Constitutional crisis in Cambodia

Dear colleagues,

The publication today of the “interpretation” by the CPP-controlled
Constitution Council concerning Article 76 of the Constitution, shows
that the CPP does not fully understand the rationale behind our
initiative:
1- Actually, we don’t aim at the dissolution of the National Assembly
but we simply want to make its decisions invalid from the day the
number of National Assembly members falls below 120.
2- This invalidity has nothing to do with the 7/10 quorum but it
derives from the upstream constitutional requirement for the National
Assembly to have at least 120 members.
3- While the Constitution DOES NOT limit the scope of the requirement,
the CPP interpretation according to which this constitutional
requirement to have “at least 120 members” applies ONLY at the
beginning of the National Assembly -- and not throughout its term --
is definitely subject to caution and certainly leaves room for
different interpretation.
4- Suppose a new car is required to have four wheels when it is
produced at a factory. Is this requirement valid ONLY at the
beginning? Certainly NOT. Suppose the car loses one wheel some time
after its production. Such a car, with only three wheels, cannot be
used normally as usual. It has become dangerous for its passengers,
for other cars and for the public at large.
5-The conflicting interpretations by the CPP and the SRP will create
at least some doubt about the legally and the validity of any decision
made by a National Assembly with less than 120 members. More
precisely, when it comes to the ratification by the National Assembly
of loans from international institutions and foreign countries, even a
little doubt is enough for serious and professional creditors to stop,
reduce or delay any loans that appear more risky (see point F7 in my
economic analysis below).

Sam Rainsy


November 13, 2011

WHY THE HUN SEN REGIME RELIES MORE AND MORE HEAVILY ON EXTERNAL BORROWINGS

The economic situation in Cambodia is artificial, fragile and
explosive based on the following interrelated facts (from F1 to F7):

F1 : A dollarized economy. The country’s money supply is composed of
US Dollars for up to 95% and Riels for only 5%. The exchange rate (1
US Dollar = around 4,000 Riels) is totally artificial, being easily
manipulated given the respective amounts of Riels and Dollars in
circulation. Because it is pegged to the Dollar, the Riel is
overvalued compared to the currencies of our neighbouring countries
and commercial partners after taking into account the differences in
inflation rate in the different countries (caution: official
statistics in Cambodia are manipulated for political reasons). The
dollarized economy and the overvalued Riel contribute to a loss of
competitivity for Cambodia’s economy which in turn contributes to a
huge trade deficit and a large unemployment.

F2 : High inflation rate, meaning increasing cost of living. This
seems paradoxical given F1 because inflation tends to be lower in
countries with an overvalued currency. But the high inflation in
Cambodia is largely due to compulsory bribes throughout the production
and distribution processes, other forms of financial extortion and
commercial monopolies based on government systemic corruption.
Inflation is an insidious form of wealth transfer from the weak and
the poor to the powerful and the rich, whereas the ongoing land
grabbing is a direct and brutal form of such a transfer.

F3 : High and increasing unemployment rate partly due to the
dollarized economy (see F1) but also to demographic factors,
inappropriate education system, corruption-related hindrances to
foreign direct investment and poor economic governance.

F4 : Deteriorating living conditions because of high inflation and low
salaries for workers, employees and civil servants. Farmers’ income
also suffers from government corruption and neglect and the absence of
any consistent agricultural policy (by comparison see SRP political
platform for agriculture). Hidden and disguised unemployment is a
major cause of poverty (see F3).

F5 : Huge trade deficit (imports of goods and services larger than
exports). The main cause for such a deficit is low productivity and
declining competitivity associated with the dollarized economy (see
F1) and high inflation (see F2).

F6 : Continuous fiscal (or State budget) deficit. Because of
government corruption (loss of State revenues, unjustified increase in
State expenditures that are always inflated) the fiscal deficit is
persistently high and needs to be covered by international assistance,
increasingly by borrowings from foreign institutions and countries.

F7 : Increasing borrowings from foreign institutions and countries,
such as China over a recent period (see F6). The corresponding capital
inflows help perpetuate the dollarized economy (see F1). External
borrowings feed corruption, allow continuous fiscal and monetary
irresponsibility on the part of the CPP-led government that is in a
position to indulge in vote buying (donations and patronage system).
Thanks to the increasing amount of non-transparent external borrowings
in foreign currencies, secret amounts of Riels could also be illegally
printed (paper money) by the CPP for corruption and election purposes
without notably affecting the exchange rate (see F1). Therefore,
external borrowings play a pivotal role in maintaining the CPP in
power by preventing a deterioration of the fiscal deficit (see F6) and
a worsening of the balance of payments (see F5) that would result in
dramatic consequences for the economy and for the CPP political
domination (see F2, F3 and F4 which show how the economic, social and
political situation is potentially explosive).


Sam Rainsy
Elected Member of Parliament
Former Finance Minister