused on the four sectors of food, rubber, fishing, and timber. It set production targets for each sector. During the plan period, food production was to increase 7 percent a year to keep up with a targeted 2.8 percent annual population growth rate, which did not seem to have been reached by 1987. The plan projected that by 1990, rubber farming would expand to 50,000 hectares in order to produce 50,000 tons of latex; timber production would reach 200,000 cubic meters; jute production would increase to 15,000 tons; and fish production would amount to 130,000 tons. As in the past, the plan labeled agriculture and forestry as the real force of the national economy. [Source: Library of Congress, December 1987 *]

The plan was less specific for the industrial sector. It did not set industrial production targets, except that for electrical output, which was projected to reach 300 million kilowatt hours per year in 1990. The plan called attention to the need for selective restoration of existing industrial production capabilities and for proposed progressive construction of a small to medium industrial base, which would be more appropriate to the country's situation. *

The plan placed increased emphasis on the distribution of goods. Trade organizations were to be perfected at all levels, and socialist trading networks were to be expanded in all localities. In particular, the trade relationship between the state and the peasantry was to be improved and consolidated in accordance with the motto, "For the peasantry, selling rice and agricultural products to the state is patriotism; for the state, selling goods and delivering them directly to the people is being responsible to the people." The plan also required that investment be directed toward the improvement of the infrastructure, particularly toward the reconstruction of communication lines and waterworks. Road, inland waterways, and railroad networks had to be restored to serve the national economy and defense.*

Last, but not least, the plan cited "export and thrift" (without elaboration), as the two primary policies to be followed in order to solve the national budget deficit. The plan implied that, into the 1990s, exports would have to consist principally of agricultural and forestry products, to which some value might be added by low-technology processing. "Thrift," although undefined, could, in the future, include some kind of government savings plan, with incentives for small depositors, to absorb surplus riels generated by Cambodia's considerable free-market and black-market sectors. *

Heng Samrin, like his predecessors, Sihanouk and Pol Pot, urged Cambodians to undertake the task of economic restoration "in the spirit of mainly relying on one's own forces." Unlike Sihanouk and Pol Pot, however, the KPRP leader stressed economic and technical cooperation with Vietnam. He believed such cooperation would be "an indispensable factor" in the development of agriculture and of forestry in Cambodia. Heng Samrin also advocated better economic cooperation with the Soviet Union and with other socialist countries. *

Economy of Cambodia in the Late 1980s

The economy of Cambodia in the late 1980s was dominated by subsistence agriculture; the industrial sector was still in its infancy. After it came to power in 1979, the new, Vietnameseinstalled government in Phnom Penh set restoration of the nation's self-sufficiency in food, a situation that the country had enjoyed throughout prewar times, as a major goal. A persistent guerrilla war and a ravaged infrastructure impeded the achievement of this goal and of economic recovery in general, however. At the Fifth Party Congress of the Kampuchean (or Khmer) People's Revolutionary Party (KPRP), held in Phnom Penh from October 13 to October 16, 1985, General Secretary Heng Samrin laid claim to some "important successes in agricultural production" in his political report. At the same time, he acknowledged that the country's "backward and unbalanced" economy still faced tremendous difficulties, including shortages of fuel, spare parts, raw materials, skilled labor, and a cadre of professionals possessing technical expertise and economic management skills. In short, the country's material and technical bases had not been restored to prewar levels. Prior to its adjournment, the KPRP Congress adopted the First Five-Year Program of Socioeconomic Restoration and Development (1986-90), hereafter referred to as the First Plan. [Source: Library of Congress, December 1987 *]

In 1987 there were signs that reforms legalizing private enterprise were revitalizing the country's economy. Small industrial enterprises reopened, and transportation and telecommunication systems were partially restored. As private market activities resumed, the population of Phnom Penh grew from 50,000 in 1978--the last year of the Pol Pot regime--to 700,000. Economic revitalization also occurred at Kampong Saom (formerly known as Sihanoukville), Cambodia's only seaport and its second largest city, which resumed its pre-1975 industrial and shipping activities. *

Economic rehabilitation has been precarious and has been plagued by uncontrollable factors, such as adverse weather and serious security problems. In 1987 a severe drought in Southeast Asia reduced Cambodia's rice production. According to a senior official of the Ministry of Agriculture, estimated production of milled rice fell that year to approximately 1 million tons, about 300,000 tons below the level of fiscal year 1986. (Cambodia needs at least 1.9 million tons of rice annually for a population of 6.5 million). *

The prospects for Cambodia's economic revitalization were poor in the late 1980s. The country's infrastructure was both weak and unstable. Factories and workshops, lacking electricity and supplies, operated only intermittently and at low capacity. The economy relied heavily--and almost completely after 1980--on foreign aid from communist countries, particularly the Soviet Union and the Socialist Republic of Vietnam (Vietnam); Western nations, Japan, and China had terminated economic assistance to Cambodia in 1980 to protest the presence of Vietnamese troops in that country. According to General Secretary Samrin, Cambodia would require "dozens of years" to restore its economy and to accomplish "a gradual passage toward socialism." Internationally, Cambodia in the future may have the option of joining the Council for Mutual Economic Assistance (CMEA, CEMA, or Comecon--see Glossary). If the Vietnamese troops leave, the country also may be offered some form of economic cooperation by other Asian and Western nations. In either case, however, Cambodia is very poor, produces little, and is not likely to prove an enticing economic partner. For this reason, in the forging of new economic links with the East and with the West, the country is likely to be relegated to a passive role, and the initiative will probably belong to the larger states, who will decide on what terms to share their largesse with Cambodia. *

Because of insufficient and inconsistent--and therefore unreliable--data, analysis of Cambodia's war-torn economy can only be tentative. In the late 1980s, key economic indicators were missing or were difficult to reconcile, particularly for the Pol Pot period (1975-78). Since 1979 government economic publications have been scarce, and official statistics represent targets and estimates spelled out in the country's economic development plans rather than actual figures. *

Economy of Cambodia in the 1990s

According to Lonely Planet; “Since the Paris Accords of 1991, Cambodia's economic growth has depended on millions of dollars of foreign aid. Foreign interest in Cambodia has decreased, however, and the country has received diminishing economic assistance. This development, along with the continued lack of openness in Cambodian politics, has made Cambodia's prospects for democratization dim, as well as its chances for sustained economic growth.” [Source: Lonely Planet]

The government after the Khmer Rouge initially advocated semi-socialist policies. In 1989, after a period of partial collectivization followed by redistribution of land, private property was formally reinstated. In 1991, the government stopped describing itself as communist and began embracing market-oriented reforms.

In the late 1980s and early 1990s the economy was propped up by the United Nations and foreign aid. There were worries that the economy would collapse after the United Nations left in 1992. That didn’t happen. Instead the economy grew by 5 percent, inflation was reduced and the currency stabilized. The government didn’t spend beyond it means and some foreign inventors showed up.

Growth was 7 percent in both 1995 and 1996 but fell to 1 percent in 1997 and zero in 1998 because of the Asian financial crisis and a patrial freeze on foreign aid because of the coup in 1997. Cambodia was hurt less by the Asian financial crisis than other Asian counties because it was so poor to begin with. Growth averaged 7 percent between 1999 and 2002. Much of the growth was attributed to relative stability which had attracted foreign investors.

Economy of Cambodia in the 2000s

Cambodia’s ability to grow economically has been hurt by China’s ability to attract most of the foreign investment in Asia. As of the early 2000s, foreign aid continued to make up 40 percent of the national budget. Growth was 9.4 percent from 1998 to 2008. Between 2004 and 2007 the growth rate was 11.1 percent. Growth was 7.8 percent from 2001 to 2011. After experiencing a downturn during the economic downturn in 2008 and 2009 growth was 5.9 percent in 2010. In 2009 Reuters reported: “Skyscrapers springing up on the banks of the Mekong, land prices rivaling Bangkok's and a stock exchange planned for this year all attest to an economy shaking off its past, thanks to growing domestic and Asian investment over the past decade.

Seth Mydans wrote in the New York Times: “The Cambodian economy has at last started to grow, at an estimated 9 percent in 2007.. And Phnom Penh is starting to transform itself with modern buildings, modest malls and plans for skyscrapers. It is one of the last Asian capitals to begin to pave over its past. The economy has been growing mostly based on income from garment manufacturing and tourism, as well as by a real estate boom that is bringing in foreign investors.

But that growth is fragile, some economists say. Garment jobs are moving to China. The high cost of fuel may begin to squeeze the tourism industry. And like its neighbors, Cambodia is suffering from rising food prices and a slowing economy. Inflation, which had not passed 10 percent before this year, may be approaching 20 percent, according to some estimates. The small middle class with money to spend in the capital's new malls could shrink. And little of its money trickles down. Cambodia remains one of the poorest nations in the world, with one of the widest gaps between rich and poor. About 35 percent of the population lives on less than 50 cents a day. "Life is better than five years ago," said Seng Sing Leng, 43, a pork seller in a marketplace. "But things are getting harder. Our income is higher than before, but prices are much higher, too."

Katie Nelson wrote in the Washington Post: “The economic change is palpable in Cambodia these days, especially in the capital, Phnom Penh, though many of the old French colonial buildings are still run-down, and piles of pungent trash dot the city. Parks have become more popular since the addition of Las Vegas-style fountains and landscaping. Foreign investment, particularly from South Korea, has been pouring in. Tony high-rises, such as the 52-story International Finance Complex and the 42-floor Gold Tower 42 -- two of the recent South Korean investments here -- are sprouting. [Source: Katie Nelson, Washington Post, July 27, 2008 ++]

“Oil exploration in the Gulf of Thailand is creating hope that the country could become a resource-rich nation. So far, the quality and size of the oil fields have not been made public, nor has the potential windfall. But economists say oil could bring a significant swell in Cambodia's gross domestic product, which was the equivalent of $8.6 billion in 2007, according to Vanndy Hem at the Asian Development Bank. ++

“Tourism, too, continues to be a boon, as more of the world discovers the famed Angkor Wat and other temples of the Khmer Empire, which ruled much of Southeast Asia for six centuries. The number of foreigners entering the country hit 2 million in 2007, said Ho Vandy, co-chair of Cambodia's Working Group on Tourism and head of the Cambodia Association of Travel Agents. That number is likely to continue to increase, at least in part because of renovations that are to be completed next year on the cross-country train route that connects Phnom Penh to the temple region.” ++

Ker Munthit of Associated Press wrote: “ A former Khmer Rouge soldier himself, Hun Sen has embraced free-market policies that have made Cambodia's economy one of the fastest growing in Asia, expanding at 11 percent in each of the past three years. "The economic growth helps (the party). And in a time of crisis, people feel they have to be united behind the power that controls the army," said Benny Widyono, an independent observer and former United Nations official during Cambodia's U.N.-brokered peace process in the early 1990s. [Source: Ker Munthit, Associated Press, July 27 2008]

Cambodia During the Global Financial Crisis in 2008 and 2009

Economics Today reported: “The effects of the global financial crisis in 2008 and 2009 on the Cambodian economy showed how perilous having a narrow economic base can be. Since the Kingdom’s economy is dependent on a few “pillars”-garments, construction, tourism and agriculture-downturns in any of those sectors can have serious consequences. [Source: Economics Today, October 9, 2012]

While GDP from 2003 to 2007 grew at above nine percent a year, during the global crisis in 2008 growth slowed to 6.7 percent and then almost stopped in 2009, when the economy expanded just 0.1 percent. The rapid downshift demonstrated more acutely than ever the need to broaden the economic foundation. Now economic diversification is at the heart of the government’s sustainable growth plan.

Image Sources:

Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, Lonely Planet Guides, Library of Congress, Tourism of Cambodia, Compton’s Encyclopedia, The Guardian, National Geographic, Smithsonian magazine, The New Yorker, Time, Newsweek, Reuters, AP, AFP, Wall Street Journal, The Atlantic Monthly, The Economist, Global Viewpoint (Christian Science Monitor), Foreign Policy, Wikipedia, BBC, CNN, NBC News, Fox News and various books and other publications.

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© 2008 Jeffrey Hays

Last updated May 2014

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