Posted by: Ian Rowley on August 11
Japan’s Internal Affairs Ministry published the latest numbers on the country’s declining population on Aug. 11. The data doesn’t make for pleasant reading. In the year through the end of March 2009, the number of births in Japan fell for the first time since 2006 to 1.08 million, while there were 1.13 million deaths. Put together, that adds up to a record decline in the population of 45,914. That bests (if that’s the right word) the previous biggest decline of 29,119 in 2007. Just as worrying, the he number of Japanese 65 or older was now record 28.21 million out of total population of 127 million. Meanwhile, the current recession—Japan’s GDP may shrink 6% this year—will likely make things worse as couples decide to delay or have fewer children.
Still, as grim as all that is, the plunge could add further impetus to the Democratic Party of Japan’s election campaign. The DPJ, which is set to oust the ruling Liberal Democratic Party in an Aug. 30 election, has included some fairly radical measures to help boost Japan’s birthrate. Among them: giving parents $270 a month per child and making state high school tuition free. The DPJ is also considering expanding medical insurance to cover certain kinds of fertility treatment and will up the one-off payment parents receive on the birth of each child.
Strong measures are needed given only Hong Kong has a lower birthrate than Japan. Critics, though, say a stronger economy and a more forgiving corporate culture which encourages people to spend more time with friends and family would have a bigger impact. There are also questions as to how the DPJ plans to pay for these and other expensive pledges given Japan’s already gigantic gross national debt, which was already 170% of GDP before the current economic crisis triggered huge stimulus spending. They are all fair points. Yet, with the rate of population decline worsening and years of inaction by the LDP one reason for the slump, the DPJ’s plans to stimulate the birthrate look like vote winners.
Wednesday, August 12, 2009
Cambodia Has to Cope With its Global Connection
Once the poster child for the benefits of globalization, Cambodia is now being asked to cope with its darker side in the aftermath of the financial crisis. The four pillars of the country’s economy – tourism, garment-making, construction, and agriculture – are feeling the global pinch in their various ways, writes journalist Anne-Laure Porée. Tourism is down thanks to the global stay-at-home vacation trend. Garment-making has collapsed due to lower US demand and choosey shoppers. Construction, like the rest of the world, plummeted with knock-on effects in consumer banking as rising unemployment led to greater personal loan defaults. Even agriculture, which could still provide positive growth in 2009, faces the uncertainty of weather and the challenges of foreign investment choking off local farmers. Perhaps the only ray of light is the natural resource industry – a sector that has long promised to provide limited value-added components to the economy. The sad part of this story is that the government seems content to wait for a rebound in the global economy, hoping the rising tide abroad will lift Cambodia’s boat. But as Porée notes, to integrate fully into the world economy, Cambodia has to learn how to be more than a supplier of garments based on cheap labor. – YaleGlobal
Waiting for a rebound, Cambodia needs to be more than dressmaker to the world
11 August 2009
By Anne-Laure Porée
YaleGlobal
PHNOM PENH: Defying the gloom descending on the tourism sector brought about by the global crisis, the capital’s airport recently launched a hopeful initiative: a new airline. Cambodia Angkor Air was launched to boost tourism between the capital and Siem Reap near the famed ruins of Angkor Wat. With tourist arrivals falling sharply since late last year, this may signal a triumph of hope over reality. If anything, the hopes and fears surrounding Cambodia’s tourist revenue and garment trade underline how the fortune of the country has become intertwined with the larger world.
Since peace came to Cambodia in the last years of the last century, the country has emerged as a poster child of globalization in Southeast Asia. In the middle of this decade, Cambodia enjoyed double digit growth and even hoisted itself up to 6th place in the rank of the fastest growing economies for the 1998-2007 period.
And now the country is experiencing the downside of dependence on the world. The sectors most affected by the crisis – tourism and garment export – are the ones that have seen the most development thanks to the integration of Cambodia into the global economy a decade ago, after peace was restored in the country. At this time, the economy was opened to foreign investors, who poured money into the garment industry, taking advantage of supports granted to Cambodia such as the Most Favored Nation (MFN) and the Generalized System of Preferences (GSP). This status provided access to the American market and it enabled other Asian investors – Chinese in particular – to get round their own quotas or the Least Developed Country status conferred upon them by the United Nations.
But the happy days are now threatened by the shrinking world market. Of the four major pillars of Cambodian economy – the garment industry, tourism, construction and agriculture – three are seriously impaired by the global crisis. With 70 percent of Cambodia’s garment production going to the US, the declining American economy, choosey shoppers and stay-at-home tourists have led to job losses in Cambodia.
The figures released in late July by the Garment Manufacturers Association of Cambodia (GMAC) showed a worse than anticipated loss: exports dropped almost 30 percent and one garment worker in 6 lost her job in the first six months of 2009. Most of these workers are women who transfer a substantial part of their earnings to their family living in rural areas in order to supplement farming-based incomes. In some villages, every family has one or several members working in the garment factories based in the Phnom Penh suburbs. Some go for unpaid leaves or part time jobs, some enter prostitution, but most decide to go back to their village in order to work in the rice fields.
According to Van Sou Ieng, GMAC president, Cambodia is much more severely affected by the crisis than other Asian countries like Indonesia, Vietnam, Bangladesh or China because the industry sector in Cambodia is less competitive. “We need more time to produce than China or Vietnam,” he says. Though the government helps with profit tax exemptions or export charge reductions, there’s no miracle cure for Ieng.
Tourism – the second pillar of the economy – has suffered from the economic crisis, and the fallout from the swine flu. In Siem Reap, located next to the famed Angkor temples, a spot visited by more than 1 million tourists in 2008, the situation is described as “catastrophic” by hotel managers. The hotels’ occupancy rate has fallen 25 percent compared to the same period in 2008. Several three or four star hotels have definitely closed their doors, and the mid-range hotels have been multiplying promotional offers for months.
The drop in Western tourists’ arrivals (down 14 percent during the four first months of 2009 according to the Minister of Tourism) has a direct impact on tourism generated incomes – foreigners spent 1.6 billion dollars in 2008. The Ministry of Economy and Finance expects a drop in tourism growth of 7 to 8 percent this year.
The construction sector is also affected: many foreign investors have delayed, reduced or slowed their projects. The capital Phnom Penh started to change face in 2008 with the building of huge towers, business centers and shopping malls but activity slid in the second half of 2008, leaving workers without employment. Such trends have had significant consequences, particularly among the banking sector. The Acleda bank, which has the largest branch network in all provinces, reported a fall in profits in the second quarter of 2009 because of late payments and less lending. The Cambodians, who speculated on land as investment, are now facing difficulties because the prices of land and real estate have plunged and they can’t sell and get cash.
The hardest hit, of course, are the poorest of the poor who count each riel. For them, any drop in income, as well as any unexpected crisis, immediately results in cutting down the number of meals per day.
Agriculture, the fourth pillar of the Cambodian economy and the least exposed to global currents, could bolster the country’s 2009 growth, which is forecast at 2.1 percent. The agricultural sector (with 4.3 percent growth expected in 2009 depending on weather conditions) is essentially based on rice farming and fishing.
But the part of agriculture that has drawn foreign interest proves to be a mixed blessing.
In northeastern Mondolkiri province, plans by a French company to set up a rubber plantation have created a conflict that symbolizes the double edged sword of globalization. For several months, Bunong, a Montagnards ethnic group, has been fighting against the project – as their farmland gets swallowed up by the rubber company that has an agreement with the Cambodian government. The company is expected to make huge profits, a part of which could return to the community via the salaries of the plantation workers and the development of a new city.
The crisis has forced the government to pay attention to those left behind by globalization. “We thought that the private sector could solve every problem but we have to reconsider the role to be played by the State in order to palliate the deficiencies of the market,” says Hang Chuon Naron, Secretary General of the Ministry of Economy and Finance.
The crisis has also led the leader of political opposition Sam Rainsy, former Economy Minister, to call for injecting government funds into the economy and for pushing reforms, in particular against endemic corruption. But the government would rather let the storm blow over, waiting for growth to come back in developed countries, hopefully pulling the country out of its recession in the process.
In the meantime, some hopes turn to the mineral, oil and gas resources development. But the revenues from these productions will be mainly derived from exports of raw materials with no local added value, whereas imports of manufactured goods will increase. Even after growth returns, Cambodia will still have to figure out how to hitch its industry to the global economy profitably rather than be a supplier of garments produced by cheap labor. Cambodia is beginning to learn the challenge of being part of an integrated world.
Anne-Laure Porée is a journalist based in Phnom Penh. She can be reached at
alporee@hotmail.com.
Waiting for a rebound, Cambodia needs to be more than dressmaker to the world
11 August 2009
By Anne-Laure Porée
YaleGlobal
PHNOM PENH: Defying the gloom descending on the tourism sector brought about by the global crisis, the capital’s airport recently launched a hopeful initiative: a new airline. Cambodia Angkor Air was launched to boost tourism between the capital and Siem Reap near the famed ruins of Angkor Wat. With tourist arrivals falling sharply since late last year, this may signal a triumph of hope over reality. If anything, the hopes and fears surrounding Cambodia’s tourist revenue and garment trade underline how the fortune of the country has become intertwined with the larger world.
Since peace came to Cambodia in the last years of the last century, the country has emerged as a poster child of globalization in Southeast Asia. In the middle of this decade, Cambodia enjoyed double digit growth and even hoisted itself up to 6th place in the rank of the fastest growing economies for the 1998-2007 period.
And now the country is experiencing the downside of dependence on the world. The sectors most affected by the crisis – tourism and garment export – are the ones that have seen the most development thanks to the integration of Cambodia into the global economy a decade ago, after peace was restored in the country. At this time, the economy was opened to foreign investors, who poured money into the garment industry, taking advantage of supports granted to Cambodia such as the Most Favored Nation (MFN) and the Generalized System of Preferences (GSP). This status provided access to the American market and it enabled other Asian investors – Chinese in particular – to get round their own quotas or the Least Developed Country status conferred upon them by the United Nations.
But the happy days are now threatened by the shrinking world market. Of the four major pillars of Cambodian economy – the garment industry, tourism, construction and agriculture – three are seriously impaired by the global crisis. With 70 percent of Cambodia’s garment production going to the US, the declining American economy, choosey shoppers and stay-at-home tourists have led to job losses in Cambodia.
The figures released in late July by the Garment Manufacturers Association of Cambodia (GMAC) showed a worse than anticipated loss: exports dropped almost 30 percent and one garment worker in 6 lost her job in the first six months of 2009. Most of these workers are women who transfer a substantial part of their earnings to their family living in rural areas in order to supplement farming-based incomes. In some villages, every family has one or several members working in the garment factories based in the Phnom Penh suburbs. Some go for unpaid leaves or part time jobs, some enter prostitution, but most decide to go back to their village in order to work in the rice fields.
According to Van Sou Ieng, GMAC president, Cambodia is much more severely affected by the crisis than other Asian countries like Indonesia, Vietnam, Bangladesh or China because the industry sector in Cambodia is less competitive. “We need more time to produce than China or Vietnam,” he says. Though the government helps with profit tax exemptions or export charge reductions, there’s no miracle cure for Ieng.
Tourism – the second pillar of the economy – has suffered from the economic crisis, and the fallout from the swine flu. In Siem Reap, located next to the famed Angkor temples, a spot visited by more than 1 million tourists in 2008, the situation is described as “catastrophic” by hotel managers. The hotels’ occupancy rate has fallen 25 percent compared to the same period in 2008. Several three or four star hotels have definitely closed their doors, and the mid-range hotels have been multiplying promotional offers for months.
The drop in Western tourists’ arrivals (down 14 percent during the four first months of 2009 according to the Minister of Tourism) has a direct impact on tourism generated incomes – foreigners spent 1.6 billion dollars in 2008. The Ministry of Economy and Finance expects a drop in tourism growth of 7 to 8 percent this year.
The construction sector is also affected: many foreign investors have delayed, reduced or slowed their projects. The capital Phnom Penh started to change face in 2008 with the building of huge towers, business centers and shopping malls but activity slid in the second half of 2008, leaving workers without employment. Such trends have had significant consequences, particularly among the banking sector. The Acleda bank, which has the largest branch network in all provinces, reported a fall in profits in the second quarter of 2009 because of late payments and less lending. The Cambodians, who speculated on land as investment, are now facing difficulties because the prices of land and real estate have plunged and they can’t sell and get cash.
The hardest hit, of course, are the poorest of the poor who count each riel. For them, any drop in income, as well as any unexpected crisis, immediately results in cutting down the number of meals per day.
Agriculture, the fourth pillar of the Cambodian economy and the least exposed to global currents, could bolster the country’s 2009 growth, which is forecast at 2.1 percent. The agricultural sector (with 4.3 percent growth expected in 2009 depending on weather conditions) is essentially based on rice farming and fishing.
But the part of agriculture that has drawn foreign interest proves to be a mixed blessing.
In northeastern Mondolkiri province, plans by a French company to set up a rubber plantation have created a conflict that symbolizes the double edged sword of globalization. For several months, Bunong, a Montagnards ethnic group, has been fighting against the project – as their farmland gets swallowed up by the rubber company that has an agreement with the Cambodian government. The company is expected to make huge profits, a part of which could return to the community via the salaries of the plantation workers and the development of a new city.
The crisis has forced the government to pay attention to those left behind by globalization. “We thought that the private sector could solve every problem but we have to reconsider the role to be played by the State in order to palliate the deficiencies of the market,” says Hang Chuon Naron, Secretary General of the Ministry of Economy and Finance.
The crisis has also led the leader of political opposition Sam Rainsy, former Economy Minister, to call for injecting government funds into the economy and for pushing reforms, in particular against endemic corruption. But the government would rather let the storm blow over, waiting for growth to come back in developed countries, hopefully pulling the country out of its recession in the process.
In the meantime, some hopes turn to the mineral, oil and gas resources development. But the revenues from these productions will be mainly derived from exports of raw materials with no local added value, whereas imports of manufactured goods will increase. Even after growth returns, Cambodia will still have to figure out how to hitch its industry to the global economy profitably rather than be a supplier of garments produced by cheap labor. Cambodia is beginning to learn the challenge of being part of an integrated world.
Anne-Laure Porée is a journalist based in Phnom Penh. She can be reached at
alporee@hotmail.com.
Concerns as US cosies up to Indochina
The Straits Times
NEW YORK, Aug 12 — When United States Secretary of State Hillary Clinton signed the Asean Treaty of Amity and Cooperation at a meeting in the Thai resort city of Phuket last month, most commentators in the region saw it as a positive move.
Any evidence of renewed US interest in South-east Asia was surely welcome, particularly when, as in this case, it came in the form of an undertaking not to interfere in the internal affairs of Asean member states.
Many South-east Asian countries, hoping to benefit from China’s economic growth without becoming smothered by Beijing’s growing military strength, have long regarded the US as a force for stability. This is particularly true with respect to the South China Sea, where vital trade routes cut across conflicting territorial claims.
But not everyone is likely to be equally enthusiastic about America’s renewed attention to South-east Asia. After all, Clinton did more than sign a treaty. She also held an unprecedented ministerial meeting with Cambodia, Laos, Vietnam and Thailand almost immediately afterwards.
In doing so, she triggered a change in the region’s geopolitical environment that had implications well beyond the immediate aim of challenging Beijing’s influence.
Much of the focus of the ministerial meeting was on developments affecting the Mekong River, which runs from south-east China and then through Myanmar, Thailand, Laos and Cambodia before reaching its delta in Vietnam. China has in recent years built a series of controversial hydroelectric dams on the upper reaches of the Mekong that many believe could have a serious impact on the environment further downstream.
Until now, mindful of Beijing’s growing power and influence, Indochinese governments have expressed only muffled concern.
According to the US Department of State, Washington will spend more than US$7 million (RM24.6 million) this year on environmental programmes in the Mekong Region. The Obama administration is also seeking Congressional approval for an additional US$15 million for assistance related to improving food security next year. More funds may be allocated for other programmes in the future.
Many countries, both inside and outside the strategically important sub-region, can now be expected to spend the next few months assessing just how far the involvement of a powerful new player in the Mekong region may impact on their own foreign policies.
Laos and Cambodia probably have the most to gain. They are relatively weak states heavily dependent upon foreign aid to finance economic development. For them, greater competition between China and the United States holds out the possibility of additional development funds and more favourable trade and investment agreements.
Even Myanmar could benefit if the US decides that strategic issues outweigh concerns over Yangon’s dismal human rights record.
Vietnam and Thailand, on the other hand, are likely to worry about the possible dilution of their own roles even as they welcome Washington’s attempt to limit China’s influence. The US will need to be sensitive to these fears as it works to extend its influence in the sub-region.
Much of Vietnam’s history has been shaped by concerns that China was attempting to dominate it. But Hanoi also has regional ambitions of its own. Vietnam maintains a ‘special relationship’ with Laos, for example, a link formalised in a 1977 treaty of friendship and cooperation.
Hanoi’s regional ambitions can also be seen in its willingness to overthrow the pro-Beijing Khmer Rouge government in Phnom Penh in 1976.
Historically, Bangkok’s relations with Beijing have been much better. Even so, Thai officials have watched with dismay in recent years as Indochina’s growing trade with China has turned what was once seen as a potential ‘baht zone’ into a likely ‘yuan zone’ market. And with the US now in the picture, could the US dollar come to dominate the region instead?
Further afield, Washington’s allies in the region face a similarly challenging task. Japan, for example, held the first of what it hoped would be a series of regular meetings with the foreign ministers of the Mekong basin countries in Tokyo in January. It has also proposed a summit meeting with the Indochinese states later this year.
With the US more active in the sub-region, Japan may have trouble keeping these countries interested in a relationship with Tokyo.
Australia is in a comparable position. One of the few Western countries to maintain an embassy in Vientiane throughout the uncertainties of the 1970s and 1980s, Canberra has focused much of its diplomatic efforts on cultivating the countries of Indochina. For example, Australia financed a major bridge across the Mekong River linking Laos and Thailand in the early 1990s.
With the US now reportedly willing to spend large sums to acquire a similar level of goodwill, will Canberra be able to compete?
One possible response would be for Washington’s allies to propose the establishment of some form of international development commission through which efforts to contain Chinese influence in the sub-region as well as advance their collective interests there could be coordinated.
What is certain is that with the US now ready to give Indochina a higher priority, the sub-region’s geopolitics are going to be very different.
NEW YORK, Aug 12 — When United States Secretary of State Hillary Clinton signed the Asean Treaty of Amity and Cooperation at a meeting in the Thai resort city of Phuket last month, most commentators in the region saw it as a positive move.
Any evidence of renewed US interest in South-east Asia was surely welcome, particularly when, as in this case, it came in the form of an undertaking not to interfere in the internal affairs of Asean member states.
Many South-east Asian countries, hoping to benefit from China’s economic growth without becoming smothered by Beijing’s growing military strength, have long regarded the US as a force for stability. This is particularly true with respect to the South China Sea, where vital trade routes cut across conflicting territorial claims.
But not everyone is likely to be equally enthusiastic about America’s renewed attention to South-east Asia. After all, Clinton did more than sign a treaty. She also held an unprecedented ministerial meeting with Cambodia, Laos, Vietnam and Thailand almost immediately afterwards.
In doing so, she triggered a change in the region’s geopolitical environment that had implications well beyond the immediate aim of challenging Beijing’s influence.
Much of the focus of the ministerial meeting was on developments affecting the Mekong River, which runs from south-east China and then through Myanmar, Thailand, Laos and Cambodia before reaching its delta in Vietnam. China has in recent years built a series of controversial hydroelectric dams on the upper reaches of the Mekong that many believe could have a serious impact on the environment further downstream.
Until now, mindful of Beijing’s growing power and influence, Indochinese governments have expressed only muffled concern.
According to the US Department of State, Washington will spend more than US$7 million (RM24.6 million) this year on environmental programmes in the Mekong Region. The Obama administration is also seeking Congressional approval for an additional US$15 million for assistance related to improving food security next year. More funds may be allocated for other programmes in the future.
Many countries, both inside and outside the strategically important sub-region, can now be expected to spend the next few months assessing just how far the involvement of a powerful new player in the Mekong region may impact on their own foreign policies.
Laos and Cambodia probably have the most to gain. They are relatively weak states heavily dependent upon foreign aid to finance economic development. For them, greater competition between China and the United States holds out the possibility of additional development funds and more favourable trade and investment agreements.
Even Myanmar could benefit if the US decides that strategic issues outweigh concerns over Yangon’s dismal human rights record.
Vietnam and Thailand, on the other hand, are likely to worry about the possible dilution of their own roles even as they welcome Washington’s attempt to limit China’s influence. The US will need to be sensitive to these fears as it works to extend its influence in the sub-region.
Much of Vietnam’s history has been shaped by concerns that China was attempting to dominate it. But Hanoi also has regional ambitions of its own. Vietnam maintains a ‘special relationship’ with Laos, for example, a link formalised in a 1977 treaty of friendship and cooperation.
Hanoi’s regional ambitions can also be seen in its willingness to overthrow the pro-Beijing Khmer Rouge government in Phnom Penh in 1976.
Historically, Bangkok’s relations with Beijing have been much better. Even so, Thai officials have watched with dismay in recent years as Indochina’s growing trade with China has turned what was once seen as a potential ‘baht zone’ into a likely ‘yuan zone’ market. And with the US now in the picture, could the US dollar come to dominate the region instead?
Further afield, Washington’s allies in the region face a similarly challenging task. Japan, for example, held the first of what it hoped would be a series of regular meetings with the foreign ministers of the Mekong basin countries in Tokyo in January. It has also proposed a summit meeting with the Indochinese states later this year.
With the US more active in the sub-region, Japan may have trouble keeping these countries interested in a relationship with Tokyo.
Australia is in a comparable position. One of the few Western countries to maintain an embassy in Vientiane throughout the uncertainties of the 1970s and 1980s, Canberra has focused much of its diplomatic efforts on cultivating the countries of Indochina. For example, Australia financed a major bridge across the Mekong River linking Laos and Thailand in the early 1990s.
With the US now reportedly willing to spend large sums to acquire a similar level of goodwill, will Canberra be able to compete?
One possible response would be for Washington’s allies to propose the establishment of some form of international development commission through which efforts to contain Chinese influence in the sub-region as well as advance their collective interests there could be coordinated.
What is certain is that with the US now ready to give Indochina a higher priority, the sub-region’s geopolitics are going to be very different.
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