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Cambodia - Corruption

Cambodia remains wide open to essentially every form of crime. Corruption has become part of everyday life in Cambodia, in fact it has reached “pandemic” proportions. Corruption, particularly within the judiciary, has been marked as the single biggest deterrent to investment in Cambodia. Public sector salaries range from $15-30 per month for lower level officials, and less than $300 per month for high-ranking officials. The minimum wage in the garment sector is $50 a month, and the living monthly wage in Cambodia’s capital city, Phnom Penh, is $150. As a result, corruption is widespread and public officials make no effort to disguise their wealth. Cambodian laws and regulations are not sufficient to address the problem and are seldom enforced.

While it is inherently difficult to determine the precise financial impact of corruption, estimates indicate it is severe. In 1997, IMF staff estimated that the amount of public revenue lost due to corrupt activities was nearly equal to the amount of budget revenue actually collected, or about 10 percent of gross domestic product.

In 2006, Transparency International ranked Cambodia 151 out of 163 countries in its corruption perceptions index; Burma was the only country in Asia ranked lower than Cambodia. There has been continued and widespread land grabbing by government officials and the politically well-connected. Widespread corruption limits the Cambodian peoples’ access to government services. Most Cambodians cannot afford to pay the unofficial fees that are often necessary to receive services such as health care, education, or approval of land titles.

According to an Association of Southeast Asian Nations (ASEAN) assessment, very few local banks are financially, operationally, and managerially competent, because very few experienced, qualified staff exist (especially at middle levels), and there are few well-trained bankers. Furthermore, government departments do not interpret and enforce laws and regulations with uniformity (ASEAN assessment). These systemic problems encourage fake banks and banks apparently dedicated solely to laundering the immense profits linked to conflict commodities, including conflict timber.

Cambodia’s cross-border trade with Vietnam and Thailand is routinely used to launder dirty money. Typically, cross-border businessmen try to avoid the delays and costs of the banking system, preferring to settle accounts more directly. Underground remittances combined with invoice manipulations are a common mechanism used in Cambodia.

As with other countries having porous borders, smuggling bulk cash is an important component of coruption schemes. With only seven border checkpoints and two international airports that are poorly policed, as of 2002 Cambodia offered flagrant opportunities for bulk cash smuggling. Cambodia’s borders with Thailand are particularly vulnerable given the large number of Thais who visit casinos in Cambodia. Casinos. Casino gambling has expanded considerably in Cambodia in recent years. Regulation is minimal in these casinos and they can readily be used to launder money, especially to Thailand, which sends some 40,000 visitors a month to gamble in Cambodian casinos (in 2001). The funds are then transferred to regional financial institutions.

The Holiday Club in Poipet, which has been linked to laundering schemes, is closely linked to Cambodian Prime Minister Hun Sen, and reportedly is managed by his adopted brother. The casino is protected by its own security people and a Cambodian police team controlled by Pen Ien, chief of the Interior Ministry’s border patrol police division and a close friend of Hun Sen (Phnom Penh Samleng Yuveakchon Khmer, 1999).

High-level corruption includes symbiotic linkages among leading politicians, criminals, and shady entrepreneurs. The system of mutual favors among these groups is embodied in the concept of “okhna,” an honorary title formerly accorded particularly worthy individuals, but now bestowed on criminals or powerful businessmen who provide financial favors and support to the Prime Minister and other leading political figures. One of the most notorious okhna linked to Hun Sen is Yeay Phu, chairperson of the Phea Pimech Company, Cambodia’s biggest salt producer and most destructive logger.

In addition to high-level connections between criminal entrepreneurs and prominent politicians, some senior officials are themselves heavily involved in illegal activities. These reportedly include Em Sam-an, the secretary general of the anti-narcotics authority at the Ministry of the Interior, alleged to be heavily involved in drug trafficking (Praha, 2001) and Princess Bopha Devi, Cambodia’s Culture Minister (and a daughter of Cambodia’s King Sihanouk), reportedly involved in heroin trafficking (Bangkok Post Editorial, 2000).

Enactment of an anti-corruption law has dragged on for years, with the government showing little inclination to adopt legislation that would lead to strong enforcement. Rather than embrace the reforms that would garner increased investment and the new jobs that would be created, some in the RGC appear to be banking on the future income from its as-yet-untapped oil and gas reserves, which should come on stream after 2009. Donors are concerned that the current corrupt political environment could lead to misuse of future revenues that are badly needed to reduce poverty in the country.

One key for understanding Cambodia’s current corruption predicament lies in its recent history. Successive political, economic and social upheavals through the last half of the 20th century led to the deaths or emigration of many competent professionals, and profoundly altered the country’s institutional legacy. Military conflicts and political strife isolated Cambodia from global trends that have profoundly reshaped some of its neighbors, and then UNTAC and subsequent events thrust the country abruptly into the modern world. Following the Paris Accord, Cambodia’s former Communist leaders embraced a hybrid system of predatory market economics and authoritarian control.

This system, with its resultant impunity, along with widespread poverty and a dearth of institutions, has given rise to an all-encompassing corruption environment. “Survival” corruption is a way of life for the poor, and a succession of medium and large-scale corrupt acts are the ticket to wealth for the politically powerful.

As in other ex-socialist states, political and economic “reforms” of the early transition phase gave way to a wholesale process of state capture. One manifestation was spontaneous privatizations, as the dominant political class assumed de facto control of much of the country’s patrimony. Through shady deals, state-owned enterprises have been taken over by politicians or their cronies. These practices continue through granting of concessions in forestry and other sectors. Since the 1980s, 20-30 percent of the country’s land, the main source of wealth, has passed into the hands of less than one percent of the population.

Complicating matters further are scarce financial resources and the general incompetence of the state. The RGC collects very limited legal revenues, as large sums are lost to smuggling, bribes and other illegal practices. Further losses are experienced once revenues enter the state financial system. Informants estimated annual diversions from government coffers ranging between $300 and $500 million.

Grand corruption involving illegal grants of logging concessions coexists with the nearly universal practice of small facilitation payments to speed or simply secure service delivery. Police and other officials demand small bribes in numerous guises. Students across the public school system pay unofficial daily fees to supplement salaries of teachers and administrators, and perhaps fill the pockets of high-level ministry officials. The same is true in public health, where access to services is often contingent on supplemental payments to doctors, nurses or other health care personnel.

As national wealth becomes increasingly concentrated, socioeconomic and political recovery sputters. Although the international community is well aware of the situation, it has thus far failed to persuade the RGC to take effective action against corruption. The reasons for donors’ comparative mildness in demanding reforms are varied. The early priority was to pacify the country and reconstruct dilapidated infrastructure. Through most of the 1990s, maintaining political stability and reasonable economic growth seemed a substantial achievement in light of the horrors of the Khmer Rouge years and the two decades of civil war that followed. Geopolitics and regional strategic interests also played a role, allowing the ruling elite to divert international donors.

A bad situation is exacerbated by an extremely weak judiciary and the absence of the rule of law. Commercial and criminal codes and associated procedural codes are being developed with international assistance, but the process is extremely slow. Numerous NGO efforts are under way to develop basic legal services for the weak and poor, and defend the public interest against predatory elites. But this work is barely under way.

Some progress is being made in training judges and prosecutors, but the number of competent legal professionals continues to be woefully inadequate. Court proceedings are simultaneously over-complex and dilatory, with most judges responding to political pressure. Low ranking court personnel profit from cumbersome administrative procedures. Despite scheduled salary increases for judges, their legal income will continue to be well below what they can extract from placing court rulings up for sale. Ordinary Cambodians distrust the legal system, including the formal courts. The police and other enforcement bodies are also seen as corrupt.

Impunity is the norm. No one with the patronage of the state is punished, whether for massive pillaging or petty theft. In fact, those most at risk are individuals and organizations that dare to resist corruption. Most Cambodians regard resistance as a futile act. Corruption is structured more or less as a pyramid; with petty exactions meeting the survival needs of policemen, teachers and health workers, but also shared with officials higher in the system. Patronage and mutual obligations are the center of an all-embracing system. Appointment to public office hinges on political connections or payment of surprisingly large sums, and these payments are recouped through a widely accepted “right” to collect bribes.

A major contributor to this state of affairs is the opaqueness with which public business is conducted. Regardless of existing laws or expectations of donors or media, officials regard virtually all documents as privileged. Crucial information is obtained, if at all, through an inside contact or by bribing a gatekeeper. This lack of transparency even extends to information the RGC is obligated to make available under agreements with international organizations. Impediment upon impediment is piled before those seeking access to public documents.

Officials develop ever more intricate, and sometimes threatening, bureaucratic requirements to “apply” for release of documents. What information is appropriate to release is often up to the discretion of functionaries. The sensitivity of the information in question is one obvious criteria as is the value assigned and the petitioner’s willingness to pay. But even when the potential reward is high, potential purveyors of official documents exercise great care. Were they to betray the trust vested in them by political patrons, they would open themselves to retribution.

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Page last modified: 02-06-2012 17:25:34 ZULU