The Associated Press
31th August 2009
TOKYO – Japan's newly empowered leader Yukio Hatoyama rushed Monday to select Cabinet ministers and start making good on promises to revive the world's second-largest economy after his party's historic trouncing of the ruling conservatives.
Hatoyama, who also has signaled he wants to redefine Tokyo's diplomacy to make it less reliant on Washington, said in a victory speech late Sunday he would focus on a quick and smooth transition and make a priority of choosing the nation's next finance minister.
Hatoyama spoke only briefly with reporters on Monday before huddling with his party leaders.
Prime Minister Taro Aso, conceding defeat, said he would step down as president of the ruling Liberal Democratic Party.
"I have no plan to run for re-election," Aso said. His successor is expected to be named late next month. "The most important thing is rejuvenating our party."
Although the nation gave the Democrats a landslide win, most voters were seen as venting dissatisfaction with the Liberal Democratic Party and the status quo more than they were endorsing the policies of the opposition.
The Liberal Democrats have governed Japan for virtually all of the past 54 years.
The Democrats will also face next year an election for the less powerful upper house of parliament. They have controlled that chamber with two smaller allies since 2007, but if they fail to deliver quickly on their promises the Liberal Democrats could resurge.
Official results were still being counted, but exit polls by all major media said Hatoyama's Democratic Party of Japan had won more than 300 of the 480 seats in the lower house of parliament. That would easily be enough to ensure that he is installed as prime minister in a special session of parliament that is expected to be held in mid-September.
The task ahead for the Democrats is daunting.
Japan managed to climb out of a yearlong recession in the second quarter, but its economy remains weak. Unemployment and anxiety over falling wages threatens to undermine any recovery. The jobless rate has risen to a record 5.7 percent. After a rapid succession of three administrations in three years, Japan is facing its worst crisis of confidence in decades.
In the long-term it faces a bleak outlook if it isn't able to figure out how to cope with a rapidly aging and shrinking population. Government estimates predict the figure will drop to 115 million in 2030 and fall below 100 million by the middle of the century.
The Democrats' solution is to move Japan away from a corporate-centric economic model to one that focuses on helping people. They have proposed an expensive array of initiatives: cash handouts to families and farmers, toll-free highways, a higher minimum wage and tax cuts. The estimated bill comes to 16.8 trillion yen ($179 billion) when fully implemented starting in the 2013 fiscal year.
The party has said it plans to cut waste and rely on untapped financial reserves to fund their programs. But with Japan's public debt heading toward 200 percent of gross domestic product, the Democrats plan has been criticized as a financial fantasy that would worsen Japan's precarious fiscal health.
Japan's stock market surged early in the morning on the news of the election, but then fell back — indicating uncertainty among investors about what the Democratic government will bring.
"The key difference is the Liberal Democrats' spending on public projects and infrastructure, but the Democrats spend on family and education," said Martin Schulz, a senior economist at the Fujitsu Research Institute.
"The Democrats have a year to show results," he added, noting next year's elections are looming.
The Democrats are also under scrutiny for their positions on national security and foreign policy.
Party leader Yukio Hatoyama, set to become Japan's next prime minister, has been vocal about distancing the country from Washington and forging closer ties with its Asian neighbors.
Washington's new ambassador to Japan said the U.S. is looking forward to working with the administration in Tokyo.
"The challenges we face are many, but through our partnership our two great democracies will meet them in a spirit of cooperation and friendship," Ambassador John V. Roos said in a statement Monday.
The Democrats first task will be to convince a skeptical public that they can actually lead.
"I feel very insecure with the Democratic Party of Japan," said 65-year-old voter Shuji Ueki. "They don't have a record."
The Democrats are made up of an inexperienced group of left-wing activists and LDP defectors. The party is just 11 years old, and only a handful have served in top government positions.
But Ichiro Ozawa, co-founder of the party, expressed a quiet confidence.
"We have no fear, and we will steadily achieve our campaign promises one by one," he said.
Monday, August 31, 2009
Tropical Storm Brings Heavy Rain, High Winds to Tokyo
By Aaron Sheldrick
Aug. 31 (Bloomberg) -- Tropical Storm Krovanh increased in strength as it approached Japan, bringing strong winds and heavy rain to Tokyo, forcing flight cancellations and halting shipments from oil refineries.
The center of Krovanh, the 12th storm of the western Pacific cyclone season, was 224 kilometers (139 miles) south of Tokyo at 8 a.m. local time today, according to the Japan Meteorological Agency.
The storm’s maximum sustained winds increased to 111 kilometers per hour from 102 kph earlier today and Krovanh was moving north at 15 kph, the agency said. On that trajectory, Krovanh’s eye will cross the coast south of Tokyo after 3 p.m.
The weather agency issued warnings for heavy rain, high waves and stormy weather for Tokyo, neighboring Chiba prefecture, the location of Japan’s biggest international airport near Narita, and surrounding areas. Krovanh is expected to bring as much as 5 centimeters (2 inches) of rain per hour as it approaches Tokyo and Chiba.
All Nippon Airways Co., Japan’s largest domestic airline, canceled 14 flights to and from Tokyo and between islands to the south of the capital, affecting 1,100 people, it said in a faxed statement. Some train services were delayed in Tokyo and neighboring areas.
Nippon Oil Corp., the nation’s largest oil refiner, stopped shipments from its Negishi refinery in Yokohama south of Tokyo and Cosmo Oil Co. halted those from its refinery in Chiba.
Japan is regularly buffeted by typhoons and tropical storms during the western Pacific cyclone season.
Twenty-three people died earlier this month in flooding and storms attributed to Tropical Storm Etau, according to Japan’s Fire and Disaster Management Agency.
Krovanh is the name of a tree in Cambodia, according to the Web site of the Hong Kong Observatory, which names the storms.
To contact the reporter on this story: Aaron Sheldrick in Tokyo at asheldrick@bloomberg.net.
Aug. 31 (Bloomberg) -- Tropical Storm Krovanh increased in strength as it approached Japan, bringing strong winds and heavy rain to Tokyo, forcing flight cancellations and halting shipments from oil refineries.
The center of Krovanh, the 12th storm of the western Pacific cyclone season, was 224 kilometers (139 miles) south of Tokyo at 8 a.m. local time today, according to the Japan Meteorological Agency.
The storm’s maximum sustained winds increased to 111 kilometers per hour from 102 kph earlier today and Krovanh was moving north at 15 kph, the agency said. On that trajectory, Krovanh’s eye will cross the coast south of Tokyo after 3 p.m.
The weather agency issued warnings for heavy rain, high waves and stormy weather for Tokyo, neighboring Chiba prefecture, the location of Japan’s biggest international airport near Narita, and surrounding areas. Krovanh is expected to bring as much as 5 centimeters (2 inches) of rain per hour as it approaches Tokyo and Chiba.
All Nippon Airways Co., Japan’s largest domestic airline, canceled 14 flights to and from Tokyo and between islands to the south of the capital, affecting 1,100 people, it said in a faxed statement. Some train services were delayed in Tokyo and neighboring areas.
Nippon Oil Corp., the nation’s largest oil refiner, stopped shipments from its Negishi refinery in Yokohama south of Tokyo and Cosmo Oil Co. halted those from its refinery in Chiba.
Japan is regularly buffeted by typhoons and tropical storms during the western Pacific cyclone season.
Twenty-three people died earlier this month in flooding and storms attributed to Tropical Storm Etau, according to Japan’s Fire and Disaster Management Agency.
Krovanh is the name of a tree in Cambodia, according to the Web site of the Hong Kong Observatory, which names the storms.
To contact the reporter on this story: Aaron Sheldrick in Tokyo at asheldrick@bloomberg.net.
Tuesday, August 25, 2009
Cambodia releases e-government guidelines
Tue. August 25, 2009
PHNOM PENH, Aug 25, 2009 (Xinhua) -- The agency behind the nationwide e-government released long-awaited guidelines for the first time at the end of last week detailing what ministries and other government departments needed to do to take their services online, local media reported on Tuesday.
The National Information Communications Technology Development Agency (NIDA) also released information security to ensure government information was kept secure and protected from system intruders, according to the report of the Phnom Penh Post.
NIDA Secretary General Phu Leewood was quoted as saying Monday that the e-Government Service Deployment Plan was important for building information communication technology (ICT) capacity in govenment and also for tracking progress and what remained to be done.
"This is a master map for us to walk together in the right diection for all [government and private] institutions to get up to speed with the global ICT sector," he said.
Thirty government ministries and institutions received the two sets of guidelines at a seminar last week.
The guidelines were based on a needs analysis conducted at all relevant ministries in 2007 with technical assistance from the Japan International Cooperation Agency (JICA).
They identify areas in which e-government can be used to build the public service competency of government institutions, provide guidelines for collecting data and help establish a blueprint for expanding government services.
Van Khema, a deputy director at NIDA in Charge of networks, said the key obstacle in the path of the e-government rollout is the connection of all 24 provinces to the central government's information-sharing system via a fibre-optic backbone. He declined to give a timeline, saying only the infrastructure would be in place "soon".
Called the Provincial Administration Information System Project, the e-government project has a budget of 15 million U.S. dollars to connect offices within each province to one another, and another 20 million U.S. dollars to connect each province to the government in Phnom Penh. Three data centers -- in Phnom Penh, Siem Reap and Sihanoukville -- will act as hubs for surrounding provinces.
PHNOM PENH, Aug 25, 2009 (Xinhua) -- The agency behind the nationwide e-government released long-awaited guidelines for the first time at the end of last week detailing what ministries and other government departments needed to do to take their services online, local media reported on Tuesday.
The National Information Communications Technology Development Agency (NIDA) also released information security to ensure government information was kept secure and protected from system intruders, according to the report of the Phnom Penh Post.
NIDA Secretary General Phu Leewood was quoted as saying Monday that the e-Government Service Deployment Plan was important for building information communication technology (ICT) capacity in govenment and also for tracking progress and what remained to be done.
"This is a master map for us to walk together in the right diection for all [government and private] institutions to get up to speed with the global ICT sector," he said.
Thirty government ministries and institutions received the two sets of guidelines at a seminar last week.
The guidelines were based on a needs analysis conducted at all relevant ministries in 2007 with technical assistance from the Japan International Cooperation Agency (JICA).
They identify areas in which e-government can be used to build the public service competency of government institutions, provide guidelines for collecting data and help establish a blueprint for expanding government services.
Van Khema, a deputy director at NIDA in Charge of networks, said the key obstacle in the path of the e-government rollout is the connection of all 24 provinces to the central government's information-sharing system via a fibre-optic backbone. He declined to give a timeline, saying only the infrastructure would be in place "soon".
Called the Provincial Administration Information System Project, the e-government project has a budget of 15 million U.S. dollars to connect offices within each province to one another, and another 20 million U.S. dollars to connect each province to the government in Phnom Penh. Three data centers -- in Phnom Penh, Siem Reap and Sihanoukville -- will act as hubs for surrounding provinces.
Saturday, August 22, 2009
Cambodia's salesman par excellence
Friday, 21 August 2009
Written by Roger Mitton
Asia Sentinel (Hong Kong)
Q&A with a man trying to bring his country into the 21st Century
As Secretary-General of the Council for the Development of Cambodia (CDC), Sok Chenda Sophea travels the world urging investors to come to Cambodia.
Few guys are more suited to this job than the erudite, multilingual Sok Chenda. Simply to meet him in full sartorial splendor and hear his finely honed spiel is to be half convinced about a benighted country that has faced terrible adversity. But the salesman tag does not do him full justice, for Sok Chenda is already a full minister and a member of the Central Committee of the Cambodian People's Party. He oversees the Special Economic Zones and often travels with Prime Minister Hun Sen. Make no mistake, behind the suave exterior, there lurks a hard center – which leads some to characterize him as moody, thin-skinned and arrogant. He admits to being a tad volatile. Don't mess with this man.
Is the global financial crisis hurting Cambodia?
No, we are not really harmed financially because our banking system is not yet well developed and sophisticated. But for sure, our overall economy is affected because we are now more integrated into the global trading system. I was part of the team that secured our membership of the World Trade Organization in 2003. We took that step to open up a larger market for Cambodia – really, we are now very open in the private sector, especially compared to our neighbours.
Of course, when our markets in the United States and Europe are not doing well, we are affected. Businessmen express concern. But I tell them: please be calm. Look at the figures. All of our exports to the US are low-end or middle price, not high-end. And in troubled times, it is the luxury items like foie gras, cognac, caviar and designer clothes that people stop buying. They still buy bread and butter, you know, the basic things like jeans, T-shirts and so on that we export to them. So we may not be too much affected.
There may even be an advantage?
Well, you know, whenever there's a crisis, there are opportunities. Consumers in our export markets are now going for the cheaper products that we make. So instead of having a market shrinking, we may have the reverse. And remember, Cambodia has been through worse hell in the past, so this latest crisis does not scare me. Don't get me wrong, there is stormy weather ahead. And if we sit back and just say let's wait and see, we'll have problems. But if we take proactive measures to boost our competitiveness and be cheaper and faster than the neighbours, we'll weather the storm. We must work harder on trade facilitation, that is the key. That's why we are setting up the Special Economic Zones, which I'm overseeing.
How do you "sell" Cambodia to investors?
I tell them to look around. Not only do we provide excellent fiscal incentives, but we are the only place in the region that allows total foreign ownership. Here, they can they run a 100 percent foreign-owned bank, insurance company, telecoms company, even a newspaper. It is amazing. You cannot do that in Thailand, Malaysia, Vietnam, even Singapore – don't mention that place. We are quite unique. Also, I tell them, yes, as a businessman, you can go to London or Tokyo with your wife or your girlfriend, but what can you do? Most sectors there – energy, transport, construction, they are all covered. They don't need you. But here, there are so many untouched sectors, so many opportunities. And it is easy to set up here.
I know you were joking a bit, giving me the sobriquet of "salesman of Cambodia", but you are right. Except you forget that I'm not only selling to investors but also to my colleagues in government. You cannot imagine the time I spend selling good governance, streamlining the formalities and all that to them. I'm the go-between. The matchmaker. I really do it. I have so many meals and drinks with colleagues telling them that the destiny of the country is in your hands, brother. And the next day, it will be another brother.
Why does Cambodia get such a low rating in business surveys?
Good question. But there is hopeful news. In the World Bank's ‘Doing Business 2009' report, we moved up to 135 out of 181 countries. Last year, we were only 150. But you know, in real life, investors never compare one country to another like that. They don't look at the physical incentives, the political regime, not even the religion – Ramadan or not, they don't care. It's about money. Investors never mention these surveys. Of course, I did ask the World Bank how they got their information, because I'm not sure they picked up the right indicators. Take the number of days needed to register a company in Cambodia. They say it takes a long time, but this is strange, because at my institution, the CDC, that does not happen.
Anyway, speaking frankly, as a businessman, I would not care how many days I have to wait for my registration. What I would care about is if, in the operation of my business, I face harassment and other problems, because that is my daily life. The registration is a one-off thing. So to me, the survey is not an issue. I don't care about it. If I see the Cambodian people are less poor and have a better life, that I care about. But the indicators in a piece of paper, I don't know who pays attention to it. You put me at the bottom of your survey, I just don't care. It doesn't make my life better.
But many foreigners still think of Cambodia as a backward, corrupt country.
It's true and not true. If it were really true, we would not have all these investors still doing business here. They are staying and making money. So it cannot be that awful. For businessmen, the bottom line is profit or loss. If I am making a profit, then okay, I may have to make some payment that I should not really have to make, but at the end of the day, I make a profit. And when I say this, I am not accusing anyone, I am just speculating. Because in this region, if you look at transparency, Singapore is always number one. But Singapore has policemen and jails for a reason – because they also have people who are corrupt and who cheat the tax department. So they are not all angels in Singapore.
Businessmen complain about other things, like expensive electricity and transport.
It's true. At the moment, our production costs are too high because of our high electricity costs, and high telecom and transportation costs. That means that if your company is a big consumer of energy and you have operations, say, in China, and you want to diversify your source of supply, where will you go? You look around and the first place you cross out is Cambodia because the price of energy is too high.
To remedy this, we are buying a lot of electricity from Vietnam. What else can we do? No electricity, no activities. So let's be pragmatic, forget about energy independence and buy from the neighbours. It's sensitive: if they switch off, we are dead. But by doing this, we can supply power and some activities can come in. Those activities create a local market and so more businessmen come and invest here. If we didn't start like this things would never take off.
Are they taking off now?
We are moving in the right direction. Things are much better than ten years ago and getting better and better. Much better than some other places in the region. Our priorities are peace and stability. Other countries have never had to deal with such political and social upheavals as we did. Do not forget that Cambodia has only been fully at peace since 1999. That means that long-term investors, those who need peace and stability and who want to develop our reserves – the oil and gas and bauxite, they have only had ten years. So our reserves are a bonanza that is still untapped. But give us until 2011 or 12 and it may be another story. And remember, longterm investors like growing up with the host country. Sure, they want to make money, but they also want to do something for you. So it's a win-win situation.
It would be more win-win if you had a better trained work force.
I agree it would be an additional plus if our labor force was more skilled. We have to do more. That's why I want the aid donors to help us set up vocational training programs, because when investors come here, they say: Oh, it's quite nice, but do you have skilled labour? That's my problem. I keep harping on about it to the foreign agencies, the Asian Development Bank, the World Bank, the United Nations, the Japanese, the French. But they don't seem to hear me, they don't react.
You've been quite critical of the international donors.
Well, personally, I, Sok Chenda, do not agree with some of their programmes. They have their agenda, but do they really think about the needs of the Cambodian people? In my opinion, only if you create jobs so that people make money, will you reduce poverty. It will take time, but it's the only way. So I tell them: Gentlemen, save all the money you spend on your programs for social development, human rights, democracy, whatever. Let's get to the point and don't blah blah.
I mean, consider their attitude to the Special Economic Zones. They ask: Where are they located? I tell them: Well, they're not in the middle of Central Park in New York, if that's what you think. They're far outside Phnom Penh, in the remote provinces, near our borders with Vietnam and Thailand. There, they'll create jobs that will keep villagers near their homes and help them get more qualifications. Then, because there's a shortage of skilled labour, businesses will go there and we will prevent the classic urban migration problems of prostitution, drugs, crime and so on. In this way, I told the donors, you will save the money you would spend trying to fix these problems. Perhaps I am being a bit simplistic, but perhaps I am right.
Your tourism sector has tanked due to the global slump.
Please keep things in perspective. This is not 1929. When you watch TV, you don't see long queues at soup kitchens. Yes, people will cut back on travel, but they won't stop entirely. It's like if you are used to eating filet steak, now you go for sirloin. And there are other factors. You know why the Koreans are our top visitors [by air]? It's not Angkor Wat. It's not our other temples, our beaches, our wonderful people, the food. It's direct flights. There are no direct flights from the U.S. or Europe or Japan to Cambodia. If we had regular direct flights from Tokyo, as we do from Seoul, the Japanese would be number one.
You travel a lot with Prime Minister Hun Sen, what's he like?
Before working for him, I didn't know the real meaning of the word "vision". He is a man of vision. Without him and his vision, there would have been no peace agreement in 1991. And he listens to all points of view. You may find that surprising when you look at Singapore and other places that do not tolerate any opposition press. Here, if you read Cambodian newspapers, every morning you have some newspapers criticising him. If he were the dictator people say he is, he would put them all behind bars. But that's not the case.
You know, years ago, when I read the newspapers, I thought, like everybody else, that Park Chung Hee, the President of Korea, was a dictator. But perhaps Korea's success today is due to him. The same for Mahathir in Malaysia. Later on, you look back and say: Oh, but thanks to him, here we are. Lee Kuan Yew. He never tolerates criticism. I just tell you because Singapore is a piece of stone, a piece of rock. It's not a country, it's a city state.
You can be pretty scathing and rather volatile, especially with journalists?
Yes, it's true. I very rarely agree to do interviews, because most journalists go for sensationalism. Afterwards, they say: No, it was not me, it was my editor. You know the line. I don't buy it and one newspaper here I have boycotted because of this. I would like journalists to respect other people. Because you have a responsibility. If you are rational in reporting economic issues, you can give hope. But you can kill that hope by saying everything is dark and grey. Then the dark that would normally not occur, happens. It has a lot to do with pyschology. So you, too, Roger, I have to seek your kind understanding, because sometimes people need to be reminded. Okay? Now I have to run. I have to pick up my daughter at the British School. Bye.
Written by Roger Mitton
Asia Sentinel (Hong Kong)
Q&A with a man trying to bring his country into the 21st Century
As Secretary-General of the Council for the Development of Cambodia (CDC), Sok Chenda Sophea travels the world urging investors to come to Cambodia.
Few guys are more suited to this job than the erudite, multilingual Sok Chenda. Simply to meet him in full sartorial splendor and hear his finely honed spiel is to be half convinced about a benighted country that has faced terrible adversity. But the salesman tag does not do him full justice, for Sok Chenda is already a full minister and a member of the Central Committee of the Cambodian People's Party. He oversees the Special Economic Zones and often travels with Prime Minister Hun Sen. Make no mistake, behind the suave exterior, there lurks a hard center – which leads some to characterize him as moody, thin-skinned and arrogant. He admits to being a tad volatile. Don't mess with this man.
Is the global financial crisis hurting Cambodia?
No, we are not really harmed financially because our banking system is not yet well developed and sophisticated. But for sure, our overall economy is affected because we are now more integrated into the global trading system. I was part of the team that secured our membership of the World Trade Organization in 2003. We took that step to open up a larger market for Cambodia – really, we are now very open in the private sector, especially compared to our neighbours.
Of course, when our markets in the United States and Europe are not doing well, we are affected. Businessmen express concern. But I tell them: please be calm. Look at the figures. All of our exports to the US are low-end or middle price, not high-end. And in troubled times, it is the luxury items like foie gras, cognac, caviar and designer clothes that people stop buying. They still buy bread and butter, you know, the basic things like jeans, T-shirts and so on that we export to them. So we may not be too much affected.
There may even be an advantage?
Well, you know, whenever there's a crisis, there are opportunities. Consumers in our export markets are now going for the cheaper products that we make. So instead of having a market shrinking, we may have the reverse. And remember, Cambodia has been through worse hell in the past, so this latest crisis does not scare me. Don't get me wrong, there is stormy weather ahead. And if we sit back and just say let's wait and see, we'll have problems. But if we take proactive measures to boost our competitiveness and be cheaper and faster than the neighbours, we'll weather the storm. We must work harder on trade facilitation, that is the key. That's why we are setting up the Special Economic Zones, which I'm overseeing.
How do you "sell" Cambodia to investors?
I tell them to look around. Not only do we provide excellent fiscal incentives, but we are the only place in the region that allows total foreign ownership. Here, they can they run a 100 percent foreign-owned bank, insurance company, telecoms company, even a newspaper. It is amazing. You cannot do that in Thailand, Malaysia, Vietnam, even Singapore – don't mention that place. We are quite unique. Also, I tell them, yes, as a businessman, you can go to London or Tokyo with your wife or your girlfriend, but what can you do? Most sectors there – energy, transport, construction, they are all covered. They don't need you. But here, there are so many untouched sectors, so many opportunities. And it is easy to set up here.
I know you were joking a bit, giving me the sobriquet of "salesman of Cambodia", but you are right. Except you forget that I'm not only selling to investors but also to my colleagues in government. You cannot imagine the time I spend selling good governance, streamlining the formalities and all that to them. I'm the go-between. The matchmaker. I really do it. I have so many meals and drinks with colleagues telling them that the destiny of the country is in your hands, brother. And the next day, it will be another brother.
Why does Cambodia get such a low rating in business surveys?
Good question. But there is hopeful news. In the World Bank's ‘Doing Business 2009' report, we moved up to 135 out of 181 countries. Last year, we were only 150. But you know, in real life, investors never compare one country to another like that. They don't look at the physical incentives, the political regime, not even the religion – Ramadan or not, they don't care. It's about money. Investors never mention these surveys. Of course, I did ask the World Bank how they got their information, because I'm not sure they picked up the right indicators. Take the number of days needed to register a company in Cambodia. They say it takes a long time, but this is strange, because at my institution, the CDC, that does not happen.
Anyway, speaking frankly, as a businessman, I would not care how many days I have to wait for my registration. What I would care about is if, in the operation of my business, I face harassment and other problems, because that is my daily life. The registration is a one-off thing. So to me, the survey is not an issue. I don't care about it. If I see the Cambodian people are less poor and have a better life, that I care about. But the indicators in a piece of paper, I don't know who pays attention to it. You put me at the bottom of your survey, I just don't care. It doesn't make my life better.
But many foreigners still think of Cambodia as a backward, corrupt country.
It's true and not true. If it were really true, we would not have all these investors still doing business here. They are staying and making money. So it cannot be that awful. For businessmen, the bottom line is profit or loss. If I am making a profit, then okay, I may have to make some payment that I should not really have to make, but at the end of the day, I make a profit. And when I say this, I am not accusing anyone, I am just speculating. Because in this region, if you look at transparency, Singapore is always number one. But Singapore has policemen and jails for a reason – because they also have people who are corrupt and who cheat the tax department. So they are not all angels in Singapore.
Businessmen complain about other things, like expensive electricity and transport.
It's true. At the moment, our production costs are too high because of our high electricity costs, and high telecom and transportation costs. That means that if your company is a big consumer of energy and you have operations, say, in China, and you want to diversify your source of supply, where will you go? You look around and the first place you cross out is Cambodia because the price of energy is too high.
To remedy this, we are buying a lot of electricity from Vietnam. What else can we do? No electricity, no activities. So let's be pragmatic, forget about energy independence and buy from the neighbours. It's sensitive: if they switch off, we are dead. But by doing this, we can supply power and some activities can come in. Those activities create a local market and so more businessmen come and invest here. If we didn't start like this things would never take off.
Are they taking off now?
We are moving in the right direction. Things are much better than ten years ago and getting better and better. Much better than some other places in the region. Our priorities are peace and stability. Other countries have never had to deal with such political and social upheavals as we did. Do not forget that Cambodia has only been fully at peace since 1999. That means that long-term investors, those who need peace and stability and who want to develop our reserves – the oil and gas and bauxite, they have only had ten years. So our reserves are a bonanza that is still untapped. But give us until 2011 or 12 and it may be another story. And remember, longterm investors like growing up with the host country. Sure, they want to make money, but they also want to do something for you. So it's a win-win situation.
It would be more win-win if you had a better trained work force.
I agree it would be an additional plus if our labor force was more skilled. We have to do more. That's why I want the aid donors to help us set up vocational training programs, because when investors come here, they say: Oh, it's quite nice, but do you have skilled labour? That's my problem. I keep harping on about it to the foreign agencies, the Asian Development Bank, the World Bank, the United Nations, the Japanese, the French. But they don't seem to hear me, they don't react.
You've been quite critical of the international donors.
Well, personally, I, Sok Chenda, do not agree with some of their programmes. They have their agenda, but do they really think about the needs of the Cambodian people? In my opinion, only if you create jobs so that people make money, will you reduce poverty. It will take time, but it's the only way. So I tell them: Gentlemen, save all the money you spend on your programs for social development, human rights, democracy, whatever. Let's get to the point and don't blah blah.
I mean, consider their attitude to the Special Economic Zones. They ask: Where are they located? I tell them: Well, they're not in the middle of Central Park in New York, if that's what you think. They're far outside Phnom Penh, in the remote provinces, near our borders with Vietnam and Thailand. There, they'll create jobs that will keep villagers near their homes and help them get more qualifications. Then, because there's a shortage of skilled labour, businesses will go there and we will prevent the classic urban migration problems of prostitution, drugs, crime and so on. In this way, I told the donors, you will save the money you would spend trying to fix these problems. Perhaps I am being a bit simplistic, but perhaps I am right.
Your tourism sector has tanked due to the global slump.
Please keep things in perspective. This is not 1929. When you watch TV, you don't see long queues at soup kitchens. Yes, people will cut back on travel, but they won't stop entirely. It's like if you are used to eating filet steak, now you go for sirloin. And there are other factors. You know why the Koreans are our top visitors [by air]? It's not Angkor Wat. It's not our other temples, our beaches, our wonderful people, the food. It's direct flights. There are no direct flights from the U.S. or Europe or Japan to Cambodia. If we had regular direct flights from Tokyo, as we do from Seoul, the Japanese would be number one.
You travel a lot with Prime Minister Hun Sen, what's he like?
Before working for him, I didn't know the real meaning of the word "vision". He is a man of vision. Without him and his vision, there would have been no peace agreement in 1991. And he listens to all points of view. You may find that surprising when you look at Singapore and other places that do not tolerate any opposition press. Here, if you read Cambodian newspapers, every morning you have some newspapers criticising him. If he were the dictator people say he is, he would put them all behind bars. But that's not the case.
You know, years ago, when I read the newspapers, I thought, like everybody else, that Park Chung Hee, the President of Korea, was a dictator. But perhaps Korea's success today is due to him. The same for Mahathir in Malaysia. Later on, you look back and say: Oh, but thanks to him, here we are. Lee Kuan Yew. He never tolerates criticism. I just tell you because Singapore is a piece of stone, a piece of rock. It's not a country, it's a city state.
You can be pretty scathing and rather volatile, especially with journalists?
Yes, it's true. I very rarely agree to do interviews, because most journalists go for sensationalism. Afterwards, they say: No, it was not me, it was my editor. You know the line. I don't buy it and one newspaper here I have boycotted because of this. I would like journalists to respect other people. Because you have a responsibility. If you are rational in reporting economic issues, you can give hope. But you can kill that hope by saying everything is dark and grey. Then the dark that would normally not occur, happens. It has a lot to do with pyschology. So you, too, Roger, I have to seek your kind understanding, because sometimes people need to be reminded. Okay? Now I have to run. I have to pick up my daughter at the British School. Bye.
Friday, August 21, 2009
Cambodia's Hun Sen looks safe despite some unease
Thu Aug 20, 2009
By Ek Madra
PHNOM PENH (Reuters) - Trouble is mounting for Cambodia's long-serving prime minister, Hun Sen, with rising unemployment and an economic slowdown on top of growing criticism from diplomats, rights activists and political rivals.
But analysts see little threat to his power or the long-term investment outlook in a country that has made great strides after decades of poverty, brutalilty and instability.
"Things are far from perfect in Cambodia, but democracy is a slow process and we have to see the bigger picture," said Pou Sothirak, a senior research fellow at Singapore's Institute of South East Asian Studies (ISEAS).
"Hun Sen's priority has been the economy, social order and the avoidance of conflict, and the current situation is a significant improvement from the past."
Hun Sen's government has come under fire recently, accused of corruption, abuse of power, and undermining the judiciary, raising concerns about future stability and its sincerity about carrying out long-awaited reforms.
Tens of thousands of people have been driven out of their homes in a slew of land seizures, while critics have blasted Hun Sen for filing lawsuits they say are merely attempts to intimidate journalists, activists and political opponents.
However, Hun Sen gets plenty of plaudits as well, and some analysts say the firm hand of the undisputed strongman is exactly what Cambodia and its economy needs.
"It's easy to criticise Hun Sen as a single-party ruler, authoritarian and totalitarian, but he's a pragmatist -- he does what he needs to do," said Ian Bryson, a regional analyst for Control Risks.
"There's no reason to forecast any instability in the near future. Cambodia's pretty rock solid. Hun Sen is healthy and he really is quite well-regarded."
Given the steady turnaround in Cambodia's fortunes since Hun Sen came to power 25 years ago, the popularity of the Khmer Rouge defector and former farmer and monk, comes as no surprise.
RECOVERY COURSE
Six years after Vietnamese invaders ended the Khmer Rouge's 1975-79 "killing fields" reign of terror, Hun Sen became premier and cultivated a reputation as a moderate, investor-friendly democrat, which helped put Cambodia on the road to recovery.
Until the global economic crisis struck, Cambodia had seen four straight years of double-digit growth fuelled by Hun Sen's pro-business policies, which created new jobs and infrastructure and raised living standards among the rural poor, many of whom live on less than $1 a day.
With backing from the poor, his Cambodian People's Party (CPP) scored 73 percent of the vote in 2008 elections, which observers said had only minor irregularities, to win its first outright majority after years of bickering coalition governments.
"I see no party that can challenge the CPP. They've improved the livelihoods of the poor and boosted their hopes and expectations for the future," said a Cambodian political science lecturer, who asked not to be named.
"The criticism Hun Sen has received does not reflect the overall situation. I can see the ruling party will continue to hold power ... and foreigners will continue to invest here."
Analysts say complaints about graft, cronyism, lawsuits and forced evictions from donors, rights groups, diplomats and financial institutions have irked Hun Sen, but will have little impact on his popularity.
The biggest challenge for the CPP, they say, is to revive the economy and ensure jobs are created to minimise the threat of social problems or civil disorder that could undermine its grip on power.
Foreign direct investment has slowed since the global financial crisis took its toll. Economic growth slowed to 5.5 percent in 2008 and the economy is forecast to shrink by 0.5 percent this year, according to the International Monetary Fund.
With a slump in demand from key markets like the United States, at least 130 garment factories have closed since late last year, prompting an estimated 50,000-60,000 lay-offs in an industry that brought in $3.8 billion in 2007.
But analysts say workers have accepted this is not the fault of government mismanagment, and that it looks unlikely to pose a threat to Cambodia's stability.
Neither, they say, will long-running diplomatic disputes with traditional foe Thailand over border demarcations, near the 11th-century Preah Vihear temple and in the Gulf of Thailand, where oil and gas deposits have been found.
Both sides have beefed up their military presence in the areas and seven soldiers died in skirmishes over the past year. But too much is at stake for both countries, and that is preventing the disputes from escalating significantly.
"It's been a bumpy ride for Cambodia, but stability is, and will remain, very much intact," added Pou Sothirak of ISEAS. "And for that reason, I expect foreign investors will return when the global economic situation improves."
(Additional reporting by Martin Petty)
By Ek Madra
PHNOM PENH (Reuters) - Trouble is mounting for Cambodia's long-serving prime minister, Hun Sen, with rising unemployment and an economic slowdown on top of growing criticism from diplomats, rights activists and political rivals.
But analysts see little threat to his power or the long-term investment outlook in a country that has made great strides after decades of poverty, brutalilty and instability.
"Things are far from perfect in Cambodia, but democracy is a slow process and we have to see the bigger picture," said Pou Sothirak, a senior research fellow at Singapore's Institute of South East Asian Studies (ISEAS).
"Hun Sen's priority has been the economy, social order and the avoidance of conflict, and the current situation is a significant improvement from the past."
Hun Sen's government has come under fire recently, accused of corruption, abuse of power, and undermining the judiciary, raising concerns about future stability and its sincerity about carrying out long-awaited reforms.
Tens of thousands of people have been driven out of their homes in a slew of land seizures, while critics have blasted Hun Sen for filing lawsuits they say are merely attempts to intimidate journalists, activists and political opponents.
However, Hun Sen gets plenty of plaudits as well, and some analysts say the firm hand of the undisputed strongman is exactly what Cambodia and its economy needs.
"It's easy to criticise Hun Sen as a single-party ruler, authoritarian and totalitarian, but he's a pragmatist -- he does what he needs to do," said Ian Bryson, a regional analyst for Control Risks.
"There's no reason to forecast any instability in the near future. Cambodia's pretty rock solid. Hun Sen is healthy and he really is quite well-regarded."
Given the steady turnaround in Cambodia's fortunes since Hun Sen came to power 25 years ago, the popularity of the Khmer Rouge defector and former farmer and monk, comes as no surprise.
RECOVERY COURSE
Six years after Vietnamese invaders ended the Khmer Rouge's 1975-79 "killing fields" reign of terror, Hun Sen became premier and cultivated a reputation as a moderate, investor-friendly democrat, which helped put Cambodia on the road to recovery.
Until the global economic crisis struck, Cambodia had seen four straight years of double-digit growth fuelled by Hun Sen's pro-business policies, which created new jobs and infrastructure and raised living standards among the rural poor, many of whom live on less than $1 a day.
With backing from the poor, his Cambodian People's Party (CPP) scored 73 percent of the vote in 2008 elections, which observers said had only minor irregularities, to win its first outright majority after years of bickering coalition governments.
"I see no party that can challenge the CPP. They've improved the livelihoods of the poor and boosted their hopes and expectations for the future," said a Cambodian political science lecturer, who asked not to be named.
"The criticism Hun Sen has received does not reflect the overall situation. I can see the ruling party will continue to hold power ... and foreigners will continue to invest here."
Analysts say complaints about graft, cronyism, lawsuits and forced evictions from donors, rights groups, diplomats and financial institutions have irked Hun Sen, but will have little impact on his popularity.
The biggest challenge for the CPP, they say, is to revive the economy and ensure jobs are created to minimise the threat of social problems or civil disorder that could undermine its grip on power.
Foreign direct investment has slowed since the global financial crisis took its toll. Economic growth slowed to 5.5 percent in 2008 and the economy is forecast to shrink by 0.5 percent this year, according to the International Monetary Fund.
With a slump in demand from key markets like the United States, at least 130 garment factories have closed since late last year, prompting an estimated 50,000-60,000 lay-offs in an industry that brought in $3.8 billion in 2007.
But analysts say workers have accepted this is not the fault of government mismanagment, and that it looks unlikely to pose a threat to Cambodia's stability.
Neither, they say, will long-running diplomatic disputes with traditional foe Thailand over border demarcations, near the 11th-century Preah Vihear temple and in the Gulf of Thailand, where oil and gas deposits have been found.
Both sides have beefed up their military presence in the areas and seven soldiers died in skirmishes over the past year. But too much is at stake for both countries, and that is preventing the disputes from escalating significantly.
"It's been a bumpy ride for Cambodia, but stability is, and will remain, very much intact," added Pou Sothirak of ISEAS. "And for that reason, I expect foreign investors will return when the global economic situation improves."
(Additional reporting by Martin Petty)
Q+A-Will Cambodia's economic woes affect stability?
Thursday August 20, 2009
BANGKOK, Aug 20 (Reuters) - Cambodian Prime Minister Hun Sen is facing pressure from rights groups and foreign donors while he battles to minimise the damage to the country's fragile economy from the global financial crisis.
Foreign governments, rights groups, non-governmental organisations and political rivals continue to hound the former Khmer Rouge soldier over his authoritarian leadership style and his attempts to muzzle critics.
However, analysts say neither the criticism of Hun Sen's government nor the effects of the slowing economy are likely create instability in the near future.
HOW DOES HUN SEN RESPOND TO CRITICS?
Hun Sen's government has filed a series of lawsuits against journalists and opposition lawmakers for defamation or "disinformation", which rights groups and foreign diplomats say are attempts to silence critics and strengthen his grip on power.
Two opposition MPs critical of Hun Sen and his party were recently stripped of parliamentary immunity, effectively unseating them from the national assembly. Other cases have included a young political activist jailed for painting anti-government slogans on his house and an advocate of cultural preservation who criticised lighting plans for the ancient Angkor Wat temple.
"Hun Sen does not know how to respond to criticism and the fear is he will respond with an iron fist through more suppression, which would undermine Cambodia's democratic progress," said Ou Vireak, president of the U.S-funded Cambodian Centre for Human Rights.
WHAT ABOUT FORCED EVICTIONS, CORRUPTION?
Tens of thousands of people have been evicted by force from prime land in the capital, Phnom Penh. Rights groups say as many as 250,000 people have been affected nationwide. The government says the dwellers are land-grabbers who refuse to accept their offers of compensation.
The World Bank and other donors say the evictions are hampering efforts to tackle poverty in a country where 35 percent of the population live on less than $1 a day. The ruling party's control over the police, military and the courts means those made homeless have limited power to fight the evictions.
The government has also come under fire for failing to deal with rampant corruption, which the United States says costs the country $500 million a year. Cambodia, which anti-graft watchdogs rank as one of the world's most corrupt countries, has dismissed the claims as foreign interference. An anti-corruption bill drafted in the 1990s is also yet to be approved.
Analysts say the failure to tackle graft will restrict the amount of foreign investment in the country.
IS ALL THIS ANY THREAT TO HUN SEN?
Hun Sen's Cambodian People's Party (CPP) enjoyed a landslide election victory in 2008 on the back of four years of double-digit growth driven by pro-investment policies, which helped create jobs and improve infrastructure and public services.
Analysts say that after decades of war and political strife, Cambodians are better off under Hun Sen. Although he is criticised for his authoritarian style, people are largely supportive of his nationalist and conservative approach to running the country.
"He has a desire to maintain Khmer traditions and morals and that maintains some strong fabric on which to base policy decisions. That's good for political stability," said Ian Bryson, a specialist on Cambodia at Control Risks in Singapore.
COULD A SLOWING ECONOMY AFFECT CAMBODIA'S STABILITY?
A boom in the garment manufacturing industry in the 1990s helped lift many rural people out of poverty, but the global financial crisis has hurt tourism and slashed demand for Cambodian-made clothes in countries like the United States.
Analysts believe victims of lay-offs are unlikely to blame the government or protest against factory closures. They say stability rests on the government's future handling of inflation, diversifying its economy and improving its investment climate.
"The government should invest more in agriculture and other industries and reduce its reliance on garments and tourism," said Pou Sothirak, a senior research fellow at Singapore's Institute of South East Asian Studies (ISEAS).
(Compiled by Martin Petty and Ek Madra in Phnom Penh; Editing by Alan Raybould and Bill Tarrant)
BANGKOK, Aug 20 (Reuters) - Cambodian Prime Minister Hun Sen is facing pressure from rights groups and foreign donors while he battles to minimise the damage to the country's fragile economy from the global financial crisis.
Foreign governments, rights groups, non-governmental organisations and political rivals continue to hound the former Khmer Rouge soldier over his authoritarian leadership style and his attempts to muzzle critics.
However, analysts say neither the criticism of Hun Sen's government nor the effects of the slowing economy are likely create instability in the near future.
HOW DOES HUN SEN RESPOND TO CRITICS?
Hun Sen's government has filed a series of lawsuits against journalists and opposition lawmakers for defamation or "disinformation", which rights groups and foreign diplomats say are attempts to silence critics and strengthen his grip on power.
Two opposition MPs critical of Hun Sen and his party were recently stripped of parliamentary immunity, effectively unseating them from the national assembly. Other cases have included a young political activist jailed for painting anti-government slogans on his house and an advocate of cultural preservation who criticised lighting plans for the ancient Angkor Wat temple.
"Hun Sen does not know how to respond to criticism and the fear is he will respond with an iron fist through more suppression, which would undermine Cambodia's democratic progress," said Ou Vireak, president of the U.S-funded Cambodian Centre for Human Rights.
WHAT ABOUT FORCED EVICTIONS, CORRUPTION?
Tens of thousands of people have been evicted by force from prime land in the capital, Phnom Penh. Rights groups say as many as 250,000 people have been affected nationwide. The government says the dwellers are land-grabbers who refuse to accept their offers of compensation.
The World Bank and other donors say the evictions are hampering efforts to tackle poverty in a country where 35 percent of the population live on less than $1 a day. The ruling party's control over the police, military and the courts means those made homeless have limited power to fight the evictions.
The government has also come under fire for failing to deal with rampant corruption, which the United States says costs the country $500 million a year. Cambodia, which anti-graft watchdogs rank as one of the world's most corrupt countries, has dismissed the claims as foreign interference. An anti-corruption bill drafted in the 1990s is also yet to be approved.
Analysts say the failure to tackle graft will restrict the amount of foreign investment in the country.
IS ALL THIS ANY THREAT TO HUN SEN?
Hun Sen's Cambodian People's Party (CPP) enjoyed a landslide election victory in 2008 on the back of four years of double-digit growth driven by pro-investment policies, which helped create jobs and improve infrastructure and public services.
Analysts say that after decades of war and political strife, Cambodians are better off under Hun Sen. Although he is criticised for his authoritarian style, people are largely supportive of his nationalist and conservative approach to running the country.
"He has a desire to maintain Khmer traditions and morals and that maintains some strong fabric on which to base policy decisions. That's good for political stability," said Ian Bryson, a specialist on Cambodia at Control Risks in Singapore.
COULD A SLOWING ECONOMY AFFECT CAMBODIA'S STABILITY?
A boom in the garment manufacturing industry in the 1990s helped lift many rural people out of poverty, but the global financial crisis has hurt tourism and slashed demand for Cambodian-made clothes in countries like the United States.
Analysts believe victims of lay-offs are unlikely to blame the government or protest against factory closures. They say stability rests on the government's future handling of inflation, diversifying its economy and improving its investment climate.
"The government should invest more in agriculture and other industries and reduce its reliance on garments and tourism," said Pou Sothirak, a senior research fellow at Singapore's Institute of South East Asian Studies (ISEAS).
(Compiled by Martin Petty and Ek Madra in Phnom Penh; Editing by Alan Raybould and Bill Tarrant)
Thursday, August 20, 2009
Japan PM hopeful pledges bureaucrat crackdown
by Shingo Ito Shingo Ito – Thu Aug 20, 12:13 am ET
TOKYO (AFP) – They are highly educated, mostly male and almost always wear grey suits, and now they are in the cross-hairs of the man who hopes to become Japan's next prime minister: government bureaucrats.
People the world over may love to hate civil servants, often accusing them of slowing down business and everyday life with a thicket of red tape, unnecessary rules and incomprehensible jargon.
But Japan's state bureaucrats, all 360,000 of them, are a slightly different species -- they may just be too good at what they do. Critics charge that it is they, not politicians, who have been running the country.
For too long, says Japan's opposition leader Yukio Hatoyama, the mandarins have quietly steered the ship of state and asked the elected lawmakers to rubber-stamp their decisions.
Hatoyama wants to clip their wings, a goal that is a key plank of his campaign platform ahead of the August 30 election which, polls have indicated, may well make him Japan's next prime minister.
The election, Hatoyama has said, will be a "revolutionary vote to create a new Japan with politician-led politics."
"In contrast with the bureaucrat-led politics... we will produce politics in which the public plays a leading role."
Hatoyama's centre-left Democratic Party of Japan is headed for a landslide win in elections this month, according to a newspaper's telephone survey of more than 60,000 voters published on Thursday.
The mass-circulation Asahi Shimbun daily predicted that the DPJ was "gathering momentum to win more than 300 seats" in the 480-seat lower house in the August 30 vote.
The Asahi cautioned that the trend may change greatly in the final days before the election as at least one out of three voters were either undecided or declined to say which party or candidate they would vote for.
Political observers have long said Japan's officials wield far greater power than their counterparts in other democracies when it comes to steering policy, drawing up laws and carving up state budgets.
The heads of ministries, who carry the rank of vice minister, are often seen as more powerful than the politicians whom they ostensibly serve.
When the top bureaucrats retire, they tend to parachute into cushy jobs in the companies and agencies they formerly supervised.
Hatoyama has also vowed to put an end to that practice -- dubbed "amakudari" or descent from heaven -- which has been blamed for breeding conflicts of interest, collusion and bid-rigging.
The special status of Japan's government servants dates to the seventh century when Japan introduced a bureaucracy modelled on ancient China's merit-based mandarin system.
Japan's best and brightest became bureaucrats, who commanded respect, even awe, as they directly served the emperor.
After Japan's defeat in World War II, when the political elite was removed from power, the bureaucrats were credited with guiding the nation on its path from post-war gloom through its economic miracle.
The officials did so by working hand in hand with the Liberal Democratic Party (LDP), which has ruled almost without break since 1955, and with big business -- a cosy relationship often dubbed the "iron triangle."
The feats of Japan's bureaucrats are still revered and a popular TV drama celebrates the heroic efforts of 1960s-era trade ministry officials.
Critics charge that, in the process, the bureaucracy became an unstoppable force that, with very little accountability to the public, turned Japan into one of the world's most heavily regulated societies.
Author Alex Kerr argued in his book "Dogs and Demons" that ministries, bent on spending funds to maintain their annual budgets, have pursued wasteful 'pave-and-build' policies that have devastated Japan's countryside.
Bureaucrats have also drawn fire when graft, waste or mismanagement have been exposed, such as the loss of tens of thousands of state pension records.
The LDP's reformist former prime minister Junichiro Koizumi stared down a stronghold of the bureaucracy when he launched the break-up of the massive postal system, a behemoth with large banking and insurance arms.
Now Hatoyama wants to rein in the officials to a far greater extent, promising to deploy 100 lawmakers to supervise ministries and, crucially, wrest back control of the budget process from the finance ministry.
He has pledged to set up a national strategy office under the prime minister's direct control which would compile the budget, draft diplomatic statements and author other key government policies.
Hatoyama's proposed sweep of the officialdom is timely, say some experts.
"The bureaucracy worked well when Japan was trying to catch up with other countries," said Fusao Ushiro, a politics professor at Nagoya University.
"But since Japan has already achieved that goal, there is greater urgency for creative thinking, which is not common or encouraged among bureaucrats. The era of the bureaucrats may be coming to an end."
Some experts though warn that Japan's civil servants may die hard, and could even stall the Democratic Party of Japan's reformist plans.
"No matter who governs the country, they will need bureaucrats," said Tetsuro Kato, politics professor at Tokyo's Hitotsubashi University.
"The question is how effectively Japan can make use of the elite group."
TOKYO (AFP) – They are highly educated, mostly male and almost always wear grey suits, and now they are in the cross-hairs of the man who hopes to become Japan's next prime minister: government bureaucrats.
People the world over may love to hate civil servants, often accusing them of slowing down business and everyday life with a thicket of red tape, unnecessary rules and incomprehensible jargon.
But Japan's state bureaucrats, all 360,000 of them, are a slightly different species -- they may just be too good at what they do. Critics charge that it is they, not politicians, who have been running the country.
For too long, says Japan's opposition leader Yukio Hatoyama, the mandarins have quietly steered the ship of state and asked the elected lawmakers to rubber-stamp their decisions.
Hatoyama wants to clip their wings, a goal that is a key plank of his campaign platform ahead of the August 30 election which, polls have indicated, may well make him Japan's next prime minister.
The election, Hatoyama has said, will be a "revolutionary vote to create a new Japan with politician-led politics."
"In contrast with the bureaucrat-led politics... we will produce politics in which the public plays a leading role."
Hatoyama's centre-left Democratic Party of Japan is headed for a landslide win in elections this month, according to a newspaper's telephone survey of more than 60,000 voters published on Thursday.
The mass-circulation Asahi Shimbun daily predicted that the DPJ was "gathering momentum to win more than 300 seats" in the 480-seat lower house in the August 30 vote.
The Asahi cautioned that the trend may change greatly in the final days before the election as at least one out of three voters were either undecided or declined to say which party or candidate they would vote for.
Political observers have long said Japan's officials wield far greater power than their counterparts in other democracies when it comes to steering policy, drawing up laws and carving up state budgets.
The heads of ministries, who carry the rank of vice minister, are often seen as more powerful than the politicians whom they ostensibly serve.
When the top bureaucrats retire, they tend to parachute into cushy jobs in the companies and agencies they formerly supervised.
Hatoyama has also vowed to put an end to that practice -- dubbed "amakudari" or descent from heaven -- which has been blamed for breeding conflicts of interest, collusion and bid-rigging.
The special status of Japan's government servants dates to the seventh century when Japan introduced a bureaucracy modelled on ancient China's merit-based mandarin system.
Japan's best and brightest became bureaucrats, who commanded respect, even awe, as they directly served the emperor.
After Japan's defeat in World War II, when the political elite was removed from power, the bureaucrats were credited with guiding the nation on its path from post-war gloom through its economic miracle.
The officials did so by working hand in hand with the Liberal Democratic Party (LDP), which has ruled almost without break since 1955, and with big business -- a cosy relationship often dubbed the "iron triangle."
The feats of Japan's bureaucrats are still revered and a popular TV drama celebrates the heroic efforts of 1960s-era trade ministry officials.
Critics charge that, in the process, the bureaucracy became an unstoppable force that, with very little accountability to the public, turned Japan into one of the world's most heavily regulated societies.
Author Alex Kerr argued in his book "Dogs and Demons" that ministries, bent on spending funds to maintain their annual budgets, have pursued wasteful 'pave-and-build' policies that have devastated Japan's countryside.
Bureaucrats have also drawn fire when graft, waste or mismanagement have been exposed, such as the loss of tens of thousands of state pension records.
The LDP's reformist former prime minister Junichiro Koizumi stared down a stronghold of the bureaucracy when he launched the break-up of the massive postal system, a behemoth with large banking and insurance arms.
Now Hatoyama wants to rein in the officials to a far greater extent, promising to deploy 100 lawmakers to supervise ministries and, crucially, wrest back control of the budget process from the finance ministry.
He has pledged to set up a national strategy office under the prime minister's direct control which would compile the budget, draft diplomatic statements and author other key government policies.
Hatoyama's proposed sweep of the officialdom is timely, say some experts.
"The bureaucracy worked well when Japan was trying to catch up with other countries," said Fusao Ushiro, a politics professor at Nagoya University.
"But since Japan has already achieved that goal, there is greater urgency for creative thinking, which is not common or encouraged among bureaucrats. The era of the bureaucrats may be coming to an end."
Some experts though warn that Japan's civil servants may die hard, and could even stall the Democratic Party of Japan's reformist plans.
"No matter who governs the country, they will need bureaucrats," said Tetsuro Kato, politics professor at Tokyo's Hitotsubashi University.
"The question is how effectively Japan can make use of the elite group."
Monday, August 17, 2009
Cambodia: Appointment Of Judges
Monday, 17 August 2009, 12:38 pm
Press Release: Asian Human Rights Commission
Cambodia: Appointment Of Judges And Prosecutors Is Unconstitutional
Lately there has been a hectic time within the Cambodian judiciary with the actual and planned retirement and appointments of many judges and prosecutors. The government has retired and replaced half of the members, two ex-officio and two appointed, of the Supreme Council of the Magistracy (SCM), the supreme judicial body responsible for the nomination and discipline of judges and prosecutors. A further 27 are also to be retired. In the meantime, some 32 judges and prosecutors, including four who are the de facto age of retirement of 60, have been appointed to new positions.
In a statement dated 7 August 2009 (see CAMBODIA: Law on the statute of judges, not their retirement, is the right end from which to tackle judicial reform), the Asian Human Rights Commission (AHRC) has already pointed out the unconstitutionality of the government’s infringement upon the jurisdiction and independence of the SCM when it had bypassed it and retired and replaced those four SCM members. According to the country’s Constitution, the nomination, including appointment, retirement and transfer, as well as the discipline of judges and prosecutors are the responsibility of the SCM, and not that of the government. The SCM is the supreme body of the judiciary which is chaired by the country’s king and which also has the responsibility of ensuring judicial independence.
The AHRC has also urged the Cambodian government to enact two long-overdue laws which the country has specifically stipulated (Art.135 of the Constitution) and which would provide the legal background and framework for the judiciary as required under Art.14 of the International Covenant on Civil and Political Rights on the right to a fair trial by an independent, competent and impartial tribunal established by law. With the law on the statute of judges and prosecutors, the age of retirement would be officially fixed and known, and actual retirement could be set without arousing any suspicion of favouritism for those who wish to remain in active service.
The AHRC has further noticed that the appointment of judges and prosecutors, as shown in the king’s successive appointment decrees, has not respected the principle of separation of powers and the independence of the judiciary as enshrined the country’s Constitutions (Arts 51 and 128). In these appointments, the Minister of Justice, a cabinet member and also a member of the SCM, has made nomination proposals, received the approval of the SCM and submitted them to the king for signing. For some appointments, the SCM has been bypassed altogether and the proposals directly submitted to the king for signature.
This practice contravenes Art 134 of the country’s Constitution which says, among other things, that “The Supreme Council of the Magistracy shall make proposals to the King on the appointment of judges and prosecutors to all courts.” It should be declared unconstitutional when, according Art. 150 of the same Constitution, “Laws and decisions by the State institutions shall have to be in strict conformity with the Constitution.”
The Cambodian government and its ministry of justice in particular seem to have exploited the absence of the constitutional review or any other forms of judicial review of their decisions and have tried to rule by decree, at least in appointment and retirement of judges and prosecutors. The constitutional review of laws seems clear cut when a specific number of public figures and even ordinary citizens may request for it. However, there is almost a complete silence over the constitutional review of decisions of state institutions, the government and its ministries included. Only a litigant who feels his or her rights are affected by such a decision could raise the issue of its unconstitutionality with the Constitutional Council through the Supreme Court. Unlike in the case of promulgated laws, neither any public figure mentioned above nor any concerned citizen may request for the constitutional review of decisions of state institutions. Nor is the Constitutional Council habilitated to do this constitutional
The AHRC strongly urges the Minister of Justice to respect the principle of separation of powers and the independence of the judiciary and the SCM, refrain from infringing upon the jurisdiction of the SCM, and let this supreme judicial body fully exercise its full constitutional authority over the nomination and discipline of judges and prosecutors. The Minister of Justice should relinquish its control of the SCM Secretariat and transfer it back where it belongs, that is, to the SCM. It should instead secure for the SCM adequate resources to enable it to fulfill its constitutional duties in the nomination and discipline of judges and prosecutors, and in the independence of the judiciary.
AHRC further urges that all decisions of state institutions, including those of the government and the Ministry of Justice regarding the nomination and discipline of judges and prosecutors as well as the independence of the judiciary, should be in strict conformity with the Constitution as specifically stipulated under its Art 150. The Law on the Organization and Functioning of the Constitutional Council should therefore be amended in order to subject such decisions to the same constitutional review as all laws.
About AHRC: The Asian Human Rights Commission is a regional non-governmental organisation monitoring and lobbying human rights issues in Asia. The Hong Kong-based group was founded in 1984.
Press Release: Asian Human Rights Commission
Cambodia: Appointment Of Judges And Prosecutors Is Unconstitutional
Lately there has been a hectic time within the Cambodian judiciary with the actual and planned retirement and appointments of many judges and prosecutors. The government has retired and replaced half of the members, two ex-officio and two appointed, of the Supreme Council of the Magistracy (SCM), the supreme judicial body responsible for the nomination and discipline of judges and prosecutors. A further 27 are also to be retired. In the meantime, some 32 judges and prosecutors, including four who are the de facto age of retirement of 60, have been appointed to new positions.
In a statement dated 7 August 2009 (see CAMBODIA: Law on the statute of judges, not their retirement, is the right end from which to tackle judicial reform), the Asian Human Rights Commission (AHRC) has already pointed out the unconstitutionality of the government’s infringement upon the jurisdiction and independence of the SCM when it had bypassed it and retired and replaced those four SCM members. According to the country’s Constitution, the nomination, including appointment, retirement and transfer, as well as the discipline of judges and prosecutors are the responsibility of the SCM, and not that of the government. The SCM is the supreme body of the judiciary which is chaired by the country’s king and which also has the responsibility of ensuring judicial independence.
The AHRC has also urged the Cambodian government to enact two long-overdue laws which the country has specifically stipulated (Art.135 of the Constitution) and which would provide the legal background and framework for the judiciary as required under Art.14 of the International Covenant on Civil and Political Rights on the right to a fair trial by an independent, competent and impartial tribunal established by law. With the law on the statute of judges and prosecutors, the age of retirement would be officially fixed and known, and actual retirement could be set without arousing any suspicion of favouritism for those who wish to remain in active service.
The AHRC has further noticed that the appointment of judges and prosecutors, as shown in the king’s successive appointment decrees, has not respected the principle of separation of powers and the independence of the judiciary as enshrined the country’s Constitutions (Arts 51 and 128). In these appointments, the Minister of Justice, a cabinet member and also a member of the SCM, has made nomination proposals, received the approval of the SCM and submitted them to the king for signing. For some appointments, the SCM has been bypassed altogether and the proposals directly submitted to the king for signature.
This practice contravenes Art 134 of the country’s Constitution which says, among other things, that “The Supreme Council of the Magistracy shall make proposals to the King on the appointment of judges and prosecutors to all courts.” It should be declared unconstitutional when, according Art. 150 of the same Constitution, “Laws and decisions by the State institutions shall have to be in strict conformity with the Constitution.”
The Cambodian government and its ministry of justice in particular seem to have exploited the absence of the constitutional review or any other forms of judicial review of their decisions and have tried to rule by decree, at least in appointment and retirement of judges and prosecutors. The constitutional review of laws seems clear cut when a specific number of public figures and even ordinary citizens may request for it. However, there is almost a complete silence over the constitutional review of decisions of state institutions, the government and its ministries included. Only a litigant who feels his or her rights are affected by such a decision could raise the issue of its unconstitutionality with the Constitutional Council through the Supreme Court. Unlike in the case of promulgated laws, neither any public figure mentioned above nor any concerned citizen may request for the constitutional review of decisions of state institutions. Nor is the Constitutional Council habilitated to do this constitutional
The AHRC strongly urges the Minister of Justice to respect the principle of separation of powers and the independence of the judiciary and the SCM, refrain from infringing upon the jurisdiction of the SCM, and let this supreme judicial body fully exercise its full constitutional authority over the nomination and discipline of judges and prosecutors. The Minister of Justice should relinquish its control of the SCM Secretariat and transfer it back where it belongs, that is, to the SCM. It should instead secure for the SCM adequate resources to enable it to fulfill its constitutional duties in the nomination and discipline of judges and prosecutors, and in the independence of the judiciary.
AHRC further urges that all decisions of state institutions, including those of the government and the Ministry of Justice regarding the nomination and discipline of judges and prosecutors as well as the independence of the judiciary, should be in strict conformity with the Constitution as specifically stipulated under its Art 150. The Law on the Organization and Functioning of the Constitutional Council should therefore be amended in order to subject such decisions to the same constitutional review as all laws.
About AHRC: The Asian Human Rights Commission is a regional non-governmental organisation monitoring and lobbying human rights issues in Asia. The Hong Kong-based group was founded in 1984.
Saturday, August 15, 2009
Civil servants uneasy as DPJ plots change in power game
U.K.-style tack eyed to dilute bureaucracy
The Japan Times
By ALEX MARTIN
Staff writer
Saturday, Aug. 15, 2009
When vice farm minister Michio Ide in June criticized the Democratic Party of Japan's plans to subsidize farmers' income as unrealistic, DPJ President Yukio Hatoyama quickly fired back.
"Bureaucrats need to be fair and neutral," Hatoyama said, adding that if bureaucrats in Britain had made such remarks, "they'd be sacked."
The incident highlighted the marked discord rising between the civil servants and the DPJ, which is boldly vowing to place the administrative power of the government in the hands of politicians if the opposition party takes power in the Aug. 30 general election.
But questions remain on how the DPJ plans to do this, and how the transition from a half century of governance by the Liberal Democratic Party — and its mandarins in the bureaucracy — would be achieved.
In June, DPJ Deputy President Naoto Kan took a six-day trip to Britain to hold talks with officials from the government and opposition parties about power transitions and the relationship between bureaucrats and politicians.
The trip implies that the DPJ has a strong interest in adopting Britain's Westminster system, in which power is concentrated in the Cabinet at the expense of the governing party and the bureaucracy.
In Britain, more than 100 members of the ruling party enter the government as Cabinet members or junior ministers. Policymaking is conducted based on the ruling party's platform, with policy-proposing capabilities centralized in the Cabinet.
Bureaucrats are expected to remain neutral in shaping and supporting policies in Britain, where a firm two-party system produces frequent regime change.
Upon his return, Kan published his thoughts on the topic in the July issue of Chuo Koron magazine, where he outlined his plans on how to concentrate power in the Cabinet by abolishing the customary practices that allowed the bureaucracy to accumulate its vast power over the years.
Kan, who was Lower House chairman of the foreign policy council under Prime Minister Morihiro Hosokawa's Cabinet in 1993 — the first non-LDP government in 38 years — got firsthand experience watching how regime change can go awry.
Hosokawa's eight-party ruling coalition was often beset by policy differences that erupted between its center-right and leftist wings, and he abruptly resigned after less than a year in office as a looming personal financial scandal threatened to force him out.
In the magazine essay, Kan mentions how the soon-to-be-appointed prime minister's secretary — a former bureaucrat — began arranging Hosokawa's schedule even before the Diet elected him prime minister.
A similar thing happened when Kan was health minister in LDP Prime Minister Ryutaro Hashimoto's Cabinet in 1996. As soon as he was appointed, the ministry's anonymous chief secretary quickly began arranging everything, from his personal secretary and press conference memos for the Cabinet's formation, to his role in the Cabinet's confirmation ceremony at the Imperial Palace.
Kan said in the essay that he now understands how bureaucrats begin scripting politicians' every move from the earliest stages of a Cabinet. "It was all very strange," he wrote.
To subvert that system, the DPJ has drafted proposals in its policy platform that would, theoretically at least, put administrative power in the hands of lawmakers.
The DPJ proposes appointing more than 100 members of the ruling party to Cabinet and sub-Cabinet level posts to strengthen the government. It also suggests that the chairman of the DPJ Policy Research Council double as a Cabinet member so policy decisions can be made from within the Cabinet.
By concentrating power within the government and the party, the DPJ said the preliminary review of legislation — a customary LDP practice that has allowed the vested interests of lawmakers and bureaucrats alike to influence legislation — would become unnecessary.
The DPJ plans on eliminating these processes as well as and banning vice ministers from expressing their opinions during press conferences, as vice farm minister Ide did in June.
Another plan central to the transition from bureaucratic to political rule is a national strategy office, a body under the direct control of the prime minister. This office would be responsible for compiling the budget and drafting foreign policy documents. Its staff would include both private-sector experts and bureaucrats.
In the past, for example, budgetary request guidelines were decided by the Finance Ministry. The DPJ says this authority would be handed over to the national strategy office.
The DPJ also plans on setting up an administrative reform council that would be responsible for cutting wasteful spending to secure the finances needed for developing policy.
During an interview July 31, Hatoyama said all of the party's plans should be legislated simultaneously as the DPJ-led government starts up. He said he plans to kick things off by holding an extraordinary Diet session in the fall.
However, such a drastic overhaul of the administrative system is bound to face enormous resistance from the bureaucracy, analysts say.
Fukashi Horie, a well-versed political observer and professor emeritus at Keio University, said that although he believes the DPJ still hasn't reached a practical conclusion on how to put its plans in motion, constant maneuvering by self-interested bureaucrats bent on influencing legislation is unavoidable.
"It's already difficult enough to enact laws without loopholes," Horie said, stressing that even if the DPJ succeeded in passing such bills through the Diet, the next issue would be how to control the bureaucrats.
"What will be required from now on is the ability to pin down and control the bureaucrats — to cajole them at times, or growl at them depending on the situation, to gain their cooperation — and that is a very difficult thing to do," he said.
Jun Saito, a former DPJ Upper House legislator who teaches political science at Yale, added that it also will be important for the DPJ to establish realistic expectations among the public that it will be in power for at least the next few years, and possibly more.
"Systemic reforms take effort and time. Winning next year's Upper House election will also be an important agenda item," he said. "Because the LDP has owned the bureaucracy, DPJ politicians have lacked the resources to formulate policies. The DPJ will need to take time to get (its) policies actually enacted and implemented, but I believe (it) will get things done."
The Japan Times
By ALEX MARTIN
Staff writer
Saturday, Aug. 15, 2009
When vice farm minister Michio Ide in June criticized the Democratic Party of Japan's plans to subsidize farmers' income as unrealistic, DPJ President Yukio Hatoyama quickly fired back.
"Bureaucrats need to be fair and neutral," Hatoyama said, adding that if bureaucrats in Britain had made such remarks, "they'd be sacked."
The incident highlighted the marked discord rising between the civil servants and the DPJ, which is boldly vowing to place the administrative power of the government in the hands of politicians if the opposition party takes power in the Aug. 30 general election.
But questions remain on how the DPJ plans to do this, and how the transition from a half century of governance by the Liberal Democratic Party — and its mandarins in the bureaucracy — would be achieved.
In June, DPJ Deputy President Naoto Kan took a six-day trip to Britain to hold talks with officials from the government and opposition parties about power transitions and the relationship between bureaucrats and politicians.
The trip implies that the DPJ has a strong interest in adopting Britain's Westminster system, in which power is concentrated in the Cabinet at the expense of the governing party and the bureaucracy.
In Britain, more than 100 members of the ruling party enter the government as Cabinet members or junior ministers. Policymaking is conducted based on the ruling party's platform, with policy-proposing capabilities centralized in the Cabinet.
Bureaucrats are expected to remain neutral in shaping and supporting policies in Britain, where a firm two-party system produces frequent regime change.
Upon his return, Kan published his thoughts on the topic in the July issue of Chuo Koron magazine, where he outlined his plans on how to concentrate power in the Cabinet by abolishing the customary practices that allowed the bureaucracy to accumulate its vast power over the years.
Kan, who was Lower House chairman of the foreign policy council under Prime Minister Morihiro Hosokawa's Cabinet in 1993 — the first non-LDP government in 38 years — got firsthand experience watching how regime change can go awry.
Hosokawa's eight-party ruling coalition was often beset by policy differences that erupted between its center-right and leftist wings, and he abruptly resigned after less than a year in office as a looming personal financial scandal threatened to force him out.
In the magazine essay, Kan mentions how the soon-to-be-appointed prime minister's secretary — a former bureaucrat — began arranging Hosokawa's schedule even before the Diet elected him prime minister.
A similar thing happened when Kan was health minister in LDP Prime Minister Ryutaro Hashimoto's Cabinet in 1996. As soon as he was appointed, the ministry's anonymous chief secretary quickly began arranging everything, from his personal secretary and press conference memos for the Cabinet's formation, to his role in the Cabinet's confirmation ceremony at the Imperial Palace.
Kan said in the essay that he now understands how bureaucrats begin scripting politicians' every move from the earliest stages of a Cabinet. "It was all very strange," he wrote.
To subvert that system, the DPJ has drafted proposals in its policy platform that would, theoretically at least, put administrative power in the hands of lawmakers.
The DPJ proposes appointing more than 100 members of the ruling party to Cabinet and sub-Cabinet level posts to strengthen the government. It also suggests that the chairman of the DPJ Policy Research Council double as a Cabinet member so policy decisions can be made from within the Cabinet.
By concentrating power within the government and the party, the DPJ said the preliminary review of legislation — a customary LDP practice that has allowed the vested interests of lawmakers and bureaucrats alike to influence legislation — would become unnecessary.
The DPJ plans on eliminating these processes as well as and banning vice ministers from expressing their opinions during press conferences, as vice farm minister Ide did in June.
Another plan central to the transition from bureaucratic to political rule is a national strategy office, a body under the direct control of the prime minister. This office would be responsible for compiling the budget and drafting foreign policy documents. Its staff would include both private-sector experts and bureaucrats.
In the past, for example, budgetary request guidelines were decided by the Finance Ministry. The DPJ says this authority would be handed over to the national strategy office.
The DPJ also plans on setting up an administrative reform council that would be responsible for cutting wasteful spending to secure the finances needed for developing policy.
During an interview July 31, Hatoyama said all of the party's plans should be legislated simultaneously as the DPJ-led government starts up. He said he plans to kick things off by holding an extraordinary Diet session in the fall.
However, such a drastic overhaul of the administrative system is bound to face enormous resistance from the bureaucracy, analysts say.
Fukashi Horie, a well-versed political observer and professor emeritus at Keio University, said that although he believes the DPJ still hasn't reached a practical conclusion on how to put its plans in motion, constant maneuvering by self-interested bureaucrats bent on influencing legislation is unavoidable.
"It's already difficult enough to enact laws without loopholes," Horie said, stressing that even if the DPJ succeeded in passing such bills through the Diet, the next issue would be how to control the bureaucrats.
"What will be required from now on is the ability to pin down and control the bureaucrats — to cajole them at times, or growl at them depending on the situation, to gain their cooperation — and that is a very difficult thing to do," he said.
Jun Saito, a former DPJ Upper House legislator who teaches political science at Yale, added that it also will be important for the DPJ to establish realistic expectations among the public that it will be in power for at least the next few years, and possibly more.
"Systemic reforms take effort and time. Winning next year's Upper House election will also be an important agenda item," he said. "Because the LDP has owned the bureaucracy, DPJ politicians have lacked the resources to formulate policies. The DPJ will need to take time to get (its) policies actually enacted and implemented, but I believe (it) will get things done."
Friday, August 14, 2009
Japan earthquakes remind investors of ever-present risk
Aug 13, 2009, 4:16 a.m. EST
By Lisa Twaronite, MarketWatch
Third strong quake in four days lead analysts to ponder worst-case scenarios
TOKYO (MarketWatch) -- The third strong earthquake in four days shook Tokyo early Thursday, reminding investors that the threat of a massive temblor looms heavily over the world's second-largest economy and leaving them to ponder the likely market impact.
The 6.7-magnitude quake that stuck at 7:49 a.m. Thursday morning local time was centered in the Pacific Ocean about 200 miles southeast of Tokyo, according to the U.S. Geological Survey. No injuries or damages were reported.
It followed a magnitude-6.5 earthquake to about 100 miles southwest of Tokyo two days earlier, which left one person dead, dozens injured and closed a major roadway connecting Tokyo with Western Japan.
Another offshore quake with an estimated magnitude of 7.1 struck the Izu Islands to the west of Tuesday's quake on Sunday evening. All three quakes were felt in the capital, though none occurred during market hours.
Japanese assets, including the yen, would be an obvious "sell" immediately after a major disaster here. Whenever the ground trembles under Tokyo trading floors, the yen tends to skip against other major currencies, and the stock market usually sheds some points.
But in the longer term, a clear directional call is impossible. The quake's magnitude, the state of the Japanese and global economies in the period leading up to the event, as well as the recent bias of yen trading preceding it, would all be factors, said Patrick Bennett, a currency strategist at Société Générale in Hong Kong.
"A huge earthquake would of course be a terrible tragedy, and as in the case of [the Japanese port city of] Kobe, would impact growth. But in the recovery/rebuilding process there will be some divergence in company performances," he said.
In the rebuilding phase that follows a disaster, winners and losers emerge. Insurers are likely to liquidate some overseas assets in order to pay claims, and that repatriation could accelerate yen appreciation.
A 2007 study by ABS Consulting Inc. and its unit EQECAT Inc. found that a large quake could lead Japan's chemical industry to suffer financial losses equal to more than two years of pre-tax earnings, while the precision machinery and petroleum industries could suffer damage equal to more than one year of pre-tax earnings.
Other industry groups that also have significant loss exposure were steel, non-ferrous metals, autos, electronics and pharmaceuticals, the study said.
Advanced preparedness
Japan is among the most earthquake-conscious societies, as it is struck by an estimated 20% of the world's earthquakes of magnitude 6 or greater.
Schools, and even some business, hold regular disaster drills, particularly on the Sept. 1 anniversary of the 1923 Great Kanto earthquake and fire which claimed about 140,000 lives in Yokohama and Tokyo.
Japan's advanced quake preparedness was likely the main reason casualties and damages from this week's strong temblors were lower than they would have been in a country without such preparations and seismic requirements in place.
Even so, companies reported quake-related disruptions. Corning Inc. /quotes/comstock/13*!glw/quotes/nls/glw (GLW 16.48, +0.25, +1.54%) said the Tuesday earthquake disrupted production at its LCD glass-manufacturing facility in Shizuoka. The plant manufactures glass substrate for Sharp Corp. /quotes/comstock/!6753 (JP:6753 1,083, +11.00, +1.03%) and other Japanese LCD panel makers.
Toshiba Corp. /quotes/comstock/!6502 (JP:6502 464.00, +7.00, +1.53%) subsidiary Hamaoka Toshiba Electronics Corp. also reportedly suffered damage at their LED factory in the area.
A quake-triggered landslide also destroyed part of the Tomei Expressway between Tokyo and Nagoya, which remained closed Thursday.
Chubu Electric Power Co. /quotes/comstock/!9502 (JP:9502 2,205, -5.00, -0.23%) automatically halted operations at two reactors at its nuclear plant in Shizuoka prefecture after the quake, which briefly cut power to thousands of homes. The utility said it would temporarily use liquefied natural gas units to offset the loss of capacity.
'Bad for the economy'
Two strong earthquakes with 6-plus magnitudes caused casualties and damages in the northern Niigata region in 2004 and 2007, but Japan's most devastating recent seismic event was Kobe's 7.3-magnitude quake in 1995. It killed more than 6,400 people and caused damages estimated around 2% of Japanese gross domestic product.
In a worst-case scenario, a Kobe-sized quake originating in the northern part of Tokyo Bay could kill up to 11,000 people in the greater Tokyo area, according to a 2005 study by the Japanese Cabinet Office's Central Disaster Management Council.
"An earthquake, as with any disaster, is bad for the economy despite many commentators' arguments that the earthquake would stimulate the Japanese economy through the demand stimulus that results," economist Warwick McKibbin wrote in a 1997 policy paper for the Washington, D.C.-based Brookings Institution.
Japan's experience in 1995 followed some traditional models, he said, in which "the yen appreciates, GDP falls, the share market drops, and long-term real interest rates rise slightly."
The initial impact, he said, is "a direct negative effect of the lower capital stock on aggregate supply," which brings down share prices and, in turn, reduces private consumption.
But those lower prices eventually attract buyers, he said, as foreign capital flows into the country "in response to the higher expected rate of return. Thus the yen appreciates and the current account deteriorates, reflecting the capital inflow."
Lisa Twaronite reports for MarketWatch from Tokyo.
By Lisa Twaronite, MarketWatch
Third strong quake in four days lead analysts to ponder worst-case scenarios
TOKYO (MarketWatch) -- The third strong earthquake in four days shook Tokyo early Thursday, reminding investors that the threat of a massive temblor looms heavily over the world's second-largest economy and leaving them to ponder the likely market impact.
The 6.7-magnitude quake that stuck at 7:49 a.m. Thursday morning local time was centered in the Pacific Ocean about 200 miles southeast of Tokyo, according to the U.S. Geological Survey. No injuries or damages were reported.
It followed a magnitude-6.5 earthquake to about 100 miles southwest of Tokyo two days earlier, which left one person dead, dozens injured and closed a major roadway connecting Tokyo with Western Japan.
Another offshore quake with an estimated magnitude of 7.1 struck the Izu Islands to the west of Tuesday's quake on Sunday evening. All three quakes were felt in the capital, though none occurred during market hours.
Japanese assets, including the yen, would be an obvious "sell" immediately after a major disaster here. Whenever the ground trembles under Tokyo trading floors, the yen tends to skip against other major currencies, and the stock market usually sheds some points.
But in the longer term, a clear directional call is impossible. The quake's magnitude, the state of the Japanese and global economies in the period leading up to the event, as well as the recent bias of yen trading preceding it, would all be factors, said Patrick Bennett, a currency strategist at Société Générale in Hong Kong.
"A huge earthquake would of course be a terrible tragedy, and as in the case of [the Japanese port city of] Kobe, would impact growth. But in the recovery/rebuilding process there will be some divergence in company performances," he said.
In the rebuilding phase that follows a disaster, winners and losers emerge. Insurers are likely to liquidate some overseas assets in order to pay claims, and that repatriation could accelerate yen appreciation.
A 2007 study by ABS Consulting Inc. and its unit EQECAT Inc. found that a large quake could lead Japan's chemical industry to suffer financial losses equal to more than two years of pre-tax earnings, while the precision machinery and petroleum industries could suffer damage equal to more than one year of pre-tax earnings.
Other industry groups that also have significant loss exposure were steel, non-ferrous metals, autos, electronics and pharmaceuticals, the study said.
Advanced preparedness
Japan is among the most earthquake-conscious societies, as it is struck by an estimated 20% of the world's earthquakes of magnitude 6 or greater.
Schools, and even some business, hold regular disaster drills, particularly on the Sept. 1 anniversary of the 1923 Great Kanto earthquake and fire which claimed about 140,000 lives in Yokohama and Tokyo.
Japan's advanced quake preparedness was likely the main reason casualties and damages from this week's strong temblors were lower than they would have been in a country without such preparations and seismic requirements in place.
Even so, companies reported quake-related disruptions. Corning Inc. /quotes/comstock/13*!glw/quotes/nls/glw (GLW 16.48, +0.25, +1.54%) said the Tuesday earthquake disrupted production at its LCD glass-manufacturing facility in Shizuoka. The plant manufactures glass substrate for Sharp Corp. /quotes/comstock/!6753 (JP:6753 1,083, +11.00, +1.03%) and other Japanese LCD panel makers.
Toshiba Corp. /quotes/comstock/!6502 (JP:6502 464.00, +7.00, +1.53%) subsidiary Hamaoka Toshiba Electronics Corp. also reportedly suffered damage at their LED factory in the area.
A quake-triggered landslide also destroyed part of the Tomei Expressway between Tokyo and Nagoya, which remained closed Thursday.
Chubu Electric Power Co. /quotes/comstock/!9502 (JP:9502 2,205, -5.00, -0.23%) automatically halted operations at two reactors at its nuclear plant in Shizuoka prefecture after the quake, which briefly cut power to thousands of homes. The utility said it would temporarily use liquefied natural gas units to offset the loss of capacity.
'Bad for the economy'
Two strong earthquakes with 6-plus magnitudes caused casualties and damages in the northern Niigata region in 2004 and 2007, but Japan's most devastating recent seismic event was Kobe's 7.3-magnitude quake in 1995. It killed more than 6,400 people and caused damages estimated around 2% of Japanese gross domestic product.
In a worst-case scenario, a Kobe-sized quake originating in the northern part of Tokyo Bay could kill up to 11,000 people in the greater Tokyo area, according to a 2005 study by the Japanese Cabinet Office's Central Disaster Management Council.
"An earthquake, as with any disaster, is bad for the economy despite many commentators' arguments that the earthquake would stimulate the Japanese economy through the demand stimulus that results," economist Warwick McKibbin wrote in a 1997 policy paper for the Washington, D.C.-based Brookings Institution.
Japan's experience in 1995 followed some traditional models, he said, in which "the yen appreciates, GDP falls, the share market drops, and long-term real interest rates rise slightly."
The initial impact, he said, is "a direct negative effect of the lower capital stock on aggregate supply," which brings down share prices and, in turn, reduces private consumption.
But those lower prices eventually attract buyers, he said, as foreign capital flows into the country "in response to the higher expected rate of return. Thus the yen appreciates and the current account deteriorates, reflecting the capital inflow."
Lisa Twaronite reports for MarketWatch from Tokyo.
Thursday, August 13, 2009
Cambodia joins microloan clean-up
Aug 14, 2009
Asia Times Online
By Stephen Kurczy
PHNOM PENH - Impoverished Cambodia has emerged as a global microfinance leader, becoming the first Asian nation to hold lenders accountable to their original mission of poverty reduction. If a new global initiative aimed at promoting greater transparency over microfinance institutions (MFIs) recently launched here gains traction, the multi-billion dollar industry could be set for a shake-out.
It has long been assumed that microfinance ventures, launched in the 1970s as non-profit enterprises to bring cheap credit to the poor, prioritize alleviating poverty over maximizing profits. In recent years, celebrities such Robert Duvall, Natalie Portman and Yeardley Smith, (the voice of Lisa in animated television series The Simpsons), became official spokespeople for different MFIs such as Pro Mujer (Pro Women), Finca International, and the Grameen Foundation.
The United Nations Capital Development Fund has in recent years channeled millions of dollars in donor funds into MFIs. The International Finance Corporation (IFC), the private lending arm of the World Bank, says it has given more than US$600 million to more than 100 MFIs worldwide and maintains a commitment to double that investment to $1.2 billion by 2010, making IFC the largest investor in an industry servicing more than 80 million people around the world.
But so-called barefoot banking has come under growing criticism as MFIs reap huge profits. Reports have shown that many misrepresent their underlying loan fees, with some charging annual interest rates in excess of 100%. For instance, Mexico's Banco Compartamos, originally a non-profit institution, generated $458 million in an April 2008 initial public offering. Private investors piled into the offering because the bank charges its 1.4 million poor borrowers up to 128% annual interest.
Chuck Waterfield, a microfinance expert and Columbia University professor, has found that many MFIs, including Compartamos, advertise as pro-poor enterprises with 4% monthly interest rates but when additional hidden fees were added those rates often topped 10% per month.
Waterfield recently devised a platform for borrowers and international donors - who underwrite and provide cheap capital for many microcredit banks to on-lend - to view more clearly individual MFIs' true underlying interest rates. "Compartamos was a watershed for the industry. It takes a crisis to make you do what you should have done 10 years ago," Waterfield told Asia Times Online.
In mid-2008, he launched MicroFinance Transparency, a database of interest rates charged by individual microlenders that aims through publicity to refocus microfinance on poverty alleviation. The goal, he says, is to collect loan information from all microcredit lenders worldwide and publish their real annual percentage rates at his website, mftransparency.org.
"The organizations with the highest interest rates have the glossiest annual reports, with pictures of mothers with babies, and they talk about how they're helping those mothers while making boatloads of profits," Waterfield said on August 7 at a launch event in Phnom Penh. "So we put the prices up there and say, 'Nice annual report but you're charging twice the interest rate as anyone else to those mothers with babies'."
Waterfield hopes that all MFIs will openly join the initiative and prove they have nothing to hide. He first introduced the project in March in Peru, then in Bosnia in April, and this month in Cambodia before heading to another launch in Bangladesh. He acknowledges that he can't force microcredit lenders, many of whom bury hidden costs in the small print of their loan forms, to sign up to the initiative.
"We've got to build credibility and Cambodia helps us build credibility because it's a willing participant. The next country we go to will be a little less willing. And next year we'll go into the countries that are really reluctant to have us show up."
People over profits
While Cambodia is renowned for its endemic corruption and is often rated among the world's least transparent countries, Waterfield said he chose the country as the first Asian nation for his initiative because its registered MFIs rank among the world's top in terms of social performance, consumer protection and ethical practices.
Of the 12 Asian MFIs that have signed on to a social performance indicators program launched by the Washington DC-based Microfinance Information Exchange (MIX), a provider of MFI business information and data services, half hailed from Cambodia.
Five Cambodian banks are also included in MIX's ranking of the world's top 100 MFIs; only India, with six, claims more. In June, Angkor Microfinance Kampuchea was one of three MFIs worldwide to receive the first gold award for social performance reporting from the Michael & Susan Dell Foundation, the Ford Foundation, and Consultative Group to Assist the Poor.
"Cambodian MFIs have been at the forefront of industry reporting for many years," MIX's chief operating officer Blaine Stephens wrote in an e-mail in response to Asia Times Online questions. "My guess is that they will demonstrate as much commitment to reporting social performance as they have to reporting financial performance in an open and transparent manner."
Cambodian MFIs charge interest based on 30- or 31-day months. This may sound intuitive, but in Mexico and other developing countries most MFIs charge interest rates based on a four-week month, which effectively allows them to charge the borrower for an extra month every calendar year, Waterfield said.
The annual interest rates charged by MFIs in Cambodia are among the lowest worldwide at between 24% and 36%. While higher than normal rates on commercial consumer loans, microloans are inherently more expensive because the lender receives less return while incurring overheads and transaction costs similar to those for larger loans.
"Here in Cambodia, we are committed to making sure that the financial services provided to the poor come as tools for their empowerment rather than shackles for their exploitation," Cambodian National Bank director general Tal Nay Im said on August 7. The National Bank has recently issued a legally binding sub-decree for MFIs to advertise their real effective interest rates.
Cambodia is the only country to outlaw flat interest rate loans, a credit structure where monthly interest is paid on the total loan amount even as the borrower pays down the principal - which means the borrower is effectively paying interest on money already paid back. In comparison, every MFI in Mexico charges a flat rate and only one microcredit bank in impoverished Bangladesh, the Grameen Bank, charges borrowers a declining rate where they pay less and less interest as the outstanding amount owed is paid down.
The Grameen Bank was founded in the 1970s by Muhammad Yunus, who was awarded the Nobel Peace Prize in 2006 and the US Presidential Medal for Freedom this week for his efforts to provide low interest loans to the poor. While many microcredit institutions claim to take inspiration from his example, Yunus has publicly lamented the industry trend towards profit maximization over uplift of the poor.
He, for one, has strongly endorsed Waterfield's new Microfinance Transparency initiative. "Microfinance emerged as a struggle against loan sharks, so we don't want to see new loan sharks created in the name of microcredit," Yunus told BusinessWeek at the time of the project's launch.
While Cambodia's 18 MFIs have agreed to submit their loan data to MicroFinance Transparency, the Bangladeshi government is drafting a law that will require all their MFIs to submit data to the initiative. In Bangladesh, banks do not at present advertise their true interest rates, Waterfield said, and there is the risk of a consumer backlash if published interest rates suddenly appear to double overnight.
Leaky lending
Not all MFIs are equally excited about Waterfield's transparency initiative, particularly those whose reputation would take a hit through greater disclosure. One of mftransparency.org's features will show, in graphical form, the relationship between loan size and interest rates charged. That presentation will show more clearly where MFIs' priorities lie.
Many MFIs had been so profitable that hedge funds, venture capital firms, and other big private equity investors have sought ways to enter the business. In Cambodia, private equity fund Leopard Capital announced in March that "we are currently evaluating several options to invest in the sector, including participating in any pre-IPO [initial public offering, or sale of shares to the public] capital raising by a leading MFI, acquiring an existing MFI or merging an existing MFI with a smaller commercial bank."
Despite Cambodia's lead on MFI transparency, the sector has been facing financial troubles wrought by the global economic crisis. The industry-wide at-risk portfolio for the nation's 1 million microloan borrowers rose from 0.5% in mid-2008 to 3.39% in mid-2009. That's exposed flaws in previous client screening.
Mai Yop, a 55-year-old salt farmer in southern Cambodia's Kampot province, admits to having lied to get a $1,000 loan three years ago from microfinance bank Acleda. While microloans are extended solely for business purposes, such as the provision of new cattle or farming tools, Mai Yop says she used the money to pay for her husband's stomach surgery.
"I had to lie, or I wouldn't get any money," said Mai Yop, who now lives on a budget of $5 a day. In order to pay back her first loan, she took loans from two other microlenders, and finally from a high-interest charging informal moneylender who eventually seized her farmland due to non-payment.
Some borrowers say they'd be in a better situation today if they'd never taken on a microloan. "We are poorer than ever," said Oum Siv, a 50-year-old grocery vendor in Kampot. Earlier this year, she said she owed $10,000 to a private moneylender after taking out a series of microcredit loans for her husband's construction business, which failed to get off the ground amid the economic slowdown.
Cambodia's MFIs say they have since adopted more rigorous screening processes for potential borrowers. But the toll from years of lax screening has only now become apparent. The situation is similar in several Cambodian provinces, with tens of thousands of Cambodians unable to repay their microloans and now at risk of losing their homes and farmland.
Despite these challenges, Waterfield said that Cambodia remains a relative microcredit success story. Elsewhere, when it comes to openness and transparency, "some of these [lenders] say, 'We've been lying for 20 years for some legitimate reasons, so it's not so easy to start telling the truth.' Here, it was like, 'sure, what do you need, we'll give it to you.' There was no resistance, no nervousness. We'll never see that again ... anywhere we go."
Stephen Kurczy is a journalist roaming across Asia. He may be reached at kurczy@gmail.com.
(Copyright 2009 Asia Times Online (Holdings) Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)
Asia Times Online
By Stephen Kurczy
PHNOM PENH - Impoverished Cambodia has emerged as a global microfinance leader, becoming the first Asian nation to hold lenders accountable to their original mission of poverty reduction. If a new global initiative aimed at promoting greater transparency over microfinance institutions (MFIs) recently launched here gains traction, the multi-billion dollar industry could be set for a shake-out.
It has long been assumed that microfinance ventures, launched in the 1970s as non-profit enterprises to bring cheap credit to the poor, prioritize alleviating poverty over maximizing profits. In recent years, celebrities such Robert Duvall, Natalie Portman and Yeardley Smith, (the voice of Lisa in animated television series The Simpsons), became official spokespeople for different MFIs such as Pro Mujer (Pro Women), Finca International, and the Grameen Foundation.
The United Nations Capital Development Fund has in recent years channeled millions of dollars in donor funds into MFIs. The International Finance Corporation (IFC), the private lending arm of the World Bank, says it has given more than US$600 million to more than 100 MFIs worldwide and maintains a commitment to double that investment to $1.2 billion by 2010, making IFC the largest investor in an industry servicing more than 80 million people around the world.
But so-called barefoot banking has come under growing criticism as MFIs reap huge profits. Reports have shown that many misrepresent their underlying loan fees, with some charging annual interest rates in excess of 100%. For instance, Mexico's Banco Compartamos, originally a non-profit institution, generated $458 million in an April 2008 initial public offering. Private investors piled into the offering because the bank charges its 1.4 million poor borrowers up to 128% annual interest.
Chuck Waterfield, a microfinance expert and Columbia University professor, has found that many MFIs, including Compartamos, advertise as pro-poor enterprises with 4% monthly interest rates but when additional hidden fees were added those rates often topped 10% per month.
Waterfield recently devised a platform for borrowers and international donors - who underwrite and provide cheap capital for many microcredit banks to on-lend - to view more clearly individual MFIs' true underlying interest rates. "Compartamos was a watershed for the industry. It takes a crisis to make you do what you should have done 10 years ago," Waterfield told Asia Times Online.
In mid-2008, he launched MicroFinance Transparency, a database of interest rates charged by individual microlenders that aims through publicity to refocus microfinance on poverty alleviation. The goal, he says, is to collect loan information from all microcredit lenders worldwide and publish their real annual percentage rates at his website, mftransparency.org.
"The organizations with the highest interest rates have the glossiest annual reports, with pictures of mothers with babies, and they talk about how they're helping those mothers while making boatloads of profits," Waterfield said on August 7 at a launch event in Phnom Penh. "So we put the prices up there and say, 'Nice annual report but you're charging twice the interest rate as anyone else to those mothers with babies'."
Waterfield hopes that all MFIs will openly join the initiative and prove they have nothing to hide. He first introduced the project in March in Peru, then in Bosnia in April, and this month in Cambodia before heading to another launch in Bangladesh. He acknowledges that he can't force microcredit lenders, many of whom bury hidden costs in the small print of their loan forms, to sign up to the initiative.
"We've got to build credibility and Cambodia helps us build credibility because it's a willing participant. The next country we go to will be a little less willing. And next year we'll go into the countries that are really reluctant to have us show up."
People over profits
While Cambodia is renowned for its endemic corruption and is often rated among the world's least transparent countries, Waterfield said he chose the country as the first Asian nation for his initiative because its registered MFIs rank among the world's top in terms of social performance, consumer protection and ethical practices.
Of the 12 Asian MFIs that have signed on to a social performance indicators program launched by the Washington DC-based Microfinance Information Exchange (MIX), a provider of MFI business information and data services, half hailed from Cambodia.
Five Cambodian banks are also included in MIX's ranking of the world's top 100 MFIs; only India, with six, claims more. In June, Angkor Microfinance Kampuchea was one of three MFIs worldwide to receive the first gold award for social performance reporting from the Michael & Susan Dell Foundation, the Ford Foundation, and Consultative Group to Assist the Poor.
"Cambodian MFIs have been at the forefront of industry reporting for many years," MIX's chief operating officer Blaine Stephens wrote in an e-mail in response to Asia Times Online questions. "My guess is that they will demonstrate as much commitment to reporting social performance as they have to reporting financial performance in an open and transparent manner."
Cambodian MFIs charge interest based on 30- or 31-day months. This may sound intuitive, but in Mexico and other developing countries most MFIs charge interest rates based on a four-week month, which effectively allows them to charge the borrower for an extra month every calendar year, Waterfield said.
The annual interest rates charged by MFIs in Cambodia are among the lowest worldwide at between 24% and 36%. While higher than normal rates on commercial consumer loans, microloans are inherently more expensive because the lender receives less return while incurring overheads and transaction costs similar to those for larger loans.
"Here in Cambodia, we are committed to making sure that the financial services provided to the poor come as tools for their empowerment rather than shackles for their exploitation," Cambodian National Bank director general Tal Nay Im said on August 7. The National Bank has recently issued a legally binding sub-decree for MFIs to advertise their real effective interest rates.
Cambodia is the only country to outlaw flat interest rate loans, a credit structure where monthly interest is paid on the total loan amount even as the borrower pays down the principal - which means the borrower is effectively paying interest on money already paid back. In comparison, every MFI in Mexico charges a flat rate and only one microcredit bank in impoverished Bangladesh, the Grameen Bank, charges borrowers a declining rate where they pay less and less interest as the outstanding amount owed is paid down.
The Grameen Bank was founded in the 1970s by Muhammad Yunus, who was awarded the Nobel Peace Prize in 2006 and the US Presidential Medal for Freedom this week for his efforts to provide low interest loans to the poor. While many microcredit institutions claim to take inspiration from his example, Yunus has publicly lamented the industry trend towards profit maximization over uplift of the poor.
He, for one, has strongly endorsed Waterfield's new Microfinance Transparency initiative. "Microfinance emerged as a struggle against loan sharks, so we don't want to see new loan sharks created in the name of microcredit," Yunus told BusinessWeek at the time of the project's launch.
While Cambodia's 18 MFIs have agreed to submit their loan data to MicroFinance Transparency, the Bangladeshi government is drafting a law that will require all their MFIs to submit data to the initiative. In Bangladesh, banks do not at present advertise their true interest rates, Waterfield said, and there is the risk of a consumer backlash if published interest rates suddenly appear to double overnight.
Leaky lending
Not all MFIs are equally excited about Waterfield's transparency initiative, particularly those whose reputation would take a hit through greater disclosure. One of mftransparency.org's features will show, in graphical form, the relationship between loan size and interest rates charged. That presentation will show more clearly where MFIs' priorities lie.
Many MFIs had been so profitable that hedge funds, venture capital firms, and other big private equity investors have sought ways to enter the business. In Cambodia, private equity fund Leopard Capital announced in March that "we are currently evaluating several options to invest in the sector, including participating in any pre-IPO [initial public offering, or sale of shares to the public] capital raising by a leading MFI, acquiring an existing MFI or merging an existing MFI with a smaller commercial bank."
Despite Cambodia's lead on MFI transparency, the sector has been facing financial troubles wrought by the global economic crisis. The industry-wide at-risk portfolio for the nation's 1 million microloan borrowers rose from 0.5% in mid-2008 to 3.39% in mid-2009. That's exposed flaws in previous client screening.
Mai Yop, a 55-year-old salt farmer in southern Cambodia's Kampot province, admits to having lied to get a $1,000 loan three years ago from microfinance bank Acleda. While microloans are extended solely for business purposes, such as the provision of new cattle or farming tools, Mai Yop says she used the money to pay for her husband's stomach surgery.
"I had to lie, or I wouldn't get any money," said Mai Yop, who now lives on a budget of $5 a day. In order to pay back her first loan, she took loans from two other microlenders, and finally from a high-interest charging informal moneylender who eventually seized her farmland due to non-payment.
Some borrowers say they'd be in a better situation today if they'd never taken on a microloan. "We are poorer than ever," said Oum Siv, a 50-year-old grocery vendor in Kampot. Earlier this year, she said she owed $10,000 to a private moneylender after taking out a series of microcredit loans for her husband's construction business, which failed to get off the ground amid the economic slowdown.
Cambodia's MFIs say they have since adopted more rigorous screening processes for potential borrowers. But the toll from years of lax screening has only now become apparent. The situation is similar in several Cambodian provinces, with tens of thousands of Cambodians unable to repay their microloans and now at risk of losing their homes and farmland.
Despite these challenges, Waterfield said that Cambodia remains a relative microcredit success story. Elsewhere, when it comes to openness and transparency, "some of these [lenders] say, 'We've been lying for 20 years for some legitimate reasons, so it's not so easy to start telling the truth.' Here, it was like, 'sure, what do you need, we'll give it to you.' There was no resistance, no nervousness. We'll never see that again ... anywhere we go."
Stephen Kurczy is a journalist roaming across Asia. He may be reached at kurczy@gmail.com.
(Copyright 2009 Asia Times Online (Holdings) Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)
SCENARIOS-Will Thailand's political crisis deepen?
(For an analysis on Thailand's political crisis, click [nBKK227649])
By Martin Petty
BANGKOK, Aug 13 - Plans to submit a petition requesting a royal pardon for Thailand's fugitive former Prime Minister Thaksin Shinawatra have renewed fears of an intensification of the country's four-year political crisis.
The United Front for Democracy against Dictatorship , whose red-shirted ranks are filled largely by the rural poor, says more than 5 million Thais have signed the petition, which has angered royalists and the middle classes who despise Thaksin.
Analysts say chances of reconciliation in politically polarised Thailand are remote, while every instance of street protests or civil unrest further dents the confidence of investors, deters tourists and hampers economic recovery.
The following are scenarios for the coming months.
- - - -
ATTEMPT TO SUBMIT PETITION TRIGGERS UNREST
The petition to revered King Bhumibol Adulyadej has sparked anger among anti-Thaksin elements. Both the government and the royalist Peoples Alliance for Democracy could try to block its submission, prompting fears of clashes or even military intervention.
Most commentators, however, believe this is unlikely to provide a flashpoint. They say the motive behind the petition is to highlight Thaksin's mass support and to keep his movement alive. They see only a slim chance a pardon will be granted to the fugitive billionaire, who maintains his graft conviction was politically motivated.
"It does not matter whether a royal pardon will be granted or not. What seems to matter most are the numbers to show how popular Thaksin is," wrote Bangkok Post columnist Veera Prateepchaikul.
Markets would likely remain unruffled.
- - - -
ABHISIT CONSOLIDATES RURAL SUPPORT, RETAINS POWER
Prime Minister Abhisit Vejjajiva is implementing a wave of economic stimulus measures aimed at winning over the rural poor, Thaksin's traditional support base, to help him retain power and keep the pro-Thaksin Puea Thai party at bay when new elections take place.
Though he is making progress in reviving the economy, his efforts are unlikely to raise his support significantly among the poor, many of whom remain loyal to Thaksin because of his populist policies while in office.
"Abhisit has grasped how crucial it is to reach out to Thaksin's power base and try to emulate the populist policies," said political scientist Prudhisan Jumbala.
"But that won't be easy and unless the poor see the results of Abhisit's economic pledges, they won't be swayed."
Thailand's financial markets will continue to underperform their Asian peers if the political impasse is not broken.
- - - -
ELECTIONS CALLED, PRO-THAKSIN PARTY WINS MOST VOTES
Abhist has refused to call elections until the economy has recovered and constitutional reform is undertaken. Critics say he is buying time to try to shore up support for his Democrat party.
In two recent opinion polls by Assumption University, Abhisit was rated a less competent premier than Thaksin, whose popularity could help the Puea Thai party he backs win the most votes in the next election, if not enough for an outright majority.
Analysts say this scenario could lead to more unrest, due to the refusal by the different fronts of the anti-Thaksin camp to accept a nominee government of a fugitive criminal they see as a challenge to the monarchy.
Under this scenario, financial markets would likely fall.
- - - -
STALEMATE CONTINUES, MILITARY SEIZE POWER
Though unlikely at this stage, a military coup can never be completely ruled out in a country that has seen 18 actual or attempted coups in 77 years of on-off democracy.
Rumours of a putsch continue to swirl but analysts say Abhisit still has the backing of Thailand's politicised and power-hungry military, and he continues to toe its line.
"The inside view is Abhisit still enjoys their support and they don't have anyone they can replace him with," said Control Risks analyst Jacob Ramsay.
This could well be the least market-friendly scenario, given how maladroit the military-backed government was following the coup that ousted Thaksin in 2006.
- - - -
CONSTITUTIONAL REFORM RESTORES STABILITY?
Abhist says he is determined to achieve national reconciliation, but with no side seemingly willing to compromise, it is unlikely to happen any time soon. A constitutional reform committee has submitted its recommendations but anti-Thaksin elements are unlikely to agree to efforts by his supporters to win an amnesty for scores of disqualified politicians from his two disbanded parties.
"It will have to obtain the support of the military, monarchy and Bangkok elites," Eurasia Group wrote in a note to clients.
"This will be difficult as the anti-Thaksin forces will be concerned that concessions will eventually lead to a pro-Thaksin government, especially given the Democrats' track record of ineptness in consolidating power."
Consensus on constitutional reform, could go a long way toward healing the political rifts -- which financial markets would heartily welcome -- but not if it results in a Thaksin proxy government.
By Martin Petty
BANGKOK, Aug 13 - Plans to submit a petition requesting a royal pardon for Thailand's fugitive former Prime Minister Thaksin Shinawatra have renewed fears of an intensification of the country's four-year political crisis.
The United Front for Democracy against Dictatorship , whose red-shirted ranks are filled largely by the rural poor, says more than 5 million Thais have signed the petition, which has angered royalists and the middle classes who despise Thaksin.
Analysts say chances of reconciliation in politically polarised Thailand are remote, while every instance of street protests or civil unrest further dents the confidence of investors, deters tourists and hampers economic recovery.
The following are scenarios for the coming months.
- - - -
ATTEMPT TO SUBMIT PETITION TRIGGERS UNREST
The petition to revered King Bhumibol Adulyadej has sparked anger among anti-Thaksin elements. Both the government and the royalist Peoples Alliance for Democracy could try to block its submission, prompting fears of clashes or even military intervention.
Most commentators, however, believe this is unlikely to provide a flashpoint. They say the motive behind the petition is to highlight Thaksin's mass support and to keep his movement alive. They see only a slim chance a pardon will be granted to the fugitive billionaire, who maintains his graft conviction was politically motivated.
"It does not matter whether a royal pardon will be granted or not. What seems to matter most are the numbers to show how popular Thaksin is," wrote Bangkok Post columnist Veera Prateepchaikul.
Markets would likely remain unruffled.
- - - -
ABHISIT CONSOLIDATES RURAL SUPPORT, RETAINS POWER
Prime Minister Abhisit Vejjajiva is implementing a wave of economic stimulus measures aimed at winning over the rural poor, Thaksin's traditional support base, to help him retain power and keep the pro-Thaksin Puea Thai party at bay when new elections take place.
Though he is making progress in reviving the economy, his efforts are unlikely to raise his support significantly among the poor, many of whom remain loyal to Thaksin because of his populist policies while in office.
"Abhisit has grasped how crucial it is to reach out to Thaksin's power base and try to emulate the populist policies," said political scientist Prudhisan Jumbala.
"But that won't be easy and unless the poor see the results of Abhisit's economic pledges, they won't be swayed."
Thailand's financial markets will continue to underperform their Asian peers if the political impasse is not broken.
- - - -
ELECTIONS CALLED, PRO-THAKSIN PARTY WINS MOST VOTES
Abhist has refused to call elections until the economy has recovered and constitutional reform is undertaken. Critics say he is buying time to try to shore up support for his Democrat party.
In two recent opinion polls by Assumption University, Abhisit was rated a less competent premier than Thaksin, whose popularity could help the Puea Thai party he backs win the most votes in the next election, if not enough for an outright majority.
Analysts say this scenario could lead to more unrest, due to the refusal by the different fronts of the anti-Thaksin camp to accept a nominee government of a fugitive criminal they see as a challenge to the monarchy.
Under this scenario, financial markets would likely fall.
- - - -
STALEMATE CONTINUES, MILITARY SEIZE POWER
Though unlikely at this stage, a military coup can never be completely ruled out in a country that has seen 18 actual or attempted coups in 77 years of on-off democracy.
Rumours of a putsch continue to swirl but analysts say Abhisit still has the backing of Thailand's politicised and power-hungry military, and he continues to toe its line.
"The inside view is Abhisit still enjoys their support and they don't have anyone they can replace him with," said Control Risks analyst Jacob Ramsay.
This could well be the least market-friendly scenario, given how maladroit the military-backed government was following the coup that ousted Thaksin in 2006.
- - - -
CONSTITUTIONAL REFORM RESTORES STABILITY?
Abhist says he is determined to achieve national reconciliation, but with no side seemingly willing to compromise, it is unlikely to happen any time soon. A constitutional reform committee has submitted its recommendations but anti-Thaksin elements are unlikely to agree to efforts by his supporters to win an amnesty for scores of disqualified politicians from his two disbanded parties.
"It will have to obtain the support of the military, monarchy and Bangkok elites," Eurasia Group wrote in a note to clients.
"This will be difficult as the anti-Thaksin forces will be concerned that concessions will eventually lead to a pro-Thaksin government, especially given the Democrats' track record of ineptness in consolidating power."
Consensus on constitutional reform, could go a long way toward healing the political rifts -- which financial markets would heartily welcome -- but not if it results in a Thaksin proxy government.
Seaweed Company’s Public Offering Illegal: Officials
By Ros Sothea, VOA Khmer
Original report from Phnom Penh
12 August 2009
A Malaysian seaweed company in Kampot province has begun selling public shares to local citizens as a way to raise investment capital, a move the government claims is illegal.
Since early 2009, FMC Services, Bhd., has invested nearly $3 million in growing seaweed on the coast, which sells as foodstuff in Japan, China, Korea, the US and Europe and can be used in cosmetics.
The company had been using about 60 hectares of sea area, but plans to increase that to 10,000 hectares, offering in September unlimited shares at $300 per share, said Mei Ratha, FMC’s Cambodia representative.
Shares could yield an increase in value of 30 percent the first year, 50 percent the second and 75 percent the third, with value doubling in the fourth year, he said, adding that around 400 people are waiting to buy in.
“Don’t wait and see,” Mei Ratha said. “Time is limited. Come and buy shares. It is beneficial. More beneficial than keeping your money with other people.”
However, on learning of the scheme, Minh Ban Kosal, director-general of the Securities Commission of Cambodia, said the public offering was not yet legal in Cambodia.
“If my company wants to sell shares, I can sell them to people I know, but not publicly announce it and ask the public to buy them,” he said.
Cambodia plans to establish a stock exchange at the end of the year, listing between four and 10 companies, but FMC is not among them, he said, adding the commission would immediately look into the offering.
Mei Ratha said he had not asked for permission to sell the shares, denying the company had done anything wrong in seeking to raise capital. The company was not only selling shares in Cambodia, but other countries as well.
Risk of bankruptcy will be insured for shareholders, he said.
Sam Ganty, a stocks expert who sits on the Securities Commission, said the shares were illegal and risky.
“If we buy shares when we know nothing about the company, and the company doesn’t have permission to sell such kind of shares, I think the shares are very risky,” he said.
Original report from Phnom Penh
12 August 2009
A Malaysian seaweed company in Kampot province has begun selling public shares to local citizens as a way to raise investment capital, a move the government claims is illegal.
Since early 2009, FMC Services, Bhd., has invested nearly $3 million in growing seaweed on the coast, which sells as foodstuff in Japan, China, Korea, the US and Europe and can be used in cosmetics.
The company had been using about 60 hectares of sea area, but plans to increase that to 10,000 hectares, offering in September unlimited shares at $300 per share, said Mei Ratha, FMC’s Cambodia representative.
Shares could yield an increase in value of 30 percent the first year, 50 percent the second and 75 percent the third, with value doubling in the fourth year, he said, adding that around 400 people are waiting to buy in.
“Don’t wait and see,” Mei Ratha said. “Time is limited. Come and buy shares. It is beneficial. More beneficial than keeping your money with other people.”
However, on learning of the scheme, Minh Ban Kosal, director-general of the Securities Commission of Cambodia, said the public offering was not yet legal in Cambodia.
“If my company wants to sell shares, I can sell them to people I know, but not publicly announce it and ask the public to buy them,” he said.
Cambodia plans to establish a stock exchange at the end of the year, listing between four and 10 companies, but FMC is not among them, he said, adding the commission would immediately look into the offering.
Mei Ratha said he had not asked for permission to sell the shares, denying the company had done anything wrong in seeking to raise capital. The company was not only selling shares in Cambodia, but other countries as well.
Risk of bankruptcy will be insured for shareholders, he said.
Sam Ganty, a stocks expert who sits on the Securities Commission, said the shares were illegal and risky.
“If we buy shares when we know nothing about the company, and the company doesn’t have permission to sell such kind of shares, I think the shares are very risky,” he said.
Intermediate Khmer and Advanced Filipino Language Courses Coming to UCLA This Fall
The Southeast Asian language courses will be teleconferenced to UCLA from U.C. Berkeley as part of a foreign language initiative and distance-learning partnership.
8/12/2009
By Seth Villanueva for the UCLA Center for Southeast Asian Studies
UCLA International Institute (Los Angeles, California, USA)
SEEKING TO expand UCLA’s diverse language offerings as well as enable current language learners to progress in their proficiency, the Centers for Southeast Asian Studies at UC Berkeley and UCLA have arranged for two Southeast Asian languages, Khmer and Filipino, to be studied at the intermediate and advanced levels, respectively, via simultaneous teleconferencing technology. Both classes will begin on Thursday, September 24, and will run from M-Th at 3-4 pm for Filipino and 4-5:30 pm for Khmer. They will meet on a compressed schedule only when both UCLA and UCB are in session.
Both languages will be taught live at UC Berkeley and teleconferenced to UCLA, thus making new material available. Khmer (the language of Cambodia) has never been taught before at UCLA, and Advanced Filipino, while taught in the past, is not otherwise available as a regular course in 2009-10. This is not the first time that SEA language courses have been successfully teleconferenced between UC campuses. Introductory Filipino language courses have previously been teleconferenced very successfully from UCLA to UC Irvine. In 2009-10, several other languages are also included in the Distance Learning program including several African, Slavic, and Scandinavian languages.
We asked UC Berkeley instructors Frank Smith (Khmer) and Joi Barrios (Filipino) to provide more information about their classes:
CSEAS: Who are the classes designed for? Who are the ideal students?
FS: The Khmer class is intended for students who, either through classroom study or family/home experience, have attained a "survival level" of spoken Khmer (able to talk about family, exchange pleasantries, name basic rooms and objects in the home, discuss names of basic food items and Khmer dishes, bargain in a Khmer market, give/receive directions and discuss transportation, talk about work and accomplishing basic tasks, describe various basic emotions/states of health and illness). No previous knowledge of the Khmer writing system is assumed or required.
JB: The Filipino class is designed for students who have taken Intermediate Filipino, or those at the intermediate level. Ideal students are those who would like to study Philippine language and culture and either write a research paper in Filipino or work on a creative writing project.
CSEAS: How does a student enroll/register?
FS: The course number is Khmer 100A. UCLA students should contact Barbara Gaerlan bgaerlan@international.ucla.edu for UCLA registration details, and also indicate their interest to me via e-mail at fjsmith@berkeley.edu. General registration information for all Distance Learning language courses is available online at http://www.registrar.ucla.edu/soc/intercampus.htm.
JB: The official course title for Advanced Filipino is South and Southeast Asian Studies 149 (Studies in South and Southeast Asian Languages). Interested students should also contact Dr. Gaerlan.
The curricula for both courses is as follows:
Intermediate Khmer
In this class students will learn how to read and write Khmer and how to discuss various areas of knowledge common to all adult native speakers in Cambodia: religion, traditional culture, the rice farming cycle, and the language of news/advertising. In the second (spring) semester, they will learn about life as a modern Cambodian in Phnom Penh, the basics of discussing history and politics in Khmer, and acquire a basic understanding and appreciation of several traditional Khmer poetic meters. Throughout the two semesters, students will learn the basics of the Khmer writing system, and gain experience reading folk tales, news stories, articles on Khmer religion and history, and read (in the second semester) a Khmer novel in its entirety. Students will also learn the necessary vocabulary (spoken and written) to expand their command of Khmer from the survival/home realm into areas of common adult discourse in Cambodia today. All this will be done via a combination of written texts, videos recorded in Cambodia, and task-based classroom activities in which spoken and written Khmer will be used to design and carry out various projects, including student-designed "TV commercials," stories about everyday life, and original poetry.
Advanced Filipino
Using literary texts (short stories, poems, and creative non-fiction) and critical essays on Philippine culture and society, students learn advanced vocabulary and more complex grammatical structures. The students shall then choose from either a creative track or a research track. For the former, the student should be able to write either a short story, five poems, or a creative non-fiction work. For the latter, the student should submit a critical essay in Filipino based on the texts and their own research. These works shall be discussed using a workshop format, enabling the students to revise the work until it can be deemed ready for publication.
Center for Southeast Asian Studies
Wednesday, August 12, 2009
Japan's population is shrinking faster
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.
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.
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.
Tuesday, August 11, 2009
Cambodia to set up first National Arbitration Center
PHNOM PENH, Aug. 10 (Xinhua) -- Cambodia's first National Arbitration Center will be set up aimed at resolving business disputes and enhancing the confidence of private sectors doing business here, according to a press release from IFC on Monday.
IFC, a member of the World Bank Group, and Cambodia's Ministry of Commerce on Monday signed a Memorandum of Understanding (MOU) to implement a three-year project to set up a National Arbitration Center to resolve business disputes and bolster confidence in the commercial system.
The National Arbitration Center will be the first commercial arbitration body in Cambodia offering the business community an alternative commercial dispute resolution mechanism to the courts and enabling businesses to resolve their disputes quickly, inexpensively, fairly, and with certainty. It thus promises to enhance the private sector's comfort level with engaging in business transactions.
IFC will support the establishment and operation of the center for the first three years, in collaboration with the Asian Development Bank and other partners. The support will include advisory services to the Secretariat of the Inception and Selection Commission in selecting and training an initial group of arbitrators, establishing procedures, and supporting the center's initial operations.
"The government has worked hard to create the legal framework for alternative dispute resolution by passing the commercial arbitration legislation in 2006 and recently issuing a sub-decree on the operations of the National Arbitration Center," said Cham Prasidh, senior minister and minister of commerce, speaking at the signing ceremony. "We are committed to supporting its development, and I believe it will be an effective mechanism for resolving commercial disputes."
Trang Nguyen, head of IFC Advisory Services in the Mekong, said, "IFC is pleased to work with the Ministry of Commerce and the private sector on this important initiative. As the Cambodian economy grows and there are more commercial transactions, a streamlined dispute resolution mechanism gives the private sector more comfort to engage in business transactions."
IFC, a member of the World Bank Group, and Cambodia's Ministry of Commerce on Monday signed a Memorandum of Understanding (MOU) to implement a three-year project to set up a National Arbitration Center to resolve business disputes and bolster confidence in the commercial system.
The National Arbitration Center will be the first commercial arbitration body in Cambodia offering the business community an alternative commercial dispute resolution mechanism to the courts and enabling businesses to resolve their disputes quickly, inexpensively, fairly, and with certainty. It thus promises to enhance the private sector's comfort level with engaging in business transactions.
IFC will support the establishment and operation of the center for the first three years, in collaboration with the Asian Development Bank and other partners. The support will include advisory services to the Secretariat of the Inception and Selection Commission in selecting and training an initial group of arbitrators, establishing procedures, and supporting the center's initial operations.
"The government has worked hard to create the legal framework for alternative dispute resolution by passing the commercial arbitration legislation in 2006 and recently issuing a sub-decree on the operations of the National Arbitration Center," said Cham Prasidh, senior minister and minister of commerce, speaking at the signing ceremony. "We are committed to supporting its development, and I believe it will be an effective mechanism for resolving commercial disputes."
Trang Nguyen, head of IFC Advisory Services in the Mekong, said, "IFC is pleased to work with the Ministry of Commerce and the private sector on this important initiative. As the Cambodian economy grows and there are more commercial transactions, a streamlined dispute resolution mechanism gives the private sector more comfort to engage in business transactions."
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