THE BLOG

A Window on World Politics in 2014 - Cambodia

14/04/2014 16:27 BST | Updated 14/06/2014 10:59 BST

In the often opaque world of international relations, from time to time a situation comes along which, whilst not earth shattering by itself, sheds a spotlight on how the international system works and the need for reform .

One such spotlight at present is the political situation in Cambodia, involving China, the UK, the EU, the US and its old foe Vietnam, plus the IMF and World Bank, and other UN institutions. It is quite an illuminating story.

Next year the Cambodian Prime Minister Hun Sen will celebrate 30 years in power. He was part of the genocidal China-backed communist Pol Pot regime, famous for the killing fields and the mass killing of people for offences like 'wearing spectacles'.

Then the Vietnamese communists, backed by Moscow, wanted China expelled from its back yard and invaded, installing the Hun Sen as new PM after he defected to the Vietnamese, and where he has been ever since. He first extended his reign by military means in 1997, which also saw an assassination attempt on the opposition leader Sam Rainsy, a former Finance Minister. Subsequently elections were dogged by accusations of rigging, and by murderous violence against opposition figures and protestors against corruption, especially protestors and journalists against land confiscations and illegal logging.

The last national elections were in July 2013. The results were announced in September 2013 amidst accusations not just of rigging, but of last minute mass doctoring of results when it was allegedly discovered by the regime that its standard 'rigging system' was insufficient. The opposition National Rescue Party (CNRP) presented evidence of rigging but then complained about a biased Hun Sen-appointed election commission, which they alleged was complicit in a cover-up.

The CNRP consequently boycotted the new parliament, believing that in reality they had won an overall majority and should form the government. In Mid April the opposition leader Sam Rainsy and PM Hun Sen provisionally reached an agreement 'in principle' for early elections and reforms to the composition of the electoral commission, with a view to future CNRP participation in the parliament. It remains to be seen what the results will be in practice, but it is unlikely that the 30 year drift to 'one party state' will be interrupted.

By contrast the international community has taken a decidedly permissive attitude towards the Cambodian regime. The country's economy is based on low wage textile manufacturing for the US and EU markets, and tourism. However the documented cases of corruption and murder of activists and journalists centre around land and property.

International human rights organisations and NGOs report land grabs, confiscations of farmers' land for sale to foreign companies, illegal logging, and 'grabbing' of urban plots for housebuilding. The World Bank suspended cooperation over the treatment of poorer residents around a central Phnom Penh lake being drained for yet more high rise development, amidst claims of money laundering via Korea and elsewhere for such property deals.

However the EU has supported sugar plantation projects which has reportedly involved similar confiscation of land (after blood diamonds we now have 'blood sugar'). Any quick scan through World Bank or EU country reports over a decade shows clearly that the government has managed to wriggle around EU and World Bank funded reforms to land titling, to the extent that it is still not serving as a brake on regime-connected land confiscations. The EU has also been criticised for providing funding for local government (communes) which ended up assisting the system of land grabs.

Vietnam retains it influence in Cambodia, despite popular antipathy towards its Eastern neighbour due to the 1979 invasion and a long-standing anti-Vietnam culture. The Cambodian regime has hired European PR experts to improve its image and brand the opposition as anti-Vietnam racists. However increasing Chinese investment has created rising tensions between China and Vietnam, played out militarily too in disputes over South China sea islands and over maritime borders. (Now Vietnam and the Philippines have started military cooperation). The result is that international aid has become less important in investment, but more important in other ways.

In December 2013 Christine Lagarde, head of the IMF, visited Cambodia and in a very political speech praised poverty reduction and consistent 7% per annum growth. However, her own IMF 'Article IV' review published two months later carried a different emphasis. It warned of a large unsustainable credit boom fueling a housing bubble, and criticised lax banking supervision. The regime had agreed a moratorium on the rapid formation of new 'regime-connected' banks until regulation could be improved. But this was ignored and banks continued to be formed. What's more the IMF pointed out the dangers of very low savings rates, and the practice of these banks getting their funds from 'unknown' overseas sources (80%+ of people do not even have a bank account, but Cambodia has more banks than retail and commercial banks in France !).

Further, more heavily criticised was the practice of regime-connected construction companies lending money for the purchase of their own properties, again using unknown sources; but also being exempted by the regime from any financial regulation or reserve requirements. In other words impunity.

Then there is the oil and gas business. The British had been focused on opportunities for British Gas and others. But since the regime, unlike Vietnam and Thailand, has not been able to get their oil and gas sector going (internal squabbling over spoils has been blamed) the British emphasis turned to helping support fair processes in elections, the judicial system and elsewhere, going against the tide. The hope that oil and gas will save Cambodia from a burst land and property bubble have faded.

So the fog is lifting. The opposition CNRP's conclusion or allegation seems to be that top regime kleptocrats have squirreled away funds from illegal logging and other sources, and now they are bringing back the funds via construction companies and new poorly regulated banks, to help investment in land and property. This is behind the well-dug-in system of land confiscations and the enabling 'tokenism' in land reform, they conclude.

The US has been vociferous in its criticisms of corruption, land grabs and money laundering, but still extends military cooperation with the Cambodian regime. Meanwhile for years there has been a joint Cambodian-international Tribunal on Pol Pot's genocide. Western lawyers have complained for years that the Cambodian regime has dragged its feet and battled to exclude senior people from the Tribunal, and some allege that this is in part due to pressure from an embarrassed Chinese communist party, worried about its image and exercising strong leverage due to ... land investment. One in four people died under Pol Pot, perhaps proportionally the world's worst example of mass political killing. Only one senior person has been convicted of being connected to this crime against humanity, and communism lives on.

There are lessons here for how aid and international relations are coordinated. With Chinese involvement the international system looks weakened and in need of reform. Whats more, no international body or country has yet called for an investigation into the international system of corruption and money-laundering; from land confiscations and 'blood sugar' to the return of 'unknown' funds for property investment and unregulated lenders, creating a credit bubble. The international system has become permissive of corruption and dictatorship. Is that the consequence of global changes that we want ?