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The truth behind Cambodia’s inequalities

Economics
Poverty
Cambodia
Equality

A female garment worker joins a rally in front of the Ministry of Labor on December 28 2013, demanding a monthly living wage of $160.

Licadho

Last week in Phnom Penh, the capital of Cambodia, I walked past a gold BMW parked casually on a side-street. That is to say, last week I walked past a BMW 5 Series, which had been covered in $1,000 worth of gold, brassy vinyl (I hear that is the cost of such a paint-job). A few men were gathered around the car, squinting and muttering to one another, as the driver watched on nervously from an ATM.

At first I thought the car’s statement was meant to say: I have more money than you to anyone who happened to catch sight of it. But then I thought about another statement this gilded car was saying: I may be running out of ways to fritter away my money.

As I walked a few blocks away from the gilded BMW, a homeless woman approached me with a baby on her back, asking for a few dollars to buy some milk. She offered to give me a little wooden trinket in return for my money because she didn’t want to beg – clearly she was just one of a growing number of people who feel the poor should be apologetic for their poverty. I gave her two dollars.

These two encounters are not uncommon in Phnom Penh, a city that is now visibly split between the ‘haves’ and the ‘have-nots’, or those who have been swept up in the country’s economic boom and those who have been swept aside.

In 1996, the professor and author Dr Walden Bello warned Cambodia about following the free-market economy, deregulated and privatized, which was beginning to develop in the Southeast Asian country.

He told an audience of academics and politicians in Phnom Penh that ‘while the rampant consumerism that comes with high-speed growth continues to dazzle many in Asia, there is a growing feeling that a process that is accompanied by the decline of agriculture, increasing inequality and uncontrolled ecological degradation is a recipe for an unlivable future.’

He added: ‘Governments and people in countries that want to be newly industrialized would do well to ponder carefully the consequences of fast-track capitalism and ask themselves: is this a model worth reproducing?’

The Cambodian government answered this question with a firm ‘yes’. Embarking on an economic policy of hurricane capitalism during the late 1990s, Cambodia opened itself up to foreign investment and provided generous incentives for international organizations to set up shop.

Between 2004 and 2012, the economy grew by more than eight per cent each year. During the same period, its gross domestic product (GDP) more than doubled, from $5.3 billion to just over $13 billion.

With this economic boom, Cambodia became a prominent tourist destination, developed a recognizable middle class and threw off its history as a country tainted by the Khmer Rouge regime.

Its capital, Phnom Penh, is now a city where Hummers and Rolls Royces zip through the busy streets, where high-rises and luxury apartments are going up as quickly as they can be built, and, as a sign of the country’s progress, those with enough disposable income are busy conspicuously consuming in the brand new Western-style shopping-malls.

Beyond the shopping malls

Cambodia’s economic ‘success’ has been praised by international organizations such as the IMF and UN. The country was dubbed the ‘New Asian Tiger’ and granted membership into the World Trade Organization (WTO). Such accolades were warmly received by the ruling Cambodian People’s Party (CPP) and Prime Minister Hun Sen, who has been in charge of the country now for almost three decades.

However, beyond the shopping malls and the gentrification of central Phnom Penh, there are areas of the capital rarely seen by foreigners and affluent Cambodians.

In neighbourhoods such as Boeung Kropeu, Sangkat Prey Sor and the Canadia Industrial Park, more than 400,000 Cambodians toil away in factories for as little as $2 a day, producing clothes for Western markets. Conditions are often so bad that workers often faint from exhaustion or overheating. Wages for Cambodian garment workers are said to be the second-lowest in world, after Bangladesh.

These factories and their produce are the driving force behind Cambodia’s economic growth. In 2013, the garment industry was valued at $5 billion and its exports accounted for a third of national GDP.

Cambodia today is a country of impoverishment and rising inequality, ruled by the corrupt, money-hungry élite.

Most factories are owned by Malaysians, Chinese and Koreans who have set up shop in Cambodia because of cheap labour and generous tax breaks from the government. The employees are almost all Cambodian, many of whom have moved from rural areas looking for better pay in the big city.

In December 2013, workers from many of these factories protested about conditions and wages. Their demand was a rise in the minimum wage from the current $80 per month to $160. A government report had earlier found that such a raise was needed to provide workers with the means to live a decent life. But the government offer was an increase of just $20 a month.

On 3 January 2014, as protesters marched down Veng Sreng Street, security forces opened fire on the so-far peaceful demonstration with live ammunition. Five workers were killed and as many as 40 were injured.

The Garment Manufacturers Association of Cambodia, an organization which represents factory owners, called these deaths ‘collateral damage’. The government, bowing to industry pressure, refused to investigate the killings. Instead, in September 2014, courts issued warrants for the arrest of seven trade union leaders charged with a series of crimes related to the January protests; this could result in 15-year prison sentences.

Forced evictions

It’s not only garment workers who are protesting their position in Cambodia’s new economy. There have also been protests in rural Cambodia, where more than 80 per cent of the population lives.

Over the past decade, Cambodia has been awash with land-grabs and forced evictions of peasants from their homes and farms. Since the early 1990s, 2.1 million hectares of land (just over the total area of Wales) have been transferred from small, subsistence farmers into the hands of industrial agriculture firms.

In 2013, The Guardian reported that since 2006, more than 100,000 hectares (250,000 acres) have been cleared from just three provinces, in order to make way for sugar plantations. But evictions have occurred in almost all areas of the country.

Much of this land was owned by subsistence farmers and rice-producers, who were either forced off their land by security forces or forced to sell their land at below-market rates.

One of the companies responsible for these clearances was Tate & Lyle, which controls 99 per cent of Cambodia’s sugar exports to the European Union (EU). Once again, the Cambodian government came to the defence of the businesses buying up great swathes of the country.

Behind these land-grabs and evictions are well-intended Western organizations. When the EU launched its ‘Everything But Arms’ initiative in 2001, the idea was to give least-developed countries like Cambodia full duty-free and quota-free access to the EU for exports.

The hope was that this would improve the lives of Cambodian farmers and see more money go into their pockets. But in 2013, two NGOs, Equitable Cambodia and Inclusive Development International, released a report showing that this initiative had encouraged human rights violations such as land seizures and forced evictions, which increased due to the number of large-scale businesses wanting to take advantage of the favourable trade deals. The poor farmers the initiative had intended to help became the victims in the drive for economic progress.

It is in places like Boeung Kropeu and throughout rural Cambodia, among the urban homeless population and the rurally displaced communities, that you find the reality behind the country’s economy. Here, words such as globalization, deregulation and quota-free may not be common parlance, but their meaning is lived every day. Beyond the headlines and hyperbole of the government and international economic organizations, Cambodia is a country of rising inequality and impoverishment.

Beyond the shopping malls of central Phnom Penh, there are areas of the capital rarely seen by foreigners, where more than 400,000 Cambodians toil away in factories for as little as $2 a day.

The most recent World Bank Poverty Assessment Report on Cambodia found that between 2004 and 2011 poverty rates more than halved, from 53 per cent, to 20.5 per cent. This was big news for the government and business élites, a validation that their economic policies were in fact working and money was trickling down from the wealthy to the poor. However, less discussed were the same report’s findings that such statistics give an inaccurate picture of poverty levels. The number of people who live in ‘vulnerable poverty’ (less than $2.60 a day) increased significantly during this period.

‘Many people who have escaped poverty are still at high risk of falling back into poverty,’ said Neak Samsen, Poverty Analyst of the World Bank in Cambodia, last year. ‘For example, the loss of just 1,200 riel [30 US cents] per day in income would throw an estimated three million Cambodians – 20 per cent of the population – back into poverty, doubling the poverty rate to 40 per cent.’

By the World Bank’s reckoning, 21 per cent of the population lives on or below the poverty line ($1.25 a day), 56 per cent live in ‘vulnerable poverty’ (below $2.60 a day), 20 per cent live in the so-called middle class and just 3 per cent are considered prosperous.

Furthermore, while economic growth has led to the development of roads, airports and the infrastructure needed for business, the infrastructure needed to lift millions out of poverty has not enjoyed such generous investment: only 24 per cent of Cambodians have access to electricity, 64 per cent to clean water and 31 per cent to sanitation.

Most hospitals accessible to the poor are understaffed, under-equipped and lacking in quality. Public schools are so ill-equipped that 75 per cent of high-school students failed their graduation exams this year. At the same time, private schools and Western-style hospitals have increased, with middle- and upper-class Cambodians able to pay the price for quality.

So where has the money from Cambodia’s economic growth gone? Into the pockets of politicians, entrepreneurs and foreign companies.

A less rosy future

Between 1990 and 2008, income inequality in Cambodia increased from 33.5 per cent to 37.5 per cent (on the Gini coefficient). Still, you don’t need statistics to tell you that. A walk around Phnom Penh will be enough to show you the divide, with luxury Hummers parked alongside roads where homeless families sleep on cardboard.

The fight for a minimum wage for garment workers and the fight to stop big businesses taking land that belongs to farmers have become key issues in recent years. But these fights are seldom listened to by the Cambodian government, drowned out by the noise of those who say business must carry on as usual.

The future looks good for the Cambodian economy and for those growing fat off it. The Phnom Penh landscape is constantly growing, with taller and taller skyscrapers, and all economic indicators point upwards.

Phnom Penh is a city visibly split between the ‘haves’ and the ‘have-nots’, those who have been swept up in the country’s economic boom and those who have been swept aside.

However, the future looks less rosy for the garment workers and peasants who are expected to produce the food, cook it and serve it, but who have so far not received their invitations to eat at the table.

In the 1870s, Mark Twain coined the term ‘Gilded Age’ to describe an era of rapid economic growth in the United States.

‘What is the chief end of man?’ Twain satirized. ‘To get rich. In what way? Dishonestly if we can; honestly if we must.’

Rather than the new ‘Asian Tiger’, Twain’s ‘Gilded Age’ serves as a better analogy for Cambodia today: a country of impoverishment and rising inequality, ruled by the corrupt, money-hungry élite, who ‘gild’ the country in lavish buildings, great Meccas for conspicuous consumption.

David Nathan is a journalist based in Phnom Penh, Cambodia. He reports on political and social issues in Southeast Asia. Previously, he worked out of Nicaragua and Costa Rica.