Country Report Cambodia November 2009

Outlook for 2010-11

• The Cambodian People's Party (CPP), led by the prime minister, Hun Sen, will remain politically dominant in 2010-11. The CPP controls around two-thirds of the seats in the National Assembly (the lower house of parliament).
• During what is proving to be a difficult period economically, the main opposition Sam Rainsy Party will aim to build support at the expense of the CPP, but it will not be able to dislodge the CPP from power.
• The government will pursue an expansionary fiscal policy in order to support domestic demand. Meanwhile, the effectiveness of monetary policy will remain limited as the economy is highly dollarised.
• Owing to the weak global economic environment and its adverse impact on garment exports, tourism and foreign investment, real GDP will contract by an estimated 1.5% in 2009, before expanding by 3.3% in 2010 and 5.1% in 2011.
• Personal disposable income will recover slowly from 2010 after falling in 2009, when rural and urban wealth was driven down by lower prices for agricultural commodities and real estate.
• The current-account deficit will remain wide in 2010-11, but Cambodia will avoid financing difficulties owing to its stock of foreign-exchange reserves and an eventual recovery in foreign direct investment.

Monthly review

• In October a UN-sponsored tribunal set up to prosecute former leaders of the Khmer Rouge called on six high-ranking officials to appear as witnesses. Their testimony could prove embarrassing for the CPP.
• The National Assembly (the lower house of parliament) has passed legislation that may restrict freedom of expression. Legislators voted 82-21 in favour of the new articles of the penal code which define defamation in vague terms.
• At a meeting in the capital, Phnom Penh, Cambodia's international donors said that economic vulnerabilities could become entrenched unless the government reined in its budget deficit next year.
• According to the Ministry of Labour, 77 garment factories closed in the first nine months of 2009, putting 30,683 people out of work, while 53 factories suspended operations owing to declining export orders.
• The number of visitors to Cambodia rose in the first eight months of 2009, but there were fewer big-spending US and European tourists.
• In September the US ambassador to Cambodia, Carol Rodley, said that billions of US dollars of investment was required in the energy sectors of Cambodia and neighbouring countries to improve substandard infrastructure.

This report covers the following industry codes:
SIC Code: 70;49
NAICS Code: 72;22