The effect of globalization in Cambodia
The effect of globalization in Cambodia
The purpose of this paper is to look at what the globalization effect on Cambodia. In this research together, I will compare the previous political system in 1975 with the new system now day. This evaluation shows the positive and negative way of globalization into Cambodia. Moreover, the positive way of globalization show that globalization has made Cambodia growth in economic, increase of foreign investment, and foreign aid. However, globalization has made the Cambodia loss their forest, resources, and policy issue.
In 1970s, Cambodia was in Civil War and invasion from senior’s country for several decades. By all of this factors, Cambodia was destroyed everything even human resources, infrastructures, and physical structures. Before these situations accrued, the politic system was monarchy, and controlled by King Norodom Sihanouk. After that, Norodom Sihanouk went to another country for a conference, General Lon Nol made coup to overthrow Sihanouk. Then, Cambodia was changed political system from monarchy to Kmer Republics in 1970. Kmer Republics was controlled by Lon Nol as a presidents in this period. During this period, Lon Nol has allied with America and received a lot of help, such as, funds, military weapons, and technical support to control his regime. At the same time, the war between Vietnam and America was occurred, it made America discontinuing its support to Cambodia. By all of this factors, President Lon Nol has conflicted in term of financial planning and had civil war with Kmer Rouge. Kmer Rouge is a communist party and it was controlled by Pol Pot in 1975. Pol Pot focused on agriculture as their main primary production function. During this period, the country was changed as the Democratic Kampuchea. In the following years, Vietnam and Hun Sen, a leader of the New People’s Republic of Kampuchea became allies and create a new of military force to removed Kmer Rouge from power in 1979.
Now, if we look at the definition of globalization we will understand that globalization is the processes of the international integration arising from the interchange of the world views, products, idea, and other aspect of cultures. (Wikipedia, 2013)
So, we can see that what is the globalization has made Cambodia change. In 1993, Cambodia have changed a new system and appointed the new government to control the country. At the same time, Cambodia entered the global market and made relationship with another country. During this situation, globalization has made Cambodia growth on the economic, and political stability. However, globalization has created some problems into Cambodia as well, for example, poverty, disaster, and policy issues.
The effect of globalization on the economy:
Globalization has made Cambodia’s economy grew at most 10 percent per year between 1998 and 2008. Although, this remarkable growth was interrupted by the global economic downturn in 2008 and 2009. Cambodia’s GDP growth reached a four-year high of 7.1 percent. This growth momentum is expected to continue with projected growth rates of 6.7 percent in 2013 and 7.0 in 2014. It is driven by string export, private investment, agriculture, diversification, and a solid macroeconomic position. (World Bank Overview, 2013)
Moreover, Cambodia relies on agriculture as their primary production function and main net export. Cambodia gained international trade with several country such as China, South Korea, Kuwait, and especially with Vietnam after the war. China is the main foreign investor in Cambodia. They embank in direct capital investment of the agriculture sector amounting to about 4.2 billion dollar, which is 4.2 billion dollar, which is 40.14% of the total foreign interment in Cambodia. Korea has invested about 40 million dollar to purchase Cassava from Cambodia farmer. Kuwait has made a bilateral agreement with Cambodia to provide a loan of about 546 million dollars to support rice production for the Kuwait market. They will also provide technical support such as building for hydro-power plans and direct flight for tourism. (Sokhengly, N., p4)
GDP-real growth rate (%)
Even globalization has made Cambodia growth on economy since 1998, but globalization has destroyed a lot of forest in Cambodia. As we know that Cambodia’s primary rainforest cover fell dramatically from over 70%in 1970 to just 3.1% today and deforestation rates in Cambodia continue to go faster. In total Cambodia lost 2.5 million hectares of forest between 1990 and 2005, 334,000 hectares of which were primary forest remain. Illegal logging, combined with rapid development and population growth, is blamed for much of Cambodia’s forest loss. (Korn, S., p. 3)
Deforestation is accelerating at an alarming rate of total forest loss at nearly 75% since the end of the 1990s. In total, Cambodia lost 25,000 square kilometers of forest between 1990 and 2005, 3,340 square kilometers of which was primary forest. As of 2007, less than 3,200 square kilometers of primary forest remain, with the result future sustainability of Cambodia’s forest reserves is under severe threat. (Reuters, Th., 2003)
The factors that made Cambodia lost the forest because of Cambodia open themselves to the free market and gave motivation to the foreign investors for example lower taxes, no regulation, and free land reduction.
For instance, the Cambodia government gave 340 sq km to a Chinese company called Tainjin Union Development to build resort and casino. In this company’s framework, they need to cut down many trees in the forest of their concession in order to build their resorts and casino. This company not this troy the forest, but also many settlements of Cambodia in the area. The people lost their own property, land and housing (Deforestation in Cambodia).
The effect of globalization on foreign aid and loans:
Since Cambodia was destroyed every things even human resources, natural resources, political structures, and physical structures in 1970, globalization has made Cambodia is supported loans and aid by foreign country.
So, Cambodia need money to support global growth and economic stability. Where Cambodia can get money from? The International monetary fund works ask to foster global growth and economic stability. It provides policy advice and financing to Cambodia and another counties in economic difficulties and also work with developing nations to help them achieve macroeconomic stabilities and reduce poverty. (International Monetary)
In order to get a loan from the International Monetary Fund (IMF), the Cambodia need to make a negotiation with the organization. The IMF require borrowers to accept their policy reform. It is called the Structural Adjustment Program (SAPs). The SAPs policy reform require the governments to cut their funding for program Such as education, welfare, healthcare, and government salary in order to open their debt back. SAOs also require government to provide intellectual property right and given an incentive to attract more investment from overseas. The government also need to regulate high tariffs on imports and subsidy that encourage domestic exports (Structural adjustment).
The Executive Board of the International Monetary Fund today completed in principle the second review of Cambodia’s performance under the program support by a three-year, SDR 58.5 million (about US$81.6 million) poverty reduction and Growth Facility (PRGF) credit. The Board also approved in principle the release of further SDR 8.36 million (about US$ 11million) from the PRGF arrangement, which would bring total disbursements under the MIF-supported program to SDR 25.1 million (about US$33 million). (International Monetary, 2001)
Additionally, Cambodia is one of the poorest countries in Southeast Asia. Cambodia also gets a high amount of foreign aid every year. It receives approximately USD $500 million every year from developed countries for projects including technical support such as Official Development Assistance (DOA) to Cambodia. This foreign aid is intended to sustain the life of Cambodians and to operate other activities such as infrastructure, building, education, and healthcare and security assistance and so on. (Sokhengly, N., p. 6)
According to U.S. official. Cambodia has made notable effort to carry out counter terrorism, although potential problem remain. (Lum, T., p. 13). In September 2006, U.S. Ambassador Joseph Mussomeli staed that “Cambodia has made great strides in securing its border and rooting out terrorists that seek to use this country as a base of operations”
In 2003, Cambodia officials arrested four men-one Cambodian Muslim, two Thai Muslim and an Egyptian-for belonging to Jemaah Islamaih, a Southeast Asian Islamic militant group with ties to Al-Qaeda, and plotting to carry out terrorist attacks in Cambodia. The three non-Cambodian were teachers at a Saudi-funded Islamic school that Cambodia authorities subsequently shut down. (Vaughn, B., 2003)
Cambodia has the highest rate of HIV infection outside sub-Saharan Africa. At the end of 2003, an estimated 123,000 Cambodians were living with HIV. Cambodia’s Health Ministry reported that 100,000 Cambodians have died of AIDS and 50,000 children have been orphaned by the disease. However, United Nations Secretary General Kofi Annan stated in 2005 that Cambodia is one of three countries in the world that has “reduced the spread of HIV/AIDS effectively.” A concerted effort by the Cambodian government, the United Nations, NGOs, and foreign assistance programs has lowered the HIV prevalence rate from 3.3% in 1999 to 1.9% in 2003. In Cambodia, HIV is most commonly transmitted through sexual contact between sex workers and males, who then pass the virus on to their wives. (Cambodia Vows, 2005)
In 2003 and 2004, the State Department’s Office to Monitor and Combat Trafficking in Persons ranked Cambodia as a Tier 2 country, stating that the country had made significant efforts to eliminate trafficking despite considerable resource constraints. (U.S. Department, 2004)
In 2005, however, the State Department downgraded Cambodia to the Tier 3 category, stating that Cambodia was a “source, destination, and transit country for men, women, and children trafficked for the purposes of sexual exploitation and forced labor” and that the government was not making significant efforts to comply with the minimum standards for the elimination of trafficking. (Under the Trafficking, 2000)
Globalization has not brought only advantage in Cambodia but overall globalization create more negative effect in that country as well. Even, globalization has made foreign investors to invest in Cambodia to growth in economy, and provide a lot of aid and loan but it has created Cambodia to have deforestation, and people lost their own land, because the land was given to the investors to run their projects. Moreover, it has helped foreign countries to take more advantages of Cambodia, its land and its worker because of free trade policies. The subsidy loan from the IMF do not help Cambodia to solve their previous debt problem, but have hurt the Cambodian people because of their SAPs policy reform. On the other hand, globalization has made Cambodia to have trouble with the policy issues such as, terrorism, HIV/AIDS, and human trafficking.
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