The long road to poverty eradication

Thida C. Khus

Despite official policy pronouncements and some genuine efforts to reform the health and education sectors, structural obstacles, most particularly low budgetary allocations and disbursement systems that are slow and not always transparent, block progress and have a debilitating effect on the quality and delivery of services. The deep structural macro-economic problems worsen year after year and paralyse the whole public health sector. Access to key natural resources are auctioned off to be commercialised, leading to further impoverishment of the population.

TheParis Peace Agreement of October 1991 ended more than two decades of civil warand international isolation, which had reduced Cambodia to a state of nearcollapse. The rapid transition to an open-market economy and generous terms forforeign investment during the 1990s took place in a climate of ongoing politicalinstability amidst strong external pressure for political and administrativereform.

Thepolitical consequences of almost 30 years of conflict have received muchanalysis and discussion. The consequences for people’s economic, social andcultural rights to development have so far not been comprehensively examined.The present analysis considers the process of privatisation of basic servicesand access to natural resources, which have long been the sources of subsistencefor the rural poor. Currently 36% of the population earn less than USD 1 eachday. Halving that poverty level by 2015 appears to be a daunting job.

Theforgotten priority

Becauseof serious budgetary limitations, the Royal Cambodian Government is unable tocontribute adequately to social and economic development. The current nationalbudget allocation to the social sector isvastly inadequate for the needs of the population groups most at risk. Thesegroups include the thousands of people disabled by war and landmines, theelderly and elderly widows in particular, the unemployed and large number ofunder-employed who are struggling to raise their children, and the ever-growingnumber of widows and orphans left behind by the AIDS epidemic.

Governmentdebt reached USD 558 million, or 17% ofGDP, by the end of 2001. Most of the debt is from loans from the WorldBank and the Asian Development Bank with a ten-year grace period.Cambodia will begin to pay its first debt service commitment, about USD 500,000,in 2003.

Table1 shows budgetary allotments to the various sectors in 2000 and 2001. (Actualexpenditures were about 80% of the allotment in 2000 and about 82% in 2001.)

Table1. Budget expenditure through the National Treasury


USD Millions







Total Budgeted Expenditures





Defence & Security





Education and Health





Economic Ministry





Other State Institutions










Source: SokHach and Sarthi Acharya, Cambodia’s Annual Economic Review 2002,Cambodia Development Resource Institute, 2002.

Cambodia’sneighbour, Thailand, spends much more on the social sector, as seen in table 2.

Table2. A Comparison of social and economic development investment


Cambodian Government


Health care

USD 7 per person

USD 150 per person

Public infrastructure development

USD 6 per person

USD 180 per person

Source: SokHach and Sarthi Acharya, Cambodia’s Annual Economic Review 2002,Cambodia Development Resource Institute, 2002.

In1999, NGOs and donor nations financed 46% of the total spending on education,while households and the government each financed 27%. For health care,households financed up to 82% of the total cost, while donor countries and NGOsfinanced up to 14% and government only 4%. These structural problems worsen yearafter year and paralyse the health sector. Cambodian families often have to selltheir land and vital assets to finance their healthcare needs.[1]

Despiteofficial policy pronouncements and some genuine efforts to reform the health andeducation sectors, structural obstacles, most particularly low budgetaryallocations and disbursement systems, which are slow and not always transparent,block progress and have a debilitating effect on the quality and delivery ofservices to the people.

Privatisationand management of natural resources

Landand forest concessions have been widespread since 1993. The 1987 Fisheries Law,which auctioned off and commercialised fishing resources, put fishermen aroundthe Great Tonle Sap Lake in extreme poverty. Thirty-eight percent of people inthis area live under the poverty line. The commercial fisheries have destroyedfish resources through over-fishing, and this has led to violent conflicts betweenlocal communities and fishing lot operators.

Widespreadprotests by local communities against the commercial fishing operators have ledto some reforms being undertaken by the Royal Government. Through these reforms56% of the fishing grounds were released to local communities to establishcommunity fisheries. However, most of the released sites proved to beunproductive.

Theright to self-determination means that people must have access to the means ofsubsistence. Where 84% of the population still depend on the natural resourcebase for their livelihood, access to land, forests and fisheries is vital fortheir very survival. Denial of that access as a result of the concession systemhas severely affected people’s livelihood, especially in relation to foodsecurity.

Theincidence of poverty and indigence in rural Cambodia is high, and often spillsover into the cities: farmers defeated by flood, drought, debt and increasinglyby landlessness, drift to the city and take shelter in one of at least 500settlements for the urban poor which currently house around 35,000 families.

Governanceand socially vulnerable groups

Poorgovernance and entrenched corruption contribute directly to poverty, and callout for the adoption of legislative measures. There has been a marked increasein official corruption but no real effective action taken to put a stop to it.In particular, the failure of the government to provide adequate salaries to itsworkers induces them to extort illegal payments from users of public servicessuch as roads, schools and hospitals. Poor people who cannot make illegalpayments often go without health care and education. The high cost of publiceducation to families means that the majority of children in Cambodia still failto complete their basic schooling.

Corruptionhas put children greatly at risk. Illegal adoption practices, child pornography,and the sexual exploitation of children are matters of serious concern. It isestimated that there are 80,000 to 100,000 commercial sex workers in Cambodia,of whom about 30% are thought to be less than 18 years of age. The sexualexploitation of children, mainly girls, is directly related to prevailingattitudes towards gender roles. Between 400 and 800 Cambodian women and childrenare trafficked to foreign countries for sex each month.[2]This puts the population of child sex workers at about 5,000 in Phnom Penhalone.[3]

Theeffect of poor governance is also felt in the countryside, where conflicts oftenerupt into violent armed confrontations without any formal mechanisms to controlor stop them. In the city, poor communities are constantly threatened witheviction for the purposes of “development” or for plans for the“beautification” of the urban landscape. At least ten evictions occurredduring 2001, displacing thousands of families, many with little notice, andrelocating them to areas with inadequate provision for basic infrastructure andservices.

Finally,unenforced laws leave workers vulnerable. Although the Cambodian Labour Law of1997 is judged to be fair and comprehensive, apart from the garment andshoe-making factories, very few employees have benefited from its enactment.Even within the foreign-owned garment and shoe factories, ignorance of the lawand abuse of the workers’ right to organise is widespread, according to arecent International Labour Organisation report and studies by a local NGO. Themain failure lies with the government, which has not provided an efficientmonitoring tool for assessing working conditions and protecting employees fromemployers’ intervention with their union.

Thebitter outcome for the poor of a decade of open foreign investment

Thegovernment adopted a liberal investment regime, embodied in the Investment Lawadopted by the National Assembly on 4 August 1994.[4]Liberalisation and high incentives for foreign investment for over a decade,have increased GDP from USD 2,151 million in 1993 to USD 3,234 million in 2001,and increased employment from four million to five million. However, economicgrowth has failed to spur economic development in Cambodia, which did nottrickle down to the ordinary citizen.

Povertyhas increased over the decade. The poverty rate figure for Cambodia is 36%, butthe poor are concentrated mainly in remote provinces where poverty can reach ashigh as 90%.

The2002 Cambodia Poverty Reduction Strategy Paper measures poverty by using twostandards: the “Food poverty line” and the “Overall poverty line”.

Asdefined by this paper, the food poverty line implies“an adequate income for a person to consume a food basket that provides atleast 2,100 calories of energy per day and a small allowance for non-food itemssuch as shelter, and clothing.”[5]In 1993-1994, the food poverty line was 20%; in 1999, it was standing at 28.9%.Poverty has also increased during the decade if measured through the OverallPoverty line—which takes non-food consumption into consideration—from 39% to51.1%.

Besidesthe growth of poverty, a wider disparity has been created between a few powerfulgovernment officials and the ordinary majority. There is more and more migrationof rural young people to the city, mostly of women to work in the garmentindustries. Large land and forest concessions to foreign companies havedisenfranchised many rural farmers. Many of them lost their productive land andnatural resources on which they depended for their livelihood. There have beenrepeated natural disasters of flood and drought, which devastated the farmers’rice production and threatened the food security of many rural communities.

Illegalpayments have made the cost of doing business in Cambodia very high. Corruptionis the main complaint of all businesses. Porous borders make legitimatebusinesses unable to compete with contraband products. The main income for thegovernment is tax on gasoline, which has made the cost of production verycostly, especially for small and medium-sized businesses and farmers. To makematters worse, the unreliable justice system makes business in Cambodia riskyand unpredictable. In addition, the “dollarisation” of the Cambodian economyhas made its products expensive and unable to compete with Vietnamese and Thaigoods.

Thepremature opening of the economy to free trade without first going throughcapacity-building and strengthening the current public administration andeducation system has attracted foreign companies that are only searching forshort term profits. These companies will soon deplete Cambodia of its naturalresources and worsen its serious economic and social problems.

Inshort, the process of change is long and painful.


[1] Cambodian Development Resource Institute. Social Assessment of Land in Cambodia, 2001.

[2] David Kihara, “Enforcement key to stop child trafficking”, The Cambodian Daily, 3 August 2001.

[3] United Nations Development Programme. Cambodian Human Development Report 2000.

[4] U.S. Department of Commerce, National Trade Data Bank, 3 September 1999.


Most of the content of this report is extracted from the 2001 Cambodian NGO Report on the International Covenant on Economic, Social, and Cultural Rights.