trade

The Mirror, Vol. 13, No. 605

Looking back at the end of a week to the past information carried, it is often difficult to understand easily what happened – or what not happened.

On Friday, we mirrored a report that in January 2009, there were 40 children under the age of six living with their parents in prisons. “The Prison Department of the Ministry of Interior is asking the Ministry of Economy and Finance to increase the monetary allowances for prisoners from Riel 1,500 [approx US$0.37] to Riel 2,800 [approx. US$0.69] per day, so that they can eat enough food.” And: “It should be remembered that children living with their parents in prison are not prisoners, and they must not receive any punishment…”

An increase from US$0.37 to US$0.69 per day is an increase of US$0.32 per day per person, that is $12.80 for all 40 children per day; that is $384 per month. For all 40 children for one whole year, this upgrade would cost $4,604.

Here are some other figures to which we referred during the week, as they had appeared in The Mirror:

• US$200,000 were donated by the Japanese Government to the Khmer Rouge Tribunal
• US$18 Million had been loaned to the Government, but the World Bank might withdraw them
• US$7.07 million were spent for the Senate in 2008
• US$12.6 million are provided to Cambodia by the World Bank to expand international trade
• US$100 Million is a loan from the International Finance Corporation of the World Bank Group to expand a mobile phone network
• US$35 million on loan from Japan for the construction of clean water production

And US$4,604? Of course all these other moneys were not designated to feed 40 children under six in prison, and the paperwork on the way from the Prison Department of the Ministry of Interior to the Ministry of Economy and Finance, and then the search where, in the national budget to find US$4,604, also takes its time, while sorting out regulations.

But: “It should be remembered that children living with their parents in prison are not prisoners, and they must not receive any punishment…” Who is in charge? Who cares? Who could even care to get things moving, without being in charge?

But there were other problems to be faced, and not only by 40 children, but by the whole nation.

Not many publications have a prestigious history like The Economist from London. It began publishing in 1843 and has continued as a weekly magazine until the present. In 2007, it had a world wide circulation of more than 1.3 million.

In addition to its publications, The Economist has also a research arm, the Economist Intelligence Unit, and it is regularly organizing Economist Conferences around the world. Such a conference was held early this year also in Cambodia, on 16 February 2009 in Siem Reap, under the heading: Business Roundtable with the Government of Cambodia – On the verge of a breakthrough? [see The Mirror report in Rasmei Kampuchea of 13.2.2009] The Prime Minister was a keynote speaker at this conference. It was considered a special event that an Economist Conferences had been organized and was held in Cambodia. This had been announced:

Key issues to be discussed included:

• In light of recent oil and gas discoveries in the Gulf of Thailand, what is the government doing to settle border claims with its neighbors?
• With predictions that oil could start flowing by as early as 2011, how will the government manage Cambodia’s newfound wealth?
• In evaluating the investment climate, are private equity firms being overly optimistic?
• What new business opportunities are there for investment in Cambodia’s much needed infrastructure?
• Given the recent boom in property development and construction, is greater regulation of the industry necessary and if so, what impact will this have on property investors?
• How will Cambodia’s garment industry deal with greater competition from China and Vietnam? What is being done to boost efficiency in this important industry?
• With a recession hitting the US, what is Cambodia doing to diversify its export markets?
• How will the government offset growing inflation and an increase in commodity prices, particularly of oil?
• Is Cambodia’s economy ready to move away from de facto “dollarization” to the Riel and what will this mean for business?

That this event was planned – as the many other Economist Conferences around the world – for high level business leaders, was obvious from the admission prices to participate in his one-day-only event:

US$ 990 Early Registration Fee (by 9 January 2009)
US$1,250 Standard Registration Fee
US$1,000 Corporate Network Members’ Fee

These high level conferences are prepared by the Economist Intelligence Unit, which is described on their own Internet website with the following ambitious words:

The Economist Intelligence Unit is the world’s foremost provider of country, industry, and management analysis. Founded in 1946 when a director of intelligence was appointed to serve The Economist, the Economist Intelligence Unit is now a leading research and advisory firm with more than 40 offices worldwide. For over 60 years, the Economist Intelligence Unit has delivered vital business intelligence to influential decision-makers around the world. Our extensive international reach and unfettered independence make us the most trusted and valuable resource for international companies, financial institutions, universities, and government agencies.

The appreciation for the fact that Cambodia had been the site of an Economist Conference turned into hostility, after – on 19 March 2009, the Economist Intelligence Unit published a 34 pages document: Manning the barricades – Who’s at risk as deepening economic distress foments social unrest?

In this document, the basic methodology of compiling the document is laid open, for three possibilities, asking If things feel bad now, how much worse could they get? – and it describes the third and worst possibility with the following words:

Failing confidence in the Dollar leads to its collapse, and the search for alternative safe-havens proves fruitless.
Economic upheaval sharply raises the risk of social unrest and violent protest. A Political Instability Index covering 165 countries, developed for this report, highlights the countries particularly vulnerable to political instability as a result of economic distress…

The political implications of the economic downturn, informed by the results of the Social and Political Unrest Index, are discussed at length in the second half of the report.

The full report, in both PDF and HTML format, is available online at www.eiu.com/special.

Putting a lot of detailed data from many countries through these procedures, which contain among others also terms developed by the Political Instability Task Force at the George Mason University in the USA, which elaborate also about further terms which we quote here:

Economic distress appears to be almost a necessary condition for serious instability, but it is not a sufficient one. There are many instances of declines in GDP per head that have not been followed by political instability. It is only when economic distress is accompanied by other, underlying or structural features of vulnerability that there is a high vulnerability to or risk of serious outbreaks of political and social unrest.

Defining political unrest

We define social and political unrest or upheaval as those events or developments that pose a serious extra-parliamentary or extra-institutional threat to governments or the existing political order. The events will almost invariably be accompanied by some violence as well as public disorder. These need not necessarily be successful in the sense that they end up toppling a government or regime. Even unsuccessful episodes result in turmoil and serious disruption. The assessment of what constitutes a “serious threat” still requires judgment and can be arbitrary, but this is a step forward from having no definition at all.

Political Instability Index

The overall index on a scale of 0 (no vulnerability) to 10 (highest vulnerability) has two component indexes—an index of underlying vulnerability and an economic distress index. The overall index is a simple average of the two component indexes. There are 15 indicators in all—12 for the underlying and 3 for the economic distress index.

As a result, a table is automatically calculated from the hundreds of data collected. We quote only the beginning of the resulting Political Instability Index of Rank, Country, and Score:

	1	Zimbabwe	8.8
	2	Chad	8.5
	3	Congo Kinshasa	8.2
	4	Cambodia	8.0
	4	Sudan	8.0
	6	Iraq	7.9
	7	Cote d’Ivoire	7.8
	7	Haiti	7.8
	7	Pakistan	7.8
	7	Zambia	7.8
	7	Afghanistan	7.8

Naturally, this ranking for Cambodia on Position 4 (from 165, with some countries sharing the same ranking number) was received with surprise, and even rejection. Considering the final results, it was quickly dismissed as a report supposedly produced with a hidden agenda against Cambodia. – More surprising is how the Cambodian embassy in England reacted against the Economist Intelligence Unit’s report, which misunderstands the report as made up of arbitrary statements targeting Cambodia – and therefore asking the Economist Intelligence Unit to “issue a retraction.” This is misunderstanding is obvious from the following excerpts of the letter of the Cambodian ambassador to the Economist Intelligence Unit:

Dear Sir,

On behalf of the Royal Government of Cambodia, I am writing to express my deep concern and disappointment with your latest report, “Manning the Barricades” in which you highlight Cambodia as one of the countries most at risk of suffering serious social unrest as a consequence of the on-going global financial crisis.

Your scaremongering allegations are highly dangerous as they could be construed as actively inciting unrest. They also happen to be a gross distortion and misrepresentation of Cambodia’s true position and there can be no justification for these claims.

May I suggest that it is insulting for you to claim that Cambodia is more politically unstable than the war-torn nations of Iraq and Afghanistan…

You also appear to have rather arrogantly dismissed any serious evidence which contradicts your own claims; not least that provided by the Prime Minister of Cambodia, Hun Sen, who only in February 2009 addressed a Business Round Table event co-hosted by your own organisation.

You may recall that the Prime Minister used that occasion to record that Cambodia had just enjoyed a decade of blistering growth, more than doubling its per capita GDP between 1998 and 2007. He attributed this great success to political stability, forging deeper integration with the global trade and investment communities; and improved macro-economic management.

You also seem to have ignored Cambodia’s sizable oil and gas deposits, its wealth of natural resources as well as its growing reputation as a “must visit” tourist destination and as a center of enterprise and investment….”

It is extremely unfortunate that the result of an analysis of hundreds and hundreds of international data, which fully agree with the assessment of Cambodia’s economic growth during the last years, is not seen for what it says: that countries which had a high growth rate based on factors now being eroded by the international economic crisis, are facing a more serious danger of disrupting instability than countries which have been anyway politically instable, and economically at a low level. The Economist Intelligence Unit is not questioning past achievements – but it is sounding a warning that these achievements are now facing a most serious challenge, and therefore the new situation merits utmost attention.

This week’s reflection is much longer than usual.

It was written with the hope to improve communication between Cambodian and international voices, which is often mis-communication: while facts are presented with an invitation to rationally discuss them, they are emotionally dismissed. This is not useful, and ways have to be found to communicate better.

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