Review of Aid Dependence in Cambodia

Aid Dependence in Cambodia

Sophal Ear, Aid Dependence in Cambodia: How Foreign Assistance Undermines Democracy

New York: Columbia University Press, 2013. Pp. xix, 186; figures, tables, appendix, notes, bibliography, index.

Reviewed by Sokunpanha You.

In the tense atmosphere following Cambodia’s July 2013 general election – in which, according to official tallies, the ruling Cambodian People’s Party (CPP) won 68 of the 123 parliamentary seats up for grabs – the opposition Cambodian National Rescue Party (CNRP) has rejected the results because of alleged widespread irregularities in voter lists and electoral processes. Despite capturing a historic 55 seats by winning races in several populous provinces (including the capital Phnom Penh) and coming close in many more, the CNRP has boycotted the National Assembly and demanded the creation of an independent body – ideally with United Nations participation – to investigate and address these irregularities. After preliminary rounds of negotiation between leaders of the two parties broke down and mass protests on the part of CNRP supporters failed to make headway, Sam Rainsy – the CNRP president – began a tour of Western countries to call on them to stop aid to Cambodia. Letters of congratulations to Prime Minister Hun Sen from the leaders of some of these same countries have been read on CPP-affiliated television stations and just as swiftly condemned by the opposition. In Cambodian politics, foreign donors are an important source of both money and legitimacy.

The role that foreign assistance plays in shaping modern Cambodia reaches beyond the political sphere into the everyday life of ordinary citizens. Aid workers were, for instance, amongst the first foreigners with whom many members of this reviewer’s generation came into contact, and the luxury Land Cruiser SUVs that are their perennial favorites were amongst the first cars that we ever saw. In fact, the 1993 elections organized by the United Nations Transitional Authority in Cambodia (UNTAC) – the US$1.5-billion UN mission operating in the country between February 1992 and September 1993 – were such a watershed event that it is not uncommon to meet Cambodians born in the early 1990s who were named (or nicknamed) UNTAC by their parents!

Sophal Ear, an assistant professor at the Naval Postgraduate School in Monterey, California, has rather less flattering views of the international community’s involvement in Cambodia. In Aid Dependence in Cambodia: How Foreign Assistance Undermines Democracy, he offers the first book-length treatment of the complex relationship between aid and development in the country. The book demonstrates that human development indicators such as maternal, infant, and child mortality rates have not improved despite billions in aid dollars and near double-digit growth during much of the past two decades. Achievements in the areas of governance and the control of corruption – as measured by the World Bank’s Country Policy and Institutional Assessment scores and Transparency International’s Corruption Perception Index – provide a similarly bleak picture. Furthermore, Cambodia’s Gini coefficient (a gauge of income inequality) worsened considerably between 1994 and 2007.

All of these factors point to a country in which the fruits of growth are captured by a small elite – led by long-ruling Prime Minister Hun Sen, powerful CPP politicians, and well-connected businessmen – who depend on patronage politics and rent-seeking to consolidate power and enrich themselves at the expense of real development. While Ear attributes this poor record primarily to a lack of political will on the part of the Cambodian government to improve standards of governance, he suggests that foreign assistance is also responsible. By footing the bills for substantial parts of public-service provision – between 2002 and 2010, Cambodia received US$5 billion in aid, or 94.3 percent of total government expenditures (p. 16) – donors enable the government to function without having to raise enough revenue through taxation to support those expenditures. This ability in turn relieves the government of accountability to the electorate. Cambodia has become “a kleptocracy cum thugocracy,” he concludes, “and the international community, led by the UN, is its enabler” (p. 8).

To support his book’s main contentions, Ear supplements his previously published quantitative examination of the relationship between aid and governance (1) with extensive material from interviews and with in-depth sectorial case studies. In an on-line survey, he asked development professionals in Cambodia to rate “donor success” at fostering “positive changes” to six different components of governance (p. 38). Though not definitive (because of the small and non-random sample), the findings are nonetheless instructive: while respondents felt that aid had had some positive influence on political stability and on voice and accountability, they did not think it had enhanced government effectiveness, regulatory quality, the rule of law, or the control of corruption. Respondents made particularly harsh comments about corruption, with some suggesting that “donors don’t control corruption in their own practices” and that they have on the whole enabled corruption to increase in Cambodia (p. 40).

Ear also quotes two estimates that place the cost of corruption at US$120 million and between US$300 and US$500 million a year, respectively (p. 45). These estimates will probably not come as a surprise to anyone who regularly reads the financial statements of companies operating in Cambodia. While there often are few tax payments reported, it is not unusual to see an expense item recorded as “diplomatic expenses” or “public relations expenses” that may amount to ten percent of a firm’s total sales. Such statements illustrate the extent to which corruption has replaced taxation as a major cost of doing business in Cambodia. On the other side of the coin, the dynamics of patronage mean that funds for public infrastructure often come not from national coffers but from the bank accounts of the political and economic elites. A regular fixture on Cambodian television news programs is Prime Minister Hun Sen’s attending one inauguration ceremony or another. Near the end of his speeches at such events, he reads out requests for money to build schools, hospitals, roads, bridges and so on. With a showman’s flourish, he then delivers his trademark phrase “choun tam somnompor” (literally, “given as requested”) before turning to the deep-pocketed politicians and tycoons sitting just behind him to tell them to pay for the projects – which, upon completion, inevitably bear his name.

With such an appalling record on corruption and governance, Ear asks, “what explains Cambodia’s rapid economic growth?” (p. 49). For explanation, he turns to an in-depth assessment of three sectors of the economy: garments, rice, and livestock.

The garment industry is an important source of employment in Cambodia and its main foreign currency earner. But, according to Ear, this sector owes its success not to a good governance environment but to favorable external market conditions, good labor practices imposed by trading partners, and a unified trade association. The Multi Fiber Agreement – which granted Cambodian garment exports preferential access to the U.S. between 1999 and 2004 – allowed the sector to take root. In return, garment factories agreed to monitoring by Better Factories Cambodia – a program of the International Labor Organization aimed at improving working conditions. But perhaps most importantly, the Garment Manufacturers Association of Cambodia (GMAC) – to which all garment exporters must belong – is so effective at working with the Ministry of Commerce to simplify export procedures and reduce corruption that this “exceptional relationship” qualifies as a “governance focal monopoly”, in which “certain public governance institutions” acquire “the capacity for coordinating private interests by positioning themselves as the unavoidable focal point of governance relations” (pp. 82-83).

In contrast, the rice sector lacks an equivalent of the GMAC. Instead, two competing rice-milling associations fail to collaborate. (Making collective action even more challenging, at least one more federation of rice exporters has been created since the publication of Aid Dependence in Cambodia). Inadequate quality-certification mechanisms, poor access to credit, and the high costs of transportation, storage, and energy further limit the sector’s potential and prevent it from fully benefitting from trade preferences offered under the European Union’s Everything But Arms initiative. Cambodia’s livestock sector is similarly constrained by high informal payments for export (a farmer selling a cow often has to grease the hand of various people from the commune chief up to the provincial governor), poor sanitary measures, the absence of quality certification, and the lack of a trade association. Although “good enough” governance may enable growth in garment exports (p. 66), Ear postulates, the government “bears some responsibility” for low yields and poor export capacity in the rice sector (pp. 71-72) and “has been a hindrance rather than an enabler” for livestock (p. 79).

Ear highlights Cambodia’s inept handling of the various Highly Pathogenic Avian Influenza (HPAI or “bird flu”) outbreaks since 2005 to argue that weak governance – and donors’ unwillingness to hold the government to account – could directly cost lives and harm livelihoods in Cambodia and pose a pandemic threat beyond its borders. Several factors contributed to the weakness of Cambodia’s response, despite its being one of the top recipients of aid money to combat HPAI. First, the biggest mistake was the decision not to compensate farmers for the culling of sick poultry. This decision led to a reluctance among farmers to report outbreaks and enabled the disease to spread to humans. The lack of compensation also reflected governmental indifference to the livelihoods of poor farmers. Second, bureaucratic wrangling and competition for aid resources (which could be diverted into individuals’ pockets) amongst the various government institutions responsible for emergency preparedness and human and animal health further retarded the response. Third, some senior politicians with interests in hotels and tourism – which were negatively affected by the outbreaks – also had influence on the policy response, including on the surveillance and reporting of HPAI cases. The political future of these same figures probably led to a halt in reporting of outbreaks in the year before the 2008 general election. And to make matters worse, the primary goal of donors was not necessarily to prevent deaths and economic hardship in Cambodia but to stop the disease from reaching their own countries.

Donors’ efforts to advance democracy in Cambodia have hardly been more successful. Beginning with UNTAC, much of the international community’s emphasis has been on organizing elections but, as Ear puts it, “Elections do not make democracies” (p. 110). Instead of fostering democratic institutions such as independent courts and a free media, the ruling party has coopted democratic procedures to gain legitimacy and to strengthen patronage networks. Following their criticism of a border treaty between Cambodia and Vietnam, a group of prominent democracy and human rights activists were arrested between 2005 and 2006. In the final chapter of the book, Ear uses this incident to illustrate how a “shallow democracy” (p. 109) operates in Cambodia. The arrests were made on flimsy evidence and questionable legal grounds, but Ear finds the successful campaign on the part of Cambodian civil society to have the activists released an encouraging sign. Some of the lessons learned from this episode include the need to coordinate actions, the power of using innovative communications tools such as text messaging (this was before Facebook and Twitter became popular in Cambodia), and the importance of influencing stakeholders, such as garment buyers and major donors, that have maximum leverage on the authorities.

Aid Dependence in Cambodia suffers from a few shortcomings. First, Ear writes in the introduction that a “consensus has emerged among those who study aid that even though aid is meant to encourage development, aid dependence results in bad governance, stunting growth” (p. 10, emphasis added). He, however, does not elaborate on what constitutes dependence. The main statistic repeated throughout the book – that foreign assistance equaled 94.3 percent of Cambodian government spending between 2002 and 2010 – offers an incomplete picture. Recurrent government expenditures are in fact mostly financed by domestic revenues: available data suggest that only 8 percent of total aid between 1993 and 2008 went towards budget support. A much bigger chunk (45 percent) was spent on technical assistance.(2) Readers would benefit from a more systematic and robust definition of aid dependence. Second, the book draws heavily on Ear’s previous works. As a consequence, while each chapter is well researched and makes for an enjoyable read on its own, this reader sometimes had the impression that the book lacks a cohesive connecting strand. In places, rather than being an integral part of the argument, the aid dimension feels rather tenuous – as though it was forced on as an afterthought. The chapter including the case studies is a good example. Third, the book is long on diagnosis but short on prescriptions. The author’s policy recommendations – collect more revenue, tie aid to tackling corruption, encourage collective action, strengthen civil society – have been proffered elsewhere and stand little chance of being effectively implemented. It is unclear whether raising more revenue would have a positive impact on governance. Taxes and other public receipts increased from 4.3 percent of gross domestic product in 1993 to 8.0 percent in 1998 and further to 13.3 percent in 2008 (3) without corresponding declines in corruption or  improvements in government accountability. Linking aid to governance benchmarks is also not a new idea: since 2000, donors have linked aid to a slew of reforms (judicial, fiscal, administrative, etc.), though the Cambodian government’s failure to follow through has hardly brought any consequences.(4) After all, as Cambodia’s experience with HPAI shows, donors often have their own agendas that are unrelated to improving governance. And it is difficult, as Ear himself admits, for donors “to be tough on a country that is genuinely aid-dependent for the survival of much of the population” (p. 48).

These shortcomings may limit the book’s usefulness as a policy blueprint, but they neither detract from its importance nor undermine the weight of its argument. Ear combines his expertise in development and post-conflict reconstruction with an intimate knowledge of Cambodia to produce a genuinely thought-provoking work. Aid Dependence in Cambodia is both a welcome addition to the growing scholarship on aid effectiveness (or the lack thereof) and a timely contribution to the debate on the future of development in Cambodia. This book is a valuable resource to development theorists and practitioners alike. And, naturally, it should be required reading for every politician and bureaucrat in Cambodia.

Sokunpanha You is a Phnom Penh banker. He holds a Master of Public Policy degree from the University of Michigan, Ann Arbor.

References

1. Sophal Ear, “Does Aid Dependence Worsen Governance?”, International Public Management Journal X (2007): 259-286.

2. Chuon Naron Hang, “The Cambodian Economy: Charting the Course of a Brighter Future,” in Cambodia: Progress and Challenges since 1991, ed. Sothirak Pou, Geoff Wade, and Mark Hong (Singapore: Institute of Southeast Asian Studies, 2012), p. 280.

3. Ibid, p. 256.

4.  Margaret Slocomb, An Economic History of Cambodia in the Twentieth Century (Singapore: National University of Singapore Press, 2010), pp. 277-278.