Global Financial Impact: Government should take economic bailout seriously

Government should take economic bailout seriously: Sam Rainsy

Sam Rainsy's letter published in The Phnom Penh Post, January 26, 2009

January 26, 2009
Letter to The Phnom Penh Post

Dear Editor,

In the front-page article "SRP calls for govt bailout" in the January 19 edition of The Phnom Penh Post, you wrote « opposition leader Sam Rainsy has called on the government to set aside a US$500 million economic stimulus package to offset the local effects of the world financial slump, claiming "tens of thousands" of Cambodian jobs have been lost to the global crisis ». This article correctly reflects the spirit of my January 16 letter to Prime Minister Hun Sen drawing his attention to Cambodia's vulnerability in the face of the ongoing world financial crisis and to the seriousness of its worsening impact on our economy, the unprecedented fall in agricultural prices literally strangling our farmers, massive job destruction in the hitherto-growing nonagricultural sectors (garment, construction, tourism), and the collapse of the property market.

The suggested US$500 million stimulus package would be the first emergency measure designed to alleviate the fallout from the world crisis and to prevent economic, social and political upheavals with incalculable consequences for Cambodia's stability and long-term development.

However, in the above mentioned article, Information Minister Khieu Kanharith is reported as saying there is no need for such a package because the government has already reserved funds for unforeseen circumstances, as it has been doing every year in the annual state budget. He is quoted as saying: "We have a reserve budget, not only for the global economic crisis but also for other disasters such as floods, and so forth", although he reportedly could not remember the exact amount set aside in 2009.

What the government has actually set aside for the fiscal year 2009 as "unplanned expenditures" -- US$144 million compared with US$132 million for 2008 -- is not adequate to cope with the deteriorating situation. Firstly, in the amount being far too little, and more importantly, in the concept, because the package must be thoroughly planned in order to produce its expected effects. For this purpose, we must forget "floods" and similar contingencies for a while, and concentrate on macroeconomics, fiscal policy, monetary policy, job creation, full-employment equilibrium, aggregate demand, deficit spending, multiplier effect and other elements of Keynesian economic theory.

I would like to respond also to National Assembly Vice President Nguon Nhel who is quoted, in the January 18 edition of Khmer-language newspaper Rasmei Kampuchea, as saying the government does not need to follow my recommendation related to the world economic crisis because it has already taken "measures against inflation". Apparently, Mr Nguon Nhel does not realize that the problem is no longer inflation but deflation and recession.

Sam Rainsy
Member of Parliament