Information about Asia and the Pacific Asia y el Pacífico
Journal Issue


International Monetary Fund
Published Date:
August 1998
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Information about Asia and the Pacific Asia y el Pacífico
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I. Introduction

1. The Cambodian economy was predominantly a centrally planned economy from the early 1980s until the signing of the 1991 Paris Peace Accord. Although attempts at reform started modestly in 1985, they gathered momentum after 1992, when reform was supported by the Fund, first under the Systemic Transformation Facility and later under the Enhanced Structural Adjustment Facility (ESAF). Progress has been made in moving toward a market economy, with state-owned enterprises now accounting for less that 10 percent of GDP. In 1997 the authorities adopted their first Socio-Economic Development Plan for 1996-2000 with a view to consolidating the progress achieved and remedying persisting major socioeconomic problems. However, with an estimated annual per capita income of about $300 in 1996, Cambodia remains one of the poorest countries in the world.

2. This report briefly discusses major developments in 1997 and updates the statistical tables included in last year’s report on recent economic developments.1 During the first months of 1997, macroeconomic performance was broadly in line with the second-year ESAF program, but the situation deteriorated markedly in the aftermath of Second Prime Minister Hun Sen’s seizure of power in July and the regional financial crisis. The effects of the political crisis seem to have been much stronger than those of the regional financial crisis as they undermined growth and investors’ confidence. Cambodia’s high degree of dollarization mitigated to a large extent the short-term impact of the unfolding regional crisis because the riel depreciated less than other currencies in the region and its limited use minimized the impact of the depreciation on the economy.

3. Chapter II discusses developments in the real sector and factors accounting for output growth, estimated at 2 percent in 1997, down from 6½ percent in 1996. The chapter also analyzes developments affecting inflation during the year. Chapter III deals with public finance and highlights the persistent problems with revenue collection which, together with overspending on the military budget, led to a squeeze in civilian nonwage expenditure. Chapter IV discusses monetary and financial sector developments and notes that, in Cambodia’s highly dollarized economy, monetary policies of the central bank—the National Bank of Cambodia (NBC)—were confined to containing bank financing of the budget. The NBC’s efforts to improve banking regulations and supervision are also discussed. Chapter V focuses on external sector developments that led to a decline in the current account deficit and a deterioration in the external payments position. Chapter VI discusses privatization, an area where only limited progress was achieved. Finally, Chapter VII deals with forestry management. Illegal logging and exports seem to have intensified following the July events.

II. Real sector

A. Growth and Sectoral Performance

4. Cambodia’s real GDP grew at an annual average of about 5½ percent in real terms between 1993 and 1996 (Table 5).2 Growth during this period was led by the manufacturing and service sectors, while agricultural output, on average, lagged behind population growth. Output growth in 1997 slowed sharply to 2 percent, mainly reflecting the adverse impact on private sector activity of the July events and the regional financial crisis.

5. Agriculture output, which accounts for about 43 percent of GDP, grew by 2 percent in 1997 (Table 6). The rice crop, the main agricultural produce and the country’s staple food, remained at about 3½ million metric tons since 1995, when it had recovered from adverse weather conditions (Table 8). The total cultivated area increased from 1.8 million hectares in 1996 to 2.1 million hectares in 1997, as some previously land-mined fields were reclaimed. The average rice yield increased from 1.3 metric tons per hectare in 1992-94 to 1.8 metric tons in 1997, well below the average 2.7 metric tons of yield reached by Cambodia’s neighbors. Exports of rice from border regions increased modestly in 1997.

6. Rubber production, one of Cambodia’s main cash crops, stagnated mainly because of the aging of rubber trees (Table 8). Trees have been replanted since the early 1990s, but results have not yet been visible because of the long period required to produce gum. The 10 percent export tax on rubber was suspended in October 1997 to preserve the sector’s competitiveness in the face of a 27 percent decline in world prices in U.S. dollar terms.3

7. Livestock grew strongly as diseases were less frequent in 1997 than usual. Growth in the fishery sector was affected by the deterioration in the environment. Deforestation-led soil erosion and flooding, as well as the destruction of marshland and forests, have changed the ecosystem in parts of the country, and several fish species have become extinct. The forestry sector represented less than 3 percent of GDP and was on a declining trend as reserves were being depleted and trees had to be cut deeper in the forest. The sector was also hit by falling world prices for tropical timber, in the wake of weakening demand for wood in the United States and Japan, the two main importers.

8. Output of the industry sector, accounting for about 21 percent of GDP in 1997, grew by 3 percent. Following rapid growth during 1994-96, construction activity declined by 1 percent in 1997, mainly because the political uncertainty and the regional financial crisis adversely affected several hotel construction projects. Garment output, most of which was for exports, continued to grow rapidly (Table 1). Relatively low labor costs, the availability of unfulfilled quotas of exports to the European Union (EU), the Most Favored Nation (MFN) status in Europe and the General System of Preferences (GSP) status granted by the United States in 1997 were the main driving forces behind the sector’s rapid development. The sector was only marginally affected by the July events.

Table 1.Cambodia: Garment Industry, 1994-98
Number ofNumber ofTotal exports ($ mill.)
1998 (proj.)8954,000250.0
Source: Ministry of Industry
Source: Ministry of Industry

9. The growth of the service sector, accounting for about 36 percent of GDP, slowed to about 1 percent in 1997. Activity in the transport and communication sector continued to be buoyant. However, growth in the tourism sector came to an abrupt halt in mid-1997 as a result of the deteriorating security situation.4 In July, the monthly tourist arrivals plummeted to about 6,000 from more than 29,000 in March. Tourist arrivals picked up somewhat during the remaining months of 1997, but did not reach the level achieved during the first half of the year (Table 2).

Table 2.Cambodia: Tourist Arrivals by Months, 1996-97

Change in percent













Source: Cambodian Ministry of Tourism
Source: Cambodian Ministry of Tourism

B. Aggregate Demand and Inflation in 1997

10. In 1997, the share of private consumption in GDP remained at about 86 percent, while government consumption declined from 10 percent in 1996 to 9 percent mainly as a result of continued cuts in nonwage current expenditure in the face of revenue shortfalls (Table 9). Domestic investment in relation to GDP declined by 4 percentage points to 16½ percent, reflecting the suspension or postponement of many foreign-financed projects in the wake of the mid-year political conflict and the cutting back of government investment. The national saving rate remained fairly constant at 5½ percent of GDP. Thus, the external current account deficit (excluding official transfers) declined by 4 percentage points, but remained high at about 11 percent of GDP.

11. The inflation performance showed a stark contrast between the first and second semesters of 1997 (Tables 10 and 11). During the first half of the year, inflation measured by the consumer price index (CPI) was about 6 percent on a 12-month basis, reflecting the stable exchange rate, restrained financial policies, and the availability of agricultural produce. During the third quarter, inflation jumped to 12 percent on a 12-month basis, owing mainly to the depreciating exchange rate and the political instability, which temporarily led to shortages of some food and nonfood items. However, during the last quarter, consumer prices declined somewhat and year-end inflation was about 9 percent. The U.S. dollar-denominated CPI, which is derived by deflating the official CPI by the parallel market exchange rate of the riel against the U.S. dollar, declined by 15 percent during 1997, suggesting that U.S. dollar-denominated prices of imports from Asian countries declined significantly.5

III. Public Finances

A. Introduction and Background

12. Fiscal policy made a major contribution to maintaining macroeconomic stability during the first years of Cambodia’s transition to a market-based economy, by avoiding bank financing of the budget deficit. Nonetheless, several structural problems remain. One key problem has been the lack of dynamics in revenue generation. The revenue-to-GDP ratio has been hovering around 9 percent since 1993, without a marked tendency to increase. In addition, military and security expenditures have absorbed a large part of current expenditure and tended to exceed their budgetary limits year after year. As a result, there has been no room for salary increases for civil servants, and civilian nonwage spending has been compressed on several occasions, to the point of becoming unsustainable.

13. The 1997 budget aimed at addressing some of the sustainability issues by targeting an increase in total revenue from 9 percent of GDP in 1996 to 9 ½ percent (Table 12).6 The budget also envisaged a significant shift from defense and security outlays to social expenditure, while holding the expenditure-to-GDP ratio unchanged at 16 percent. The overall deficit was targeted at 6 ¼ percent of GDP, to be entirely foreign financed.

14. The execution of the budget met with severe difficulties in 1997, largely repeating the pattern of previous years. These difficulties were exacerbated by the aftermath of the July events. There were significant shortfalls in revenue collection, overspending on the military budget, and a compression of civilian nonwage expenditures. In addition, capital expenditure had to be squeezed in the second half of the year because aid inflows significantly declined. In the event, the government abstained from bank financing of the deficit and, thus, limited the impact of the poor budgetary performance on inflation. No significant steps were undertaken to improve the tax administration. Full implementation of the new Tax Law (adopted in February 1997), an important step in consolidating Cambodia’s tax system and laying the foundations for a modern tax system, was delayed because of technical problems and a lack of consensus in the Council of Ministers.

B. Revenue Performance in 1997

15. Three quarters of the planned one percentage point increase in revenue (as a ratio to GDP) was to be generated by the new Tax Law, and the 1997 budget envisaged total revenue to increase to 9¾ percent of GDP. In the end, revenue only reached 9¼ percent of GDP, with better-than-targeted domestic tax revenue and nontax revenue, offset by low trade tax revenue (Table 13). Without the impact of the depreciation of the riel on some tax and nontax categories and unexpected royalties from an oil exploration contract (yielding about ½ percent of GDP), revenue performance would have been worse.

16. Domestic tax revenue was better than originally budgeted. However, as indicated, this outcome was influenced mainly by the impact of the depreciation of the riel and not by policy actions planned at the beginning of the fiscal year. Several measures included in the new Tax Law (such as the excise tax on hotel services, income tax for employees of NGOs and final withholding tax of 15 percent on salaries of nonresidents) were not introduced (Box l),7 and no major efforts were undertaken to collect tax arrears as planned.8 There was a significant shortfall in trade taxes (of about 1 percent of GDP), despite the depreciation of the riel. The main factors accounting for this shortfall were (i) continued granting of ad hoc exemptions to major importers (garments) and exporters (sawn timber and rubber), (ii) flawed import valuation procedures, and (iii) a temporary drop in imports immediately after the July events.

17. Nontax revenue performed better than planned because of the depreciation of the riel (affecting such categories as timber royalties, building leases, and overflight fees) and of the unexpected royalties from an oil exploration contract. Timber royalties, for the first time in years, exceeded the targets, but this was mainly the result of the riel’s depreciation. Several other revenue categories fell short of their targets because of persistent problems such as ministries not collecting revenues (or arrears) or not transferring revenue to the MEF. No concrete steps were taken to address these problems, which are partly administrative in nature and partly political.

Box 1.Status of Implementation of 1997 Tax Law

(As of January 1998)

Taxes on turnover/consumption
  • Levy of turnover tax on (previously exempt) first sale after importation.

Implemented in 1997
  • Replacement of taxes on turnover and consumption for the 600 largest taxpayers with a value-added tax.

Postponed until January 1999
  • Harmonized taxation of estimated-regime taxpayers at a 2 percent tax rate (some up from 1 percent, some down from 4 percent).

Not yet implemented
Excise taxes
  • Introduction of excise tax on automobiles, hotel services, international air travel, and telecommunications.

Implemented, except for hotel services
Tax on salaries
  • Application of the tax to private and public sector enterprise employees as well as to government employees, elected officials, and employees of NGOs.

Not yet implemented
  • Introduction of tax on fringe benefits paid to salary earners.

Implemented in 1997
  • Final withholding tax of 15 percent on salary payments to non-residents.

Not yet implemented
  • Restructuring of the rates (raising the top tax rate and reducing the exemption threshold).

Not yet implemented
Tax on profits
  • Introduction of withholding taxes on interest, dividends, and other payments to foreign or domestic firms and individuals.

Not yet implemented
Strengthened application of the minimum tax on all enterprises, including loss-making enterprises.Implemented in 1997

C. Expenditure Performance in 1997

18. Total expenditure was about 2 percentage points lower than budgeted, mainly reflecting a squeeze in current expenditure in light of the shortfall in revenue and a drop in capital expenditure stemming from slow aid inflows.

Current Expenditure

19. Current expenditure, at 8 ¾ percent of GDP, was nearly ¾ percentage point lower than budgeted, reflecting a slightly higher wage bill, more than offset by lower-than-budgeted civilian nonwage expenditures (Tables 14 and 15). Overspending (by CR 20 billion or about ¼ percent of GDP) on the wage bill was entirely attributable to military spending, reflecting the unanticipated integration of about 20,000 defecting Khmer Rouge soldiers in the Royal Army and the impact of higher rice prices.9

20. Early in the year, when signs of a revenue shortfall started to appear, the MEF began to control nonwage current expenditures in line with the monthly revenue resource envelop. As in the previous year, expenditures were affected by general cuts across the board, specific cuts in some ministries’ budgets, and postponement of payments. In the event, expenditure for civilian operations and maintenance was cut by nearly 1 percent of GDP, while there was some overspending on the military budget. As a result, current expenditure on health and education was, for the second year in a row, lower than budgeted.

Capital Expenditure

21. Capital expenditure was squeezed by more than 1 percent of GDP, to nearly 5½ percent of GDP (Table 16). The shortfall in revenue led to lower locally financed investment, while the slowdown in project loans and grants contributed to a decline in foreign-financed capital spending. In July, Germany and the United States suspended their nonhumanitarian aid programs for the remainder of the year, and there was also a slowdown in aid inflows from some other major bilateral donors such as France, Japan, and the EU. The World Bank and the AsDB, while continuing the financing of ongoing projects, delayed the start of new projects.

D. The Deficit and its Financing

22. Following a small deficit in 1996, the current balance was marginally positive (CR 3 billion), though below the target of CR 15 billion. The overall deficit, at 5¼ percent of GDP, was more than 1 percent of GDP smaller than planned and foreign funding and nonbank financing allowed the government to build up deposits with the banking system. Nonbank financing largely took the form of a build-up of enterprise deposits with the Treasury.

IV. Money and Banking

A. Overview

23. Cambodia is among the most highly dollarized economies in the world and is still largely cash-based. The stock of foreign currency cash holdings is probably significantly larger than measured broad money (including foreign currency deposits). Dollarization is a legacy of the country’s recent history. Money and banks were abolished under the Khmer Rouge regime. In 1980, a monobank system was introduced and the riel was brought back into circulation. However, confidence in the domestic currency remained low throughout the 1980s and early 1990s as a result of political and economic uncertainty. Dollarization was further facilitated by the inflow of foreign exchange, associated with UNCTAD operations and the return of expatriate Cambodians following the formation of a new coalition government in 1993. The main developments in the monetary and financial sector in 1997 were a significant withdrawal of foreign currency deposits, induced by political and economic uncertainty on the one hand and progress in the NBC’s work on bank regulation and supervision on the other.

B. Institutional Changes in the Banking Sector

24. Cambodia’s banking system consists of the NBC, with 20 provincial branches, 22 locally incorporated banks, 7 branches of foreign banks, 1 state-owned bank, and a decentralized system of NGOs engaging in rural financing (Table 18). The major changes in 1997 included the continued reduction of the state’s direct involvement in the financial sector through (i) the conversion of three joint-venture banks (Cambodia Commercial Bank, Cambodia Public Bank, and Canadia Bank) into locally incorporated private banks, and (ii) the liquidation of the state-owned Municipality Bank; its remaining assets and liabilities were absorbed by the NBC. The only remaining state-owned commercial bank is the Foreign Trade Bank. Its privatization was scheduled for 1997, but a delay in the audit has postponed the process until 1998.

25. In early 1998, the government firmed up its plans to establish, with foreign financial assistance, a Rural Development Bank (RDB) as a “frontal institution” that will channel financial flows from bilateral and multilateral donors to grassroot institutions specializing in microfinance and will supervise these institutions. Presently, there are about 60 such grassroot institutions that are left unsupervised and perform financial and social services to the rural communities. So far their work is largely uncoordinated and their operations are not always run smoothly (sometimes funding from headquarters is cut off). The RDB would not be allowed to receive deposits from the public. It is the government’s intention to privatize this financial institution at a later stage.

C. Monetary Aggregates

26. Developments in monetary aggregates in 1997 were characterized by a significant withdrawal of foreign currency deposits (10 percent in U.S. dollar terms), induced by waning confidence in the political and economic situation (Tables 19, 20, and 21). The withdrawal started soon after the first signs of political violence in March and accelerated after the July events. This development came to a halt in the last two months of the year when the political situation stabilized and security improved. As a result, the year-on-year growth rate of broad money dropped from 40 percent at end-1996 to 16 percent at end-1997. The share of foreign currency deposits in broad money remained stable at around 62-63 percent. Measured velocity (at 9.4) declined by 10 percent, compared with a decline of 23 percent the year before, indicating that the processes of monetization and intermediation slowed down in the wake of the political events.10 Part of the withdrawn foreign currency deposits appeared to have stayed in the system as foreign cash in circulation, but another part was most likely transferred to banks abroad.

27. The stock of private sector credit increased by 18 percent (expressed in U.S. dollar terms) during the first half of the year, reflecting buoyant economic growth. During the second half, political and economic uncertainty led to a standstill in credit activity. By December, the stock of private sector credit (in U.S. dollar terms) was 2 percent lower than the end-June stock. Banks also reported problems with customers who were unable to service their loans as business activity slackened significantly. By year-end, this situation started to improve somewhat.

D. Monetary Policy

28. Cambodia’s high degree of dollarization severely limits the NBC’s scope for monetary policy. Because the domestic currency share in the (unmeasurable) stock of total liquidity (including foreign currency cash in circulation) is so small, central bank actions are not effective. The most important central bank measure has been to limit central bank financing of the government deficit, the main source of domestic money creation in Cambodia under the present circumstances. Cooperation between the NBC and the MEF in the past few years has been effective in this regard. As such, domestic currency liquidity expansion has been contained, thereby minimizing pressure on the exchange rate and prices. During 1997, the government was able to build up its deposit base with the NBC by CR 74 billion. The resultant decrease in net claims on government partially offset the increase in the NBC’s net foreign assets, containing the growth in reserve money to 21 percent (year-on-year), about half the growth rate recorded in 1996 (Table 22).

29. Interest rates still do not perform a meaningful role in resource allocation in Cambodia. Commercial bank interest rates remained broadly unchanged during 1997 (Table 23). Riel deposit rates remained in the range of 8-12 percent and U.S. dollar deposit rates in the 3-7 percent range. Lending rates ranged from 12 percent to 18 percent (U.S. dollar loans).

E. Exchange Rate Policy

30. In 1997 Cambodia continued its market-based exchange rate policy. The exchange rate of the riel against the U.S. dollar remained broadly stable around CR 2,750 during the first half of the year. However, during the last six months, the rate depreciated by about 27 percent and reached CR 3,450 at end-December. During the first five months, the NBC conducted 13 foreign exchange auctions for a total of $6.4 million (the total amount sold in the 1996 auctions was $33.6 million). The main purpose of such auctions, as in the past, was to smooth exchange rate fluctuations. During the second half of the year, no further auctions were conducted. Throughout the year, the spread between the official and the market rate was well below 2 percent, and most of the time it was less than 1 percent.11 The NBC intends to reduce the spread further in the course of 1998.

F. Banking Supervision and Regulation

31. The Cambodian banking system expanded rapidly in 1991-94, putting significant strains on the NBC’s regulatory and supervisory capacity. The moratorium on issuing new licenses (June 1994) was intended to give the NBC breathing space to develop its banking control skills. Since then, supported by technical assistance from the Fund and other multilateral organizations, a foundation has been laid to enhance the NBC’s bank supervision capacities.12 The banking supervision department was reorganized in 1995, new reporting forms designed, and a start was made with off-site inspections based on these reporting forms. On-site inspections started in 1996, through an international audit firm. In addition, to enhance transparency and avoid conflict of interest, the NBC began to divest its interests in the five joint-venture banks, a process that was completed in 1997.

32. Progress in bank supervision in 1997 was achieved on several fronts. First, international audit firms conducted on-site inspections in eight banks. These inspections revealed problems in only one bank. This bank has been given six months to formulate and implement a recovery plan. If this strategy fails, the NBC will advise to close this bank. Given the continued limited capacity of the NBC to conduct such inspections independently, it has been agreed that the entire sector will be inspected by international firms by the end of 1999. Second, the NBC strengthened its reporting requirements by asking the commercial banks to submit, on a monthly basis, the list of loans exceeding $100,000 (or CR 300 million), classified according to the loan classification criteria. By now, banks have to submit 14 reports on a monthly basis and a report on nonperforming loans on a quarterly basis. Third, the NBC raised the minimum capital requirement for new banks to $15 million.

33. The new draft Commercial Bank Law, which is expected to provide a much needed transparent framework for banking operations in Cambodia and for bank supervision, has been with the National Assembly for more than a year, awaiting adoption.

34. Effective January 1, 1998, the NBC increased the reserve requirements from 5 percent to 8 percent and the capital guarantee deposit from 5 percent to 10 percent (Table 24).13 Both measures were introduced for prudential reasons, to ensure liquidity and solvency of the banking system.

V. External Sector

A. Overview

35. Cambodia’s economy is open to international trade and financial relations, underpinned by a framework of liberalized exchange, foreign investment, and trade regimes. This outward-oriented policy has served the country well and has attracted foreign direct investment as well as foreign concessional financial assistance which contributed to strengthening the external payments position.

36. External sector developments in 1997 were marked by a sharp turning point in mid-1997. During the first half of the year, significant foreign concessional aid and foreign direct investment entered into the country, with an ensuing deterioration in the trade balance, as exports could not keep pace with rising aid- and investment-related imports. During this period, the overall balance remained positive as the capital account surplus more than offset the current account deficit. In contrast, during the second half, the current account improved mainly because imports declined in response to falling capital inflows, but the overall balance of payments, although in surplus, deteriorated.

37. The current account (excluding official transfers) declined from 15½ percent in 1996 to 11 percent in 1997, reflecting strong export performance in the garment industry and the reduction in aid-related project imports (Table 25). The capital account deteriorated as multilateral disbursements and foreign direct investment contracted sharply as a result of the political crisis in Cambodia and the financial crisis in Asia. Thus, the overall balance of payments recorded a surplus of $29 million in 1997, compared with that of $52 million in 1996. Official foreign reserves increased to a level equivalent to 2½ months of imports of goods and services.

B. Developments in 1997

38. Total exports increased by about 11 percent in 1997, supported by a strong growth in nontraditional exports, whereas traditional exports remained subdued (Table 26). The export share of forestry products declined from 43 percent in 1994 to 14 percent in 1997.14 Illegal cutting and exporting of logs continued on a large scale in spite of the official ban on such exports. The volume of forestry product exports declined in 1997 and stood at about one half of the 1995 level, when the government exported large quantities of illegally felled trees. In addition, the international price for timber fell in 1997, further reducing the value of timber exports. Natural rubber, the second most important traditional export item (representing about 5 percent of total exports in 1997), increased by 13 percent, despite the sharp drop in international prices.15 Cambodia has also steadily increased its rice and fish exports, but the total value of those exports remained marginal.

39. The most significant export development in 1997 was the more-than-doubling of nontraditional exports, representing about 35 percent of total exports. Nontraditional exports included textile and garment products, covered under the MFN and GSP statuses, as well as leather and furniture items. These exports were virtually nonexistent prior to 1995, but sizable foreign direct investment and a propitious international climate boosted them over the last three years.

40. Re-exports continue to represent an important feature of Cambodia’s external trade, although their share in total exports receded from 53 percent in 1993 to 45 percent in 1997. Re-exports continued to stem from differences in tariffs on goods imported by Cambodia and its neighbors.16 These goods included cigarettes, motorcycles, beer, electronic equipment, and nonmonetary gold. Most of these consumer goods were re-exported to Vietnam, while gold went mainly to Thailand.

41. The assessment of import performance is hampered by the large share of tariff-exempt imports for which there are no customs data. Such imports, which were estimated to represent 32 percent of total imports in 1997, included imports procured by government, imports financed by official foreign assistance and foreign direct investment, inputs for the garment industry, and imports for which ad hoc exemptions from inspection were granted. Retained imports, representing 68 percent of total imports, declined by 6 percent in U.S. dollar terms, reflecting the political turmoil and slack in foreign financial inflows (Table 27). In contrast, security-related government imports were estimated to have almost doubled, whereas aid-related imports decreased sharply.

42. The service account continued to be in deficit in 1997, representing about 17 percent of the current account deficit (excluding official transfers). The tourism sector remained the single most important foreign exchange earning service sector, despite a decline from $84 million in 1996 to $73 million in 1997. Both the cut in foreign aid and the departure of roughly half of the expatriate community after July were reflected in the continued decline of technical assistance. Interest payments on foreign debt remained modest given the high degree of concessionality of Cambodia’s external debt.17 Official transfers, mainly in the form of project financing and technical assistance, plummeted to about $171 million in 1997, half the peak level recorded in 1995. Foreign direct investment was almost halved in 1997 as a result of loss in business confidence and the regional financial crisis (Tables 28 and 29).

C. External Debt

43. Cambodia’s external bilateral sovereign debt was rescheduled on Naples terms at the Paris Club on January 26, 1995 for all outstanding obligations prior to December 31, 1985.18 Since then, Cambodia signed bilateral rescheduling agreements with France, Germany, and Japan and has continued discussions, albeit at a very low pace, with the United States with a view to signing a similar agreement. Cambodia also has sizable external debt obligations vis-à-vis four former Council of Mutual Economic Assistance (CMEA) countries. Pending the signing of agreements with the United States and the CMEA countries, Cambodia suspended servicing their claims.

44. At end-1997, Cambodia’s external debt (excluding short-term debt but including obligations to the IMF) amounted to an estimated $2 billion or about 65 percent of GDP (Table 30). Bilateral debt accounted for 86 percent of total debt. The Russian Federation was Cambodia’s main creditor with an estimated $1.3 billion (65 percent of total debt), followed by the U.S.A. with $0.4 billion (17 percent).19 However, the figures quoted for Russia and the U.S.A. are before rescheduling although the principle of such rescheduling has been accepted by both creditors (Box 2). Accordingly, if the most favorable rescheduling assumptions to Cambodia are applied to its external debt and interest payment arrears, the bilateral debt, after rescheduling, could be as low as $0.7 billion and would represent only 46 percent of total debt.20 The World Bank would then become Cambodia’s principal creditor, while the IMF’s share would be less then 8 percent.

D. Trade Regime Developments in 1997

45. Cambodia, surrounded by ASEAN member countries, has a long-term interest in freeing its trade and having unhindered access to ASEAN’s 500 million consumer-strong market. Accordingly, during 1997 Cambodia signed bilateral trade agreements with China, Indonesia, Thailand, and Vietnam and completed the preparatory technical work for its admission to ASEAN. Import tariffs were reduced by about 15 percentage points for a number of consumption and equipment goods. As a result, the average tariff rate was reduced to 18 percent. In 1997, the maximum import tariff rate was 120 percent on luxury cars and the minimum rate was 0.3 percent on unwrought gold and silver. There were four primary tariff bands (7, 15, 35, and 50 percent) within these extremes. There were no state trade monopolies nor import quotas. In preparation for entry into ASEAN, about 100 nontariff barriers were identified; these will be gradually eliminated once Cambodia joins ASEAN. The authorities drew up the required “Inclusion, Temporary Exclusion, Sensitive Products, and General Exception Lists” and the corresponding timetables for the elimination of the first three of them. A new Customs Code is being drafted in order to meet ASEAN requirements, and the government submitted 16 draft pieces of legislation to the National Assembly for ratification during 1997 with a view to harmonizing Cambodian regulations with the obligations of membership in ASEAN. The authorities are also drafting their Foreign Trade Regime of Cambodia report, a prerequisite for joining the World Trade Organization.

46. Notwithstanding the above positive trade policy developments, the Cambodian authorities partially reversed previous progress by curtailing the coverage of the independent Société Générate de Surveillance’s pre-shipment inspections.

Box 2.Cambodia: External Debt to the United States and CMEA Countries

Cambodia contracted three loans to purchase U.S. agricultural commodities, which remain outstanding since 1973-74. During the civil war, all debt-related documentation in Cambodia was destroyed. As a result, the Cambodian government never serviced these loans. According to the U.S. Department of Agriculture (USDA), the total amount of outstanding loans (including debt service in arrears) stood at $338.5 million on September 30,1997 ($222.4 million for outstanding principal, $81.1 million for unpaid principal, and $35 million for late interest). The Cambodian authorities dispute the total amount of outstanding debt, estimating it at only $184.7 million (compared with the U.S. claim of $222.4 million), based on the fact, that because of the onset of the civil war, some late deliveries of commodities did not take place. Cambodia’s official development assistance debt to the USDA is eligible for rescheduling under the 1995 Paris Club agreement.

The debt rescheduling Agreement between the Soviet Union’s Vneshekonombank and Cambodia’s Foreign Trade Bank of May 18, 1991 and its implementation accord consolidated 15 previous Soviet state credits to Cambodia into one new credit, denominated in rubles in an amount of SUR 796.6 million. The new credit was to be converted subsequently into U.S. dollars at a mutually agreeable conversion rate; it bore no interest; and the repayment schedule and modalities were to be agreed among the parties. Under the so-called zero option, the Russian Federation assumed the former Soviet Union’s claims on Cambodia. Although the 1991 Agreement is considered valid by both countries, several of its operational aspects remain to be negotiated. Russia’s participation as a creditor in the Paris Club since September 1997 paves the way for a bilateral rescheduling agreement between the two countries. In September 1997, Russia provided the Paris Club with a total claim on Cambodia of SUR 832.8 million. The Cambodian authorities dispute this amount and consider their debt to Russia to amount only to SUR 796.6 million, which was the consolidated amount in the 1991 Agreement. Pending the outcome of the various ongoing discussions, Cambodia has suspended the servicing of all debt to Russia.

Cambodia also contracted debts in rubles between 1983 and 1985 with three other CMEA countries, the Czech Republic, Poland, and the Slovak Republic,. The total amount of these debts is SUR 11.1 million. There are currently no bilateral discussions with any of the three countries, and none of them has a creditor status at the Paris Club.

47. Cambodia maintains a liberal exchange system, with no restrictions on the making of international current payments and transactions, and there are no discriminatory current account arrangements or multiple currency practices. A new Foreign Exchange Law was adopted in 1997, formalizing the liberal exchange framework.

VI. Privatization

48. Only limited progress was achieved in privatization in 1997 (Tables 31-36). First, the divestiture of the country’s six major rubber plantations was mired in ongoing discussions within the administration on the legal statute of the future entity or entities in charge of rubber cultivation. Second, about 20 medium-size enterprises were divested during 1997. The corresponding deals involved mostly 50-70-year leases of existing facilities and only one effective sale. Third, with regard to the remaining small enterprises that were to be privatized over a three-year period, virtually no progress was achieved because the 18,000 employees of these enterprises require a $l,000-$3,000 per person severance package.

VII. Forestry Sector and Forestry Policy

A. Background

49. Tropical forest is among Cambodia’s few developmentally significant natural resources. Proper forest management policies are therefore critical for the quality and sustainability of the country’s economic development. In recent years, however, uncontrolled logging has led to rapid deforestation. If the current trend of deforestation is not reversed, the country’s timber resources could be depleted within the next five years with dramatic environmental, social, and economic consequences. Current practices also lead to significant revenue losses for the government as it does not receive compensation for the economic value for its forests.

50. One of the main problems with respect to the forestry sector is that no coherent set of policies has been adopted to address forestry management and impose effective control. More importantly, political commitment to design such policies and implement them consistently has been lacking, an issue that has been compounded by the involvement of the military in illegal logging in major parts of the country. Government policy since 1992 has been going through cycles whereby bans on logging and exports of logs were followed by ad hoc exemptions granted to special interests to export timber. Such exemptions provided incentives for renewed and widespread illegal cutting. Faced with these illegal activities, the government’s next step was to suspend the export ban to facilitate the exports of already felled logs, at which point the cycle resumed (i.e., with the imposition of a new export ban), quite often under international pressure (Table 3).

Table 3.Cambodia: Official Logging, Exports and Reforestation, 1993-97

Round logs (m3)126,73228,252136,025441,519
Fire wood (steer)51,1128,8002,0853,590300
Small trees (tree)3,70054,83021,5801,200
Round logs (m3)80,835457,991459,085161,673
Sawn wood (m3)150,841163,61666,269
Processed wood (m3)13,34364,41497,535248,920
Reforestation (ha)711753605551455
Source: Data provided by Department of Forestry
Source: Data provided by Department of Forestry

51. The government’s current medium-term exploitation strategy is based on granting large-scale concessions. However, this strategy suffers from serious weaknesses which risk to accelerate the current pattern of deforestation, including the facts that (i) the economic viability of capital investment associated with the concessions rests on an unsustainable level of logging; (ii) timber royalties are only a fraction of the economic value of the timber; and (iii) the strategy does not contain any incentive to curtail illegal logging. In addition, this strategy has not been applied consistently because of the government’s tendency to grant additional ad hoc logging permissions.

B. Developments in 1997

52. No significant improvements were made in forestry management in 1997, despite some government initiatives. These initiatives were piecemeal and did not address the issues at their roots. Major areas of concern remain the illegal felling and exporting of logs, the uncontrolled granting of concessions, and weak government revenue collection.

53. Illegal logging and exports remain the most important issue. According to several independent sources, there was some improvement in the first months of the year following the imposition of a new export ban on December 31, 1996, the diplomatic initiative to request cooperation from the Thai, Lao, and Vietnamese governments in controlling illegal exports from Cambodia,21 and the issuance of a Joint Order by the Ministry of Agriculture, Forestry, and Fishery (MAFF) and the Ministry of Defense, requesting military commanders to cooperate with forestry officials.22 However, the situation deteriorated rapidly after the July events, with illegal cutting and exports intensifying. The government’s estimate of illegal logging in 1997 is about 51,000 cubic meters, but the volume estimated by independent sources is significantly higher (as much as 50 times higher).

54. The government considers its concession policy, initiated in 1994, as a key element of its medium-term exploitation strategy.23 As of November 1997, negotiations have been or are being conducted with 32 concessions (Box 3). Among these, for only six concessions all legal requirements have been completed, thus allowing normal exploitations.24 For an additional five concessions, not all legal requirements have been completed but permission to collect logs has been granted. All other concessions remain inactive, and the government intends to withdraw some of the concessions from those companies that are not making any progress with respect to the legal requirements.

55. In addition to the general weaknesses inherent in the government’s current concession policy, this policy was not applied consistently in 1997. The government tended to provide logging permissions even when not all legal requirements were fulfilled. More disturbingly, government officials continued to grant annual harvesting licenses without adequate planning or supervision and to give authoritizations for collection of logs outside concession areas without due regard to environmental or economic factors.

56. Government revenue collection from timber remained far below what it potentially could be, thereby depriving the government year after year of major resources needed to promote social and economic development in the country. In 1997, the budget collected CR 37 billion from forestry activities. Of this amount, 78 percent were in the form of royalties, 5 percent were deposits from concession contracts, 5 percent reforestation fees, and 12 percent export service charge. These revenues were in line with the officially reported removals of 441,000 cubic meters at an average royalty of $14 per cubic meter from concessions and $40 per cubic meter from outside concessions.25 However, since actual cutting was much higher, so was potential revenue.26 In addition to the above revenue sources, there was a 5 percent export tax on logs and sawn timber. After the July 1997 events, the government granted ad hoc exemptions with respect to this tax to all sawn timber export companies (an estimated loss for the budget of about $5 million).

Box 3.Status of Current Forest Concessions

(As of November 1997)

CompanyCountryArea (hectares)
Concessions paying royalties
and having normal exploitations
Grand Atlantic Timber (GAT), SDN, BHDMalaysia215,720
Mieng Ly Heng InvestmentCambodia198,500
Long Day Machinery IndustryTaiwan98,000
Samling Corporation, SDN, BHDMalaysia467,484
Concessions collecting wood;
legal procedures still on-going
Everbright Cig WoodChina136,376
Pheapimex Fuchan CambodiaTaiwan358,725
Cambodia Chernda Playwood Mfg.Taiwan103,300
Grand Atlantic Timber (GAT), SDN, BHDMalaysia149,780
Kingwood Industry PTETaiwan63,100
Concessions with permission but not yet active
Lang Song InternationalTaiwan132,000
Sam Rong Wood Industries Pte.Cambodia200,050
Superwood IpepMalaysia94,418
Double Ace InvestmentMalaysia177,500
Concession with on-going inventory
(no exploitation permit)
Geometric HoldingsIndonesia245,700
Timas ResourcesSingapore161,450
Talam Resources, SND, BHDMalaysia111,500
Concessions with pending request, no on-going
Pt. Maharani Infiniti ResourceIndonesia459,330
B.L.P. Import ExportThailand91,200
Cambodia Timber ProductCambodia35,884
Chung Shing Cambodia Co.Taiwan374350
Samling Corporation SND, BHDMalaysia298,598
Pheapimex Fuchan-VanachayTaiwan129,260
Kingwood IndustryTaiwan144,100
Landworth Holding PtyCambodia99,400
Macro Cambodia Forestry IndustryIndonesia1,432,930
Thai Boon RoongCambodia119,700
Thai Boon RoongCambodia297,000
Lang Song InternationalTaiwan119,300
Pacific CraftFrance24,537
Super LandMalaysia162,200
Forestry Concessions Total6,979,959

57. No significant policy initiatives were taken in 1997 to address the problems at their roots and improve governance in forestry management. None of the three key measures relating to forestry, specified in February 1997 as prior actions for a possible third-year ESAF program, were implemented. First, the Prime Ministerial Order, requiring the Finance Minister’s approval of, and financial control over, all contracts involving state assets went through several drafts, but has not yet been implemented due to a lack of political consensus. This Order is seen as a key element for establishing firm control over the management of public resources, of which forests are a main part. Second, a monitoring and control system for logging and log exports has not yet been established and is not expected until late 1998.

58. In November 1997, the Council of Ministers issued a ten-point program to support the government’s forestry policies (Annex I). The program aimed at centralizing and strengthening decision-making regarding forestry management by granting more authority to the National Steering Committee at the Department of Forestry and by reinforcing earlier government declarations. However, no tangible results have been obtained thus far in terms of better control and management because, in practice, no follow-up has been given to most of the proposed measures.

59. Despite a growing awareness in government circles of the need for change in forest policy, much needs to be done to develop a coherent policy framework. Four studies, supported by the World Bank, are currently undertaken and look at key issues such as logging control and logging verification, the legal framework for granting concessions, reform of the forest policies and forest concession management. Based on the recommendations of each of these studies, expected by mid-1998, the government intends to formulate policies which would set the stage for a medium-term policy framework. To arrive at a sustainable level of logging and ensure adequate returns to the country, full political support at the highest levels will be needed.

Table 4.Cambodia: Gross Domestic Product by Sector, 1993-97
(In billions of riels at current prices)
Crops and rubber1,7241,8532,3742,6282,940
Rubber and other crops7078911,0201,1501,343
Mining and quarrying1618222831
Electricity and water3944506377
Transport and communication173195248292349
Wholesale and retail trade7888781,0071,1541,267
Hotels and restaurants2431354651
Government services216232269266293
Home ownership312336384432477
Other services416466505614676
Gross domestic product5,4146,1317,2008,2519,251
(Percent change from previous period)
Crops and rubber139.27.528.110.711.8
Rubber and other crops139.226.114.512.716.8
Mining and quarrying90.08.527.926.710.5
Electricity and water136.313.014.327.421.8
Transport and communication101.012.926.817.919.5
Wholesale and retail trade99.911.514.614.79.8
Hotels and restaurants90.525.715.530.410.7
Government services99.27.516.0-1.110.2
Home ownership81.07.814.212.610.5
Other services101.612.08.521.410.1
Gross domestic product115.913.217.414.612.1
Sources: Data provided by the Cambodian authorities; and Fund staff estimates.
Sources: Data provided by the Cambodian authorities; and Fund staff estimates.
Table 5.Cambodia: Real Gross Domestic Product by Sector, 1993-97
(In billions of riels at 1989 prices)
Crops and rubber77.270.982.283.484.5
Rubber and other crops29.032.434.335.436.5
Mining and quarrying3.
Electricity and water0.
Transport and communication8.99.710.711.812.4
Wholesale and retail trade42.344.848.853.353.2
Hotels and restaurants1.
Government services11.512.512.912.712.7
Home ownership18.820.321.823.123.6
Other services20.422.123.725.125.7
Gross domestic product292.1303.7326.8349.7356.6
(Percent change from previous period)
Crops and rubber-2.3-
Rubber and other crops-10.311.
Mining and quarrying8.
Electricity and water6.
Transport and communication10.09.510.010.35.3
Wholesale and retail trade6.
Hotels and restaurants8.
Government services5.08.03.5-1.80.0
Home ownership8.
Other services9.
Gross domestic product4.
Sources: Data provided by the Cambodian authorities; and Fund staff estimates.
Sources: Data provided by the Cambodian authorities; and Fund staff estimates.
Table 6.Cambodia: Sectoral Contribution to GDP at Constant 1989 Prices, 1993-97(In percent)
Crops and rubber26.423.425.223.923.7
Rubber and other crops9.910.710.510.110.2
Mining and quarrying1.
Electricity and water0.
Transport and communication3.
Wholesale and retail trade14.514.714.915.214.9
Hotels and restaurants0.
Government services3.
Home ownership6.
Other services7.
Gross domestic product100.0100.0100.0100.0100.0
Sources: Data provided by the Cambodian authorities; and Fund staff estimates.
Sources: Data provided by the Cambodian authorities; and Fund staff estimates.
Table 7.Cambodia: Deflators for Gross Domestic Product by Sector, 1993-97(Percent change over previous period)
Crops and rubber144.817.
Rubber and other crops166.713.
Mining and quarrying75.9-0.418.46.98.0
Electricity and water123.
Transport and communication82.
Wholesale and retail trade88.
Hotels and restaurants76.
Government services89.7-0.512.10.710.2
Home ownership67.
Other services84.
Gross domestic product107.
Sources: Data provided by the Cambodian authorities; and Fund staff estimates.
Sources: Data provided by the Cambodian authorities; and Fund staff estimates.
Table 8.Cambodia: Agriculture, Livestock, and Fishery Production, 1993-97


Agriculture 1/
Sweet potatoTons55363937
Mung beanTons1117201415
Sugar caneTons140219202178
Fresh fish and shrimpTons109103113104108
Source: Data provided by the Cambodian authorities.

Harvest year for crops; tons are metric tons.

Source: Data provided by the Cambodian authorities.

Harvest year for crops; tons are metric tons.

Table 9.Cambodia: Aggregate Demand, 1993-97
(In billions of riels at current prices)
Aggregate expenditure6,3857,7699,36510,81612,061
Exports of GNFS (retained)4527499551,2381,733
Aggregate resources6,3857,7699,36510,81612,061
Gross domestic product5,4146,1317,2008,2519,251
Imports of GNFS (retained)9711,6382,1652,5642,809
Memorandum items:
(In percent of GDP)
Exports of GNFS (retained)8.312.213.315.018.7
Imports of GNFS (retained)-17.9-26.7-30.1-31.1-30.4
Domestic investment14.118.521.220.416.5
Private investment9.813.
Government investment4.
National saving4.
Government saving-1.4-1.4-0.6-0.80.3
Private saving6.
Current account
Including official transfers-2.0-3.9-4.4-5.9-5.6
Excluding official transfers-9.4-13.7-16.1-15.5-11.0
Sources: Unofficial estimates provided by the Cambodian Authorities and Fund staff estimates.
Sources: Unofficial estimates provided by the Cambodian Authorities and Fund staff estimates.
Table 10.Cambodia: Consumer Price Index, 1990-97 1/
U.S. dollar-based CPI
National BankNational Institute of StatisticsNational BankNational Institute of Statistics

CMar. 1998=100)

Change in


(Sep. 1994=100)

Change in

Parallel Market

Exchange Rate 2/
Index 3/

(Mar. 1990=100)

Change in

Index 3/

(Sep. 1994=100)

Change in

Sources: Based on data provided by the Cambodian authorities; and Fund staff estimates.

In January 1996, the National Institute of Statistics’ CPI became the official price index in lieu of that of the National Bank of Cambodia.

Riel per U.S. dollar, end-period buying rate.

Riel-based consumer price indices divided by the parallel market exchange rate.

Sources: Based on data provided by the Cambodian authorities; and Fund staff estimates.

In January 1996, the National Institute of Statistics’ CPI became the official price index in lieu of that of the National Bank of Cambodia.

Riel per U.S. dollar, end-period buying rate.

Riel-based consumer price indices divided by the parallel market exchange rate.

Table 11.Cambodia: National Institute of Statistics Consumer Price Index, 1995-98 1/(Base: July-September 1994=100)
Average for 12-month period103.3110.8119.6
Memorandum items:
Rate of inflation
(Final quarter basis)
Rate of inflation
Source: Data provided by the Cambodian authorities.

Adopted by the authorities as the official consumer price index from January 1996.

Source: Data provided by the Cambodian authorities.

Adopted by the authorities as the official consumer price index from January 1996.

Table 12.Cambodia: General Government Operations, 1994-97
ActualActualActualBudgetEstimated outcome
In billionsPercent ofIn billionsPercent ofIn billionsPercent ofIn billionsPercent ofIn billionsPercent of
of rielsGDPof rielsGDPof rielsGDPof rielsGDPof rielsGDP
Total revenue590.49.6643.08.9749.19.1896.49.7846.59.2
1. Tax revenue364.65.9445.56.2534.36.5673.37.3597.46.5
Direct taxes8.
Indirect taxes75.01.2103.81.4163.72.0195.22.1206.52.2
o.w. Excise taxes2.
Trade taxes280.94.6320.84.5344.14.2437.84.7347.33.8
2. Nontax revenue224.63.7189.82.6175.62.1211.72.3236.82.6
3. Capital revenue1.
Total expenditure (Cash)1009.116.51200.616.71342.816.31480.816.01310.314.2
1. Current expenditure673.811.0689.69.6812.99.9870.09.4809.78.8
Civil administration101.41.7110.91.5130.21.6132.21.4132.91.4
Defense and security192.13.1214.83.0220.62.7232.52.5251.42.7
Operating expenditures324.35.3284.44.0344.94.2362.23.9321.83.5
Civil administration121.92.0105.21.5172.22.1211.22.3161.91.8
Defense and security202.33.3179.22.5172.72.1151.01.6159.91.7
Economic transfers4.
Social transfers41.30.744.80.663.90.880.70.967.70.7
Civil administration37.50.640.60.657.30.773.40.860.50.7
Defense and security3.
Other current expenditure9.
2. Capital expenditure 1/335.35.5511.17.1529.96.4610.86.6500.65.4
Locally financed78.51.356.90.861.60.7122.81.390.61.0
of which:
Local currency counterpart0.
Externally financed256.84.2454.26.3468.35.7488.05.3410.04.4
CURRENT DEFICIT (Cash)−83.4−1.4−46.5−0.6−63.8−0.826.40.324.50.3
OVERALL DEFICIT (Cash)−418.7−6.8−557.7−7.7−593.7−7.2−584.4−6.3−463.8−5.0
1. Foreign financing (net)432.17.0559.37.8575.67.0597.56.5510.05.5
of which:
Project aid267.14.4450.76.3467.15.7488.05.3410.04.4
Budget support121.
Nonconcessional loans43.20.739.40.5------------
2. Domestic financing−13.4−0.2−−13.1−0.1−46.2−0.5
Bank financing−26.6−−17.0−−73.1−0.8
Memorandum items:
Defense and security outlays398.26.5398.25.5399.94.8390.84.2418.54.5
Revenue from forestry106.71.771.
Source: Data provided by Cambodian Authorities.
Source: Data provided by Cambodian Authorities.
Table 13.Cambodia: Structure of Revenue, 1995–97(In billions of riels)

Total revenue642.9749.1846.5
Tax revenue445.5534.3597.4
Direct taxes20.926.543.6
Wage tax1.12.75.7
Profit tax17.821.635.0
Public enterprises5.83.06.4
Private enterprises12.018.628.6
Property tax1.22.12.6
Tax on agricultural activity0.10.00.0
Tax on unutilized land0.00.00.3
Other income taxes0.70.00.0
Indirect taxes103.8163.7206.5
Turnover tax17.127.446.5
Public enterprises2.23.03.0
Private enterprises14.934.743.5
Consumption tax60.070.475.2
Business licence tax1.31.71.9
Excise taxes9.056.674.1
Slaughter tax0.30.50.3
Vehicle licence tax4.83.33.7
Holiday tax0.20.00.0
Inheritance tax1.81.60.0
Stamp tax0.11.01.0
Tax on illegally imported cars8.30.30.1
Airport tax0.00.00.0
Other indirect taxes0.10.00.0
Taxes on international trade320.8344.1347.3
Taxes and duties on imports300.8334.8335.8
Import tariffs (non-petroleum)218.8245.6209.8
Fees on petroleum products1.71.81.8
Import fees0.05.06.1
Import tariffs on petroleum80.399.7117.8
Taxes on exports17.38.19.9
Nontax revenue197.5175.6236.8
Receipts on public property120.591.6134.1
Receipts from public enterprises26.737.936.4
Factory leases5.910.18.4
Amortization payments0.53.94.0
Surplus on working capital1.20.00.0
Operating surpluses of public enterprises1.40.00.0
Civil aviation10.817.117.1
Tourism receipts0.13.61.0
Sale of material0.62.70.2
Transportation fees0.30.50.2
Receipts from commercial activity3.40.00.0
Sales of electricity to provinces0.00.50.1
Receipts from water supply0.06.30.8
Royalties and concessions17.05.133.1
Petroleum concessions0.70.631.6
Mining concessions0.20.00.4
User fees6.56.96.6
Building leases6.23.012.6
Other nontax revenue77.084.0102.6
Posts and telecommunication54.463.683.0
Advertising fees0.00.40.0
Public services10.516.311.5
Of which:
Visa fees5.08.04.2
Timber export licence fee1.30.00.0
Customs documentation fees1.30.81.3
Nontax revenue of provinces1.63.00.1
Other nontax revenue9.81.18.0
Source: Data provided by the Cambodian authorities.
Source: Data provided by the Cambodian authorities.
Table 14.Cambodia: Budgetary Expenditure by Economic Classification, 1995–97 1/

(In billions of riel)
Operating costs284.4344.9321.8
Social transfers44.863.967.7
Economic transfers14.516.16.3
Capital expenditure511.1529.9500.6
Other 2/20.235.629.6
(In percent of total expenditure)
Operating costs23.723.624.6
Social transfers3.74.25.2
Economic transfers1.31.10.5
Capital expenditure42.544.338.2
Other 2/
(In percent of GDP)
Operating costs3.94.23.5
Social transfers0.60.70.7
Economic transfers0.20.20.1
Capital expenditure7.16.45.4
Other 2/
Source: Data provided by the Cambodian authorities.

Budget presentation (payment-order basis).

Includes interest payments and subsidies to provinces.

Source: Data provided by the Cambodian authorities.

Budget presentation (payment-order basis).

Includes interest payments and subsidies to provinces.

Table 15.Cambodia: Budgetary Expenditure by Ministry, 1995–1997(In billions of riels)
1995 1/19961997



Royal Palace14.
National Assembly9.
Council of Ministers38.13.419.45.410.
Foreign Affairs19.
National Defense301.7181.2116.73.80.0298.0206.685.26.30.0304.7202.595.66.60.0
Economy and Finance28.
Public Works217.
Religious Affairs0.
Posts and Telecommunication19.
Culture and Fine Arts4.
Social Affairs34.91.11.632.
Rural Development9.
Women’s Welfare0.
Memorandum items:
National Defense25.155.641.
Economy and Finance2.
Public Works18.
Source: Data provided by the Cambodian authorities.

Payment order basis.

Source: Data provided by the Cambodian authorities.

Payment order basis.

Table 16.Cambodia: Official External Assistance to the Budget, 1995-97(In billions of riels)

Total official external financing532.5617.0508.1
Budget support81.8150.098.1
World Bank39.762.57.2
Project aid450.7467.0410.0
World Bank20.551.391.0
Source: Data provided by the Cambodian authorities.
Source: Data provided by the Cambodian authorities.
Table 17.Cambodia: Civil Servants by Ministry(As of December 31, 1997)
TotalCentral GovernmentProvincial GovernmentAverage monthly

salary in riels
Education, Youth and Sports75,57351.52,7699.372,80462.371,416
Transport and Communication5,8634.02,1037.03,7603.254,864
Economy and Finance5,2303.64,10013.71,1301.042,336
Culture and Fine Arts3,5802.41,6215.41,9591.751,234
Social and Veterans Affairs2,1901.56222.11,5681.343,303
Royal Palace3320.23321.100.088,488
Relations with National Assembly4460.34461.500.065,795
Rural Development1,9061.34691.61,4371.241,579
Post and Telecommunication2,0211.41,2814.37400.661,809
Religious Affairs6940.52150.74790.565,442
Foreign Service5150.35151.700.053,511
Women’s Affairs4400.31490.52910.253,598
Civil Aviation4270.34271.400.051,168
Council of Ministers1,0440.71,0443.500.066,768
Source: Data provided by the Cambodian authorities.
Source: Data provided by the Cambodian authorities.
Table 18.Cambodia: Profile of the Commercial Bank System, December 1997
No. ofAuthorizedDate ofMajority
Name of BanksBranchesCapital (000 $)OperationShareholder
State-owned bank (1)
Foreign Trade Bank
Foreign bank branches (7)
Krung Thai Bank5,0009/25/92Thai
Bangkok Bank5,0009/26/92Thai
Thai Farmers Bank5,0008/21/92Thai
Siam City Bank5,00011/30/92Thai
Credit Agricole Indosuez5,0003/1/93French
May Bank5,00012/28/93Malaysian
P.T. Lippo Bank5,00010/16/96Indonesian
Private banks (22)
Agricultural and Commercial Bank5,0007/9/92Thai
Cambodia Commercial Bank310,0007/1/91Thai
Cambodia Farmers Bank15,0004/5/92Thai
Cambodia Asia Bank 1/10,0002/23/93Malaysian
Cambodia Public Bank10,0005/25/92Malaysian
Canadia Bank45,00011/11/91Canadian
Chansavangwonk Banking Corp.5,0005/19/93Thai
Phnom Penh City Bank 1/5,0009/15/93Thai
Singapore Banking Corp. 1/16,00010/27/93Singaporean
Singapore Commercial Bank5,00012/25/93Singaporean
Rich Nation Bank5,0001/25/94Hong Kong
Union Commercial Bank5,0004/20/94Hong Kong
Global Commercial Bank5,0004/26/94Thai
Pacific Commercial Bank85,0005/28/94Khmer
First Overseas Bank25,0005/30/94Malaysian
Great International Bank5,0005/30/94Australian
Cambodia Mekong Bank10,0005/31/94Khmer
Emperor International Bank 1/10,0006/4/94Hong Kong
Agricultural, Industrial and Merchandise Bank5,0006/29/96Japanese
Cambodia International Bank5,0006/30/94Singaporean
Advanced Asia Bank5,00010/25/96Korean
Thaneakear Khmer 1/10 billion riels10/28/96Khmer
Source: Data provided by the Cambodian authorities.

In operation without renewal of license.

Source: Data provided by the Cambodian authorities.

In operation without renewal of license.

Table 19.Cambodia: Monetary Survey, 1995-97(In billions of riels)

New Accts 1/
Net foreign assets5506697247978819618919341,177
National Bank304361388438535572596704814
Deposit money banks (DMBs)246308336360346388295230363
Net domestic assets99725527311811−31−115
Net domestic credit446453469499567546574623697
Government (net)14813312910712850513554
Public enterprises555555556
Private sector293315335387434490518582637
Other items (net)−347−381−414−473−536−528−564−653−811
National Bank−116−140−147−165−201−214−225−312−392
Broad money6497417798249129799029021,063
Narrow money279310311315329333331349385
Currency in circulation251277279285300304304318356
Demand deposits283332312929273129
Quasi money371431468509583646571553678
Time deposits567789111013
Foreign currency deposits366425461501575637560543665
Memorandum items:
Net foreign assets
(in millions of U.S. dollars)218262277297325351323293346
Deposit money banks9812012813412714210772107
National Bank120141148163197209216221239
Gross assets192212218232267276283286305
Gross liabilities−72−71−70−69−69−67−67−66−66
(in millions of SDRs)−48−48−48−48−48−49−49−48−49
Foreign currency deposits
(in millions of U.S. dollars)145166176187212233203170195
Credit to private sector
(in millions of U.S. dollars)116123128144160179188182187
Nominal GDP (billions of riel)7,2008,2519,251
Average stock of liquidity527781984
Change in net credit to government
as percent of beginning period
money stock1−3.1−7.9
Exchange rates (riels/U.S. dollar)
(end of period)2,5262,5582,6192,6872,7132,7352,7613,1923,450
Source: Data provided by the Cambodian authorities.

Reflects reclassification of accounts related to the shift to the new plan of accounts by the National Bank and the adoption of the new reporting form by the Foreign Trade Bank from December 1995.

Source: Data provided by the Cambodian authorities.

Reflects reclassification of accounts related to the shift to the new plan of accounts by the National Bank and the adoption of the new reporting form by the Foreign Trade Bank from December 1995.

Table 20.Cambodia: Sources of Broad Money Growth, 1995-97










(Percent increase)
Broad money13.028.314.15.25.810.67.3−
(Increase as percent for previous period broad money)
Net foreign assets6.922.718.37.59.410.18.8−7.14.627.1
Net credit to governtment−4.34.3−2.2−0.6−2.82.5−8.50.1−1.82.1
Credit to public enterprises−
Credit to private sector3.
Other items (net)7.3−6.9−5.2−4.4−7.5−7.71.0−3.7−10.0−17.5
Source: Data provided by the Cambodian authorities.
Source: Data provided by the Cambodian authorities.
Table 21.Cambodia: Deposit Money Banks’ Balance Sheet, 1995-97(In billions of riels)
December 1/

New Acct.
Net foreign assets246308336360345388295230364
Foreign assets412456492542507547487434564
Foreign liabilities166148156182159162192204200
Net domestic assets6376748486123120174144
Net claims on Government−7−6−7−4−4−4−5−4−4
Claims on public enterprises555555566
Claims on private sector 2/293315335387434490518582637
Net claims on National Bank454748242011101114
Other assets, net−274−285−307−328−369−379−408−421−509
Fixed assets79868796969799123109
Interbank claims546044395980404032
Other assets2930333336495310188
Restricted deposits4445115544
Interbank liabilities374644323756333126
Deposits at National Bank83748390171150170171190
Demand deposits273332312929263129
Time and savings deposits567789111013
Foreign currency deposits366425461501575637561543665
Source: Data provided by the Cambodian authorities.

Reflect reclassification of accounts related to the adoption of the new reporting form by the Foreign Trade Bank as of December 1995.

Almost all in foreign currency.

Source: Data provided by the Cambodian authorities.

Reflect reclassification of accounts related to the adoption of the new reporting form by the Foreign Trade Bank as of December 1995.

Almost all in foreign currency.

Table 22.Cambodia: Reserve Money, 1995-97(In billions of riels)
December 1/

New Acct.
Reserve money315334345380449440460482544
Currency outside banks251277279285299304304318356
Currency in banks5676812121010
Bank deposits58516089142124144154178
(acct063) 2/2617244489799197126
Other deposits000000000
Net foreign assets304361388438535572596704814
Foreign assets4855425706247237557819141039
Bank accounts219225276317202238268314658
Foreign exchange413710162518101725
SDR holdings383838393938394447
IMF reserve position000000000
Other 3/187241246252457461464539309
Foreign liabilities181180182187188183185210225
Net domestic assets11-27-43-57-78-127-133-222-271
Net credit to Goverment15513913611113154563958
Net claims on banks-65-67-68-43-83-38-35-46-56
Claims on banks1099931012131
Restricted deposits252626287131314443
Loans from DMBs252626242117161514
Due to FTBC 4/252525000000
Claims on public enterprises000000000
Claims on private sector000000000
Other items (net)-79-99-111-126-126-143-154-215-273
IMF net76156002944
Intra-central bank account91279887109
Fixed and other assets202125225456565553
Contested claims011112111
Capitalized expense33566571113
Capital and reserves39596172117123129210272
SDRs allocation585858606058596772
Income & expense account881218715202128
Valuation adjustment000000000
Government lending funds000000000
Interoffice accounts and others223300000
Source: Data provided by the Cambodian authorities.

Revisions reflecting reclassification of accounts related to the shift to the new plan of accounts by the National Bank as of December 1995.

Effective May 1994, deposits required of new commercial banks prior to their commencing operations.

Consists mainly of holdings of short-term securities issued by foreign governments.

Related to an old loan from the Foreign Trade Bank of Cambodia (FTBC) to the National Bank for printing expenses.

Source: Data provided by the Cambodian authorities.

Revisions reflecting reclassification of accounts related to the shift to the new plan of accounts by the National Bank as of December 1995.

Effective May 1994, deposits required of new commercial banks prior to their commencing operations.

Consists mainly of holdings of short-term securities issued by foreign governments.

Related to an old loan from the Foreign Trade Bank of Cambodia (FTBC) to the National Bank for printing expenses.

Table 23.Cambodia: Interest Rates, 1995-97 1/(Percent per annum)
Deposit rates
Riel savings deposits8.
Riel term deposits 2/32.92122.423.411.411.411.411.411.411.411.411.4
Foreign currency savings deposits2.
Foreign currency term deposits3.
Lending rates 3/
Foreign currency loans: rates charged
to private enterprises18.818.919.118.918.818.718.818.818.818.818.818.8
Source: Data provided by the Cambodian authorities.

Simple averages of rates reported by the ten commercial banks with the largest deposits. These data represent a new series not available for earlier periods.

The average rate shown is that reported for three-month riel deposits. The rates offered by all banks vary considerably, recently ranging between 2 and 15 percent per annum. The volume of total riel deposits continues to be small.

Virtually all loans to the private sector in Cambodia are denominated in foreign currencies.

Source: Data provided by the Cambodian authorities.

Simple averages of rates reported by the ten commercial banks with the largest deposits. These data represent a new series not available for earlier periods.

The average rate shown is that reported for three-month riel deposits. The rates offered by all banks vary considerably, recently ranging between 2 and 15 percent per annum. The volume of total riel deposits continues to be small.

Virtually all loans to the private sector in Cambodia are denominated in foreign currencies.

Table 24.Cambodia: Prudential RegulationsAs of January 1998
RegulationMain featuresDate of issue
Maintenance of required reserves against deposits and other borrowingReserve requirements of 8 percent are levied on deposits in both foreign and domestic currency. Reserves are defined as cash-in-vault or unremunerated deposits at the National Bank, are calculated on the basis of average daily deposit liabilities over successive 28 day periods, and must be met on an average basis over the period. Penalties for non-compliance is imposed by charging 1/10 of the latest refinancing rate per day on the deficiency.December 30, 1993

Rate adjusted January 1, 1998
Minimum capitalNew banks must pay the entire amount of their authorized capital into a special account at the National Bank before they start operations; the paid-up capital can be withdrawn later for operational expenses. In addition, each bank must maintain 10 percent of authorized capital in a special capital account at the National Bank, as a form of security. The first 5 percent are unremunerated. The second 5 percent are remunerated at a rate that follows SIBOR.January 1, 1994

Rate adjusted January 1, 1998
Provisions for bad and doubtful debtsClassification and provisioning for bad and doubtful loans.December 31, 1994
Monitoring banks’ open foreign exchange positionsCalculations of limits on foreign exchange exposure of commercial banks and other financial institutions.January 16, 1995
Late submission of the commercial banks’ reportsBanks are required to submit monthly reports on their balance sheet and selected activities within two weeks of the end of the month. Penalties are imposed on banks which report late.March 30, 1995
Risk cover ratio (capital adequacy)Banks must maintain capital adequacy ratio at the minimum level of 5 percent.May 22, 1995
Source: Data provided by the Cambodian authorities.
Source: Data provided by the Cambodian authorities.
Table 25.Cambodia: Balance of Payments, 1993-97(In millions of U.S. dollars, unless otherwise indicated)
Current account excluding official transfers-189.0-329.4-473.6-485.0-346.1
Current account including official transfers-40.0-94.4-128.0-185.7-175.4
Trade balance-203.0-274.6-404.6-451.3-303.4
Domestic exports102.0234.4268.6297.6403.6
Imports, f.o.b.-422.0-737.0-1,213.2-1,110.2-1,037.1
Of which: retained imports, f.o.b.-305.0-509.0-673.3-749.0-706.9
Services (net)10.0-74.8-89.0-56.6-62.7
Of which: tourism53.084.172.7
Of which: interest-1.0-9.8-6.1-6.9-4.8
Private transfers4.
Official transfers149.0235.0345.5299.3170.7
Of which: budget support43.034.020.913.85.4
Of which: project aid106.0201.0153.6155.7106.4
Capital account74.8135.8167.6238.1204.7
Medium- and long-term loans4.853.871.459.037.3
Foreign direct investment0.080.0150.7239.9135.0
Short-term flows and errors and omissions70.02.0-54.5-60.832.3
Overall balance34.841.439.552.429.3
Change in gross official reserves-41.0-72.4-82.0-52.4-29.6
Debt rescheduling0.00.0239.00.00.0
Change in arrears (- = reduction)0.010.0-
Memorandum items:
Current account excluding
official transfers (in percent of GDP)-9.4-13.7-16.1-15.5-11.0
Current account including official
transfers (in percent of GDP)-2.0-3.9-4.4-5.9-5.6
Gross official reserves71.0100.0181.6234.0263.6
In months of imports of goods and services1.
Net international reserves70.0109.9164.6198.5
External debt 1/410.2487.0613.3674.32,048.9
Sources: Data provided by the Cambodian authorities; and Fund staff estimates.

In 1997 includes $1,346 million owed to four countries of the former Council of Mutual Economic Assistance. This amount is indicative and subject to negotiations and rescheduling.

Sources: Data provided by the Cambodian authorities; and Fund staff estimates.

In 1997 includes $1,346 million owed to four countries of the former Council of Mutual Economic Assistance. This amount is indicative and subject to negotiations and rescheduling.

Table 26.Cambodia: Merchandise Exports, 1993-97(In millions of U.S. dollars, unless otherwise indicated)
Rubber 1/
Quantity(‘000 MT)21.030.840.233.447.0
Unit value($/MT)534.2975.01,025.9955.3770.9
Logs 1/50.4124.0111.652.537.8
Quantity(‘000 m3)562.41,160.0697.6350.1312.1
Unit value($/m3)89.7106.9160.0150.0121.0
Sawn timber34.173.072.996.065.4
Quantity(‘000 m3)151.0360.0304.2357.0381.8
Unit value($/m3)225.7202.8239.8269.0171.3
Fishery products3.55.1
Unit value($/MT)1,9621,686
Quantity(‘000 MT)4.06.0
Unit value($/MT)271.0242.5
Other traditional exports13.612.2
Nontraditional exports42.9112.6257.7
Sources: Data provided by the Cambodian authorities; and Fund staff estimates.

Volume includes estimates for illegal exports.

Sources: Data provided by the Cambodian authorities; and Fund staff estimates.

Volume includes estimates for illegal exports.

Table 27.Cambodia: Customs Imports, 1993-97(In millions of U.S. dollars)

Total imports361.2553.2930.0721.7768.4
Diesel oil18.430.451.069.566.7
Construction material24.220.819.220.617.8
Fuel oil2.
Food products2.711.617.826.119.9
Radio cassettes4.
Vehicle parts4.
Nonalcoholic drinks3.
Household oil0.
Sources: Data provided by the Cambodian authorities; and Fund staff estimates.
Sources: Data provided by the Cambodian authorities; and Fund staff estimates.
Table 28.Cambodia: Sectoral Distribution of Foreign Investment Approvals, August 1994-December 1997 1/
Total approvalsNo. ofshare
Sector(millions of US$)projects(in percent)
Tourism and hotels4803710.6
Construction and building materials7883517.4
Agriculture, livestock, and food processing3221167.1
Textile, including garments1271922.8
Telecommunication and transportation247185.4
Electronics, engineering, and mechanical assembly15150,3
Wood Processing293256.5
Ariston project 2/1,300128.7
Source: Data provided by the Cambodian authorities.

The effective implementation rate of approved foreign investment projects is not known but is much lower than the amounts indicated.

This refers to a large project by the Malaysian Company Ariston that includes investments in infrastructure, tourism, and utilities. A breakdown of the total committed investment amount among different sectors is not available.

Source: Data provided by the Cambodian authorities.

The effective implementation rate of approved foreign investment projects is not known but is much lower than the amounts indicated.

This refers to a large project by the Malaysian Company Ariston that includes investments in infrastructure, tourism, and utilities. A breakdown of the total committed investment amount among different sectors is not available.

Table 29.Cambodia: Investment Approvals by Investor Country of Origin, August 1994-December 1997(Including joint ventures)
Country(millions of US$)(percent)
United States3938.7
United Kingdom721.6
Other Asia/Pacific
Hong Kong SAR1092.4
Other countries30.0
Source: Data provided by the Cambodian authorities.
Source: Data provided by the Cambodian authorities.
Table 30.Cambodia: External Debt, 1995-97 1/(In millions of U.S. dollars)
Total external debt outstanding568.3674.32,048.9
World Bank59.8103.0125.7
New debt41.631.536.6
Rescheduled debt347.3333.91,733.5
Total disbursements123.975.237.7
World Bank25.643.222.7
Bilateral new debt22.00.05.5
Total amortization3.916.20.4
World Bank0.00.00.0
New debt3.90.70.4
Rescheduled debt0.015.50.0
Total interest7.96.94.8
World Bank0.40.60.9
New debt0.40.60.7
Rescheduled debt6.34.51.3
Sources: Data provided by the Cambodian authorities; and Fund staff estimates.

Until 1997 excludes debt incurred to four former Council of Mutual Economic Assistance countries amounting to some $1,346 million; this amount is included in 1997. This amount is indicative and subject to negotiations and rescheduling.

Sources: Data provided by the Cambodian authorities; and Fund staff estimates.

Until 1997 excludes debt incurred to four former Council of Mutual Economic Assistance countries amounting to some $1,346 million; this amount is included in 1997. This amount is indicative and subject to negotiations and rescheduling.

Table 31.Cambodia: Status of State-Owned Enterprises(End-1997)
Enterprises to be RetainedEnterprises to be PrivatizedEnterprises Already Privatized
FullyReducedFullyReducedLeasedJointSold toEnterprises
Controlling MinistryactiveactivityIdleTotalactiveactivityIdleTotalenterprisesventureprivate sectorclosedTotal
Public works and transport7108145101510117
Post and telecommunications0000000020002
Council of Ministers1001000001001
Source: Data provided by the Cambodian authorities.
Source: Data provided by the Cambodian authorities.
Table 32.Cambodia: Previously State-Owned Enterprises Sold to the Private Sector(End-1997)

Date of saleSale price

Flour FactoryIndustry7/24/91450,000
Soap FactoryIndustryCambodia10/25/9185,800
Mechanical Factory #2Industry11/14/91360,000
Mechanical Factory #4IndustryCambodia11/14/91225,000
Battery ShopIndustry11/14/91156,000
Battery ManufacturerIndustry11/14/9680,000
Tire ShopIndustryCambodia11/14/9140,000
Mechanical Factory #3Industry11/15/91440,000
Mechanical Factory #9Industry11/15/91420,000
Mechanical Factory #7Industry11/29/91155,000
KM 6 StoreIndustryCambodia7/30/9256,000
Rubber WarehouseIndustryCambodia7/30/9225,000
Bata Shoe FactoryIndustry8/24/92140,000
Soap FactoryIndustryCambodia8/24/9272,000
Kbal Thnal StoreIndustryCambodia12/8/92170,000
Print ShopCultureCambodia6/15/93
Agriculture Material ManufacturerIndustryCambodia6/17/94
Print ShopCultureCambodia6/17/95
Tobacco ManufacturerIndustryCambodia1/26/963,400,000
SOKLAIT (Warehouse and plant)IndustryCambodia10/21/961,250,000
Source: Data provided by the Cambodian authorities.
Source: Data provided by the Cambodian authorities.
Table 33.Cambodia: State-Owned Enterprises Leased to the Private Sector by Type of Activity(End-1997)
Duration of lease (years)Payment in 1998 (US$)
Type of asset (No. of leases)1-14 yrs.15 or 20 yrs.>20 yrs.TotalAverageMinimumMaximum
Total (116)1152534,509,31645,7181,000510,000
Beverage companies (3)030598,020199,340180,420217,600
Brick, ceramics, stone manufacturers (6)01577,40015,4806,00041,200
Car repair, ship repair (4)103104,70026,1752,60054,500
Chemical plants (4)31150,50037,62517,00055,500
Garages, gas stations (11)083135,05012,2771,25036,000
Land, buildings (20)848662,20836,7891,000200,000
Leather, textiles manufacturers (16)0106742,61549,50812,000100,000
Mechanical plants (4)031140,00036,25012,00060,000
Miscellaneous manufacturing (12)156329,90029,9918,40060,000
Restaurants, guest house (4)12179,80019,9504,80045,000
Sawmills (10)073351,65739,0737,000128,000
Shops, offices (2)00233,00033,00033,00033,000
Tire factories (5)041232,21846,44415,00091,000
Warehouses (15)0213872,24858,1506,000510,000
Source: Data provided by the Cambodian authorities.
Source: Data provided by the Cambodian authorities.
Table 34.Cambodia: State-Owned Enterprises Leased to the Private Sector by Ministry(End-1997)
Duration of leaseUnknownPayment in 1998 (US$)
MinistryNumber of leasesEarliest leaseLatest lease1-14 yrs.15 or 20 yrs>20 yrs.durationTotalMinimumMaximum
Total116June 1989Sept. 19978525424,509,3161,000510,000
Agriculture22November 1991June 199711191690,9002,600200,000
Commerce20August 1991Sept. 199734130919,5491,000510,000
Culture4July 1992July 19962020102,80010,80050,000
Health1November 1992Sept. 199700103,6003,6003,600
Industry52June 1989May 19970302112,390,6986,000217,600
Public works15July 1991Jan. 19961680365,7694,800100,000
Post and Telecommunications2May 1996June 1997110036,0006,00030,000
Source: Data provided by the Cambodian authorities.
Source: Data provided by the Cambodian authorities.
Table 35.Cambodia: Proposed Privatization Decisions(End-1997)
Total NumberStatus 1/Number of Employees
Type of Enterpriseof EnterprisesActiveReduced ActivityIdleEmployees
Total44L P RL P RL P R21,176
1 14 101 3 15 0 1
Chemical industry1R164
Goods transport6LPPRLL
Port activities6RRRRRR2,069
Passenger transport1L108
Printing, video3RRP179
Rubber plantations6PPPPPP15,657
Service industries6LPPRPL676
Trade, import, export3PPL349
Utilities, mail, telecommunications2PP1,206
Source: Data provided by Cambodian authorities.

Each letter in a column represents an enterprise:

L: enterprise to be liquidated;

P: enterprise to be privatized; and

R: enterprise to be retained.

Source: Data provided by Cambodian authorities.

Each letter in a column represents an enterprise:

L: enterprise to be liquidated;

P: enterprise to be privatized; and

R: enterprise to be retained.

Table 36.Cambodia: Joint Ventures Entered into by the State(End-1997)
Share Retained by the StatePrivate Interest
CompanyBusinessMinistryin PercentNationalityShare in Percent
CASOTIMWood ProcessingAgriculture20Russia80
COLEXIMWood ProcessingAgriculture60Japan40
RAC (Royal Air Cambodge)AirlineCouncil of Ministers60Malaysia40
Cambodia Samart CommunicationTelecommunicationsPost & Telecommunications30Thailand70
Cambodia Shinawatra Co.Post & Telecommunications30
CAMTELTelecommunicationsPost & Telecommunications30
SOCITELTelecommunicationsPost & Telecommunications30
Telstra International Ltd.TelecommunicationsPost & Telecommunications40Australia60
Tricelula Communication CambodiaTelecommunicationsPost & Telecommunications30
Kampuchea Transport Shipping Co.Goods TransportPublic Works & Transport33Cambodia67
CAMINTELTelecommunicationsPost & Telecommunications51Indonesia49
Source: Data provided by the Cambodian authorities.
Source: Data provided by the Cambodian authorities.
ANNEX I: Communiqué of November 11, 1997 Regarding Forestry Policies

Reference the Anoukret Nr.33 of 3/7/96, establishing the National Steering Committee of Forest Policy Reform and the importance of the four forestry studies, the National Steering Committee decides:

First decision

That the Ministry of Agriculture, Forestry and Fisheries (MAFF) is the only institution having custody over the National Production-forest Resources; within this framework the MAFF delegates authority to the Department of Forestry and Wildlife (DFW) to assume its full responsibilities for all forestry-related matters including:

  • Providing technical clearance dealing with forestry matters (legislation, regulations, taxation), concession and investment agreements for forest exploitation, wood collection, wood transformation, and/or commercialization of wood products;

  • Providing service to the Royal Government of Cambodia (RGC) by ensuring that forest inventories are carried out, by specifying exploitation zones, issuing guidelines for forestry management plans and their approval, determine annual allowable cut, elaboration of forestry development projects, determination of reforestation areas and community forestry zones;

  • Strengthening the control of forest exploitation, wood transformation and commercialization, transportation and export of wood products, anytime and everywhere. The DFW will work immediately and urgently with the four Technical Studies to develop and bring in best result for the forest policy reform process.

Second decision

That the four consulting firms, which are now conducting the Forest Policy Studies (Associates in Rural Development, Development Alternatives, Inc., FORTECH, and White & Case), should proceed with their work in direct collaboration with all departments and agencies of the RGC; therefore full authorization is granted to the DFW and the four consulting firms to access any person, public or private, as well as obtain documents that might be of use for their studies.

Third decision

That every request for forestry investment has to be considered and commented upon by the Secretariat of the National Committee and DFW before the contracts are signed. The Secretariat should establish and maintain a publicly accessible record for all official forestry related documents, including concession contracts, collection permits, legislation, decrees orders and other rules and regulations.

Fourth decision

That the Committee reinforce the validity of the Declaration Nr 37 and Order No. 02 of 26 December 1996 which imposes an export ban for raw logs and crudely sawn timber and the other concrete measures taken since last year to curb illegal activities.

Fifth decision

That the secretariat should review with White & Case the draft forest law to give comments to the commission on economy, planning, agriculture, investment, rural development, and environment of the National Assembly before the full assembly discussion.

Sixth decision

That the secretariat should investigate innovative mechanisms for collecting forest revenues, including fees based on volume harvested, annual rents based on concession areas, performance bonds and other mechanisms.

Seventh decision

That the Secretariat should establish a formal mechanism for discussion of matters concerning the industry with representatives of concessionaires and other appropriate stakeholders in the forest sector; every problem or request has to be submitted through the National Steering Committee to the RGC for final decision, the Executive Secretary should inform the members of the Steering Committee of the composition and planned program of the Advisory Group not later than February 1998.

Eighth decision

Amendment on Article 2 of Anoukret No. 33 dated July 3, 1996 that the members of the Steering Committee should be the Minister or the head of institutions.

Ninth decision

The MEF should allow the MAFF to keep reforestation fee paid by concessionaires for reforestation activities.

Tenth decision

That the National Steering Committee will meet at the end of each of the four studies to discuss the results and the recommendations and to take immediate action in 1998.

Summary of the Cambodian Tax System(As of December 1997)
TaxNature of taxExemptions and deductionsRates
1.Taxes on income, profits, and capital gains
• Tax on wages and salariesA monthly tax on income from wages and salaries and on fringe benefits, withheld at source. The tax applies to all wages received in Cambodia and to wages received abroad by Cambodian nationals if the employer is a Cambodian residentThere are no exemptions. Deductions from the tax base are applied according to the number of children under age 18, as follows: (i) 0-1 children, 0 percent; (ii) 2-3 children, 10 percent; (iii) 4-5 children, 20 percent; and (iv) 6 or more children, 30 percentProgressive rates applied to monthly income as follows: (i) Less than 750,000 riel, 0 percent; (ii) 750,000-1,000,000 riel, 5 percent; (iii) 1,000,000-10,000,000 riel, 10 percent; (iv) 10,000,000-20,000,000 riel 15 percent; and (v) 20,000,000 riel and over, 20 percent.
• Tax on rental incomeA tax on receipts from rents on land and buildings. The tax is paid by the owner.Property owners whose monthly income from rent is below 500,000 riel are exempt, as are enterprises who are taxed on an actual account basis.10 percent
• Tax on enterprise profitsA monthly tax on the profits of businesses, including interest received and capital gains. Incorporated businesses, manufacturing and commercial enterprises whose annual turnover is more than 200,000,000 riel, service enterprises whose annual turnover is more than 100,000,000 riel, importers and exporters, enterprises that have signed a contract with the State, enterprises covered by the Law on Investment, and hotels and restaurants are required to keep accounts and pay accounts-based profit taxes.There are no exemptions under the tax law. However, under the Law on Investment exemptions can be granted by the Council for the Development of Cambodia (CDC) to investing enterprises for up to 8 years, commencing the year the investment project first becomes profitable.20 percent for incorporated businesses. A progressive rate structure applies to annual profits as follows: (i) less than 1,000,000 riel, 10 percent; (ii) 1,000,000-10,000,000 riel, 15 percent; (iii) 10,000,000-20,000,000 riel, 20 percent; and (iv) 20,000,000 and higher, 30 percent The tax rate is 9 percent for projects approved by the CDC under the Law on Investment.
2.Taxes on use of goods or permission to perform activities (the patente)An annual registration or license fee levied on all businesses, industries, and professionals. The base is the previous year’s turnover, or estimated turnover. New businesses are taxed on the basis of a provisional estimate.Farmers are not subject to the tax.The patente is levied as a percentage of total turnover at the following rates:
Manufacturing and handicrafts0.5 percent
Fisheries, construction, transport, small services, restaurants and trade0.8 percent
Other services1.0 percent
3.Taxes on domestic goods and services
• Turnover taxA monthly tax on business turnover payable both by those subject to the profits tax on the basis of their accounts, and those subject to the presumptive tax regime. In the Utter case, turnover tax payable each month may be fixed in advance for periods of 3,6 or 12 months. Also covers first sale of imported products.Agricultural products sold by primary producers (but not sold by traders); and mobile traders and small permanent establishments, as determined by the Minister of Economy and Finance. Enterprises operating under the Law on Investment are not exempted from the turnover tax.Industrial, handicraft and mining businesses1 percent
Traders, services and other businesses4 percent
Hotels (on turnover other than room charges), restaurants, bars, massage parlors, and other establishments10 percent
• Excise taxA tax levied on select products, both locally produced and imported These include: cigarettes, tobacco, alcoholic and nonalcoholic drinks, ice cream, lotus seeds and gasoline, cars, international air travel and telecommunications.None.Gasoline20 percent
Other taxable products10 percent
• Stamp taxTax payable in the form of stamps affixed to some documents.None.Specific small amounts depending on the type of document, ranging from 10 riel for school registration to 1,000 riel for investment authorizations.
4.Slaughter taxTax levied on slaughterhouses based on the value of the livestock that is slaughtered.None.Tax is equal to 3 percent of the set price for each animal. The set values range from 50,000 riel for pigs to 100,000 riel for cattle and buffalo.
5.Taxes on propertyTax levied on the transfer of land, buildings, motor vehicles, and motorcycles.Transfers of property ordered by the State are exempted, as are government transfers, public utilities, and charitable organizations. The sale of motor vehicles is also exempted if the seller is subject to the turnover tax or the profits tax.Tax is paid by purchaser on presumptive values, fixed as follows: (i) individual cars, 375,000 riel; (ii) trucks, vans, etc., 300,000 riel; (iii) motorcycles, 100,000 riel; (iv) land, from 5,000-30,000 riel per square meter depending on zone; (v) buildings, from 50,000-125,000 riel per square meter depending on zone.
6.Taxes on international trade

• Taxes on imports
  • - Import duties

Effective September 16, 1993, a general tariff (based on the Harmonized System classification) has been levied on all imports. All rates are ad valorem and duties are levied on c.i.f. basis, except for eight major revenue-producing items for which values for duty purposes are fixed in US dollar terms by the Minister of Economy and Finance.Exempted from import duties are: (i) imports for projects and investments approved by the CDC, on approval at the time of import; (ii) fuel for Royal Air Cambodge, up to a ceiling of 2,000 tons of aviation fuel; (iii) insecticides, pesticides, and agricultural machinery (excluding tractors); and (iv) imports of embassies, international organizations providing humanitarian aid, and projects financed through bilateral grants and aid.There are essentially four rate categories: (i) 7 percent for essential goods and basic raw materials; (ii) 15 percent for intermediate goods and machinery and equipment; (iii) 35 percent for most consumer goods and building materials; and (iv) 50 percent for luxury goods. Reduced rates are applied to certain goods in rough proportion to the extent to which they are assumed to be re-exported. Gold and silver coins are subject to the lowest rate, 0.3 percent. Automobiles are subject to tariffs ranging from 30 to 120 percent

Petroleum products:

(i) Gasoline: 50 percent of the prescribed value of $320 per ton.

(ii) Diesel: 50 percent of the prescribed value of $275 per ton.
  • - Consumption tax

Ad valorem tax levied on f.o.b. values of a limited number of imports.Imports exempt from duty are also exempted from the consumption tax.4 percent
• Export taxes
  • - Tax on timber

Ad valorem tax levied on the value of logs and sawn timber at export In principle, exports of logs are limited to those cut on Government-agreed concessions. An export ban on all logs was reinstated on December 31, 1996.None.10 percent
  • - Tax on rubber

Ad valorem tax levied on rubber.None.10 percent
  • - Other products

Ad valorem tax levied on selected livestock products and precious stones.None.5-10 percent
7.Other taxes and fees
• Motor vehicle feesAnnual levy automobiles and boats.None.Lorry:160,000 riel
Motor car:
up to 9 horsepower37,500 & 50,000 riel
9-12 horsepower50,000 & 75,000 riel
over 12 horsepower87,500 & 125,000 riel
Motorcycles3,000-7,500 riel
Small power boat5,000 riel
Cargo ship (over 2,000 tons)1,200,000 riel
Sea-going fishing boat (over 500 horsepower)300,000 riel

IMF Staff Country Report 97/9 “Cambodia—Recent Economic Developments,” March 1997.

Cambodia’s national statistics continue to be very weak. In particular, the statistical coverage of wide-spread urban and rural informal sector activity remains nonexistent. The authorities are working on the preparation of a new set of historic national accounts data, based on the 1993 System of National Accounts methodology, with assistance from the Asian Development Bank (AsDB).

The downward trend in rubber prices began in 1996 when world production started to exceed demand and was compounded during February-May 1997 when the United States sold 56,000 tons of natural rubber from their National Defense Stockpile.

The hotel and restaurant sector grew at double digit rates in 1994-96, fueled by substantial foreign direct investment. Tourist arrivals soared from 5,000 a month in 1993 to over 15,000 a month in 1995 and to about 22,000 a month in 1996.

Most prices of goods and services included in the riel-based CPI are tallied in U.S. dollars and then converted into riels using the official exchange rate. The prices are then weighted in the index, which also includes products and services tallied directly in riels.

The fiscal year coincides with the calendar year.

From the beginning, there was a consensus that the introduction of the value-added tax (VAT), the single highest revenue generating measure in the new law, would only take place in January 1998, because the technical preparations required time. Thus, the impact of VAT was not included in the 1997 budget. However, soon after the adoption of the Tax Law, VAT introduction was postponed until January 1999, mainly because of political reluctance.

During 1996, audits conducted by the Ministry of Economy and Finance (MEF) at the 136 largest enterprises had identified CR 23.6 billion in tax arrears. Of these, CR 10 billion was supposed to be collected during fiscal year 1997, but in the event nothing was collected.

Part of the military’s salaries is paid in the form of rice and rice prices were higher than originally budgeted.

Velocity is the ratio of nominal GDP to the average stock of broad money during any given year.

The exchange rate regime is described in detail in the IMF Staff Country Report 97/9 “Cambodia—Recent Economic Developments,” March 1997.

In June 1996, the NBC resumed granting some new licenses.

Banks have to hold reserves at the NBC, as capital guarantee deposits, against their paid-up capital.

Timber export data include estimates for illegal exports but remain subject to a large margin of error.

Data include estimates for unrecorded exports.

Tariffs levied in Cambodia on goods for re-exports were between 25 percent and 50 percent lower than those for retained imports until end-1996. In 1997, the authorities further reduced import taxes on these goods. To prevent domestic fraud, a cap is imposed on the share of imports of those products that can be declared as re-exports and the remainder is taxed at the normal rate.

Nonetheless, there was an accumulation of $0.3 million in debt service payments arrears to China in 1997.

The main provisions of the 1995 Paris Club rescheduling agreement involved the offering of terms along one of two options: (i) writing-off of 67 percent of debt service obligations and consolidation of the remaining part at market interest rates over 23 years including a grace period of 6 years; or (ii) consolidation of obligations at concessional interest rates so as to reduce payments due by 67 percent in net present value.

The Russian debt is valued at SUR 0.6 per U.S. dollar, although the exchange rate is subject to negotiations and the debt stock to a large up-front discount.

The most favorable rescheduling assumptions include that (i) a bilateral debt rescheduling agreement is signed by end-1998; (ii) Cambodia’s total debt corresponds to SUR 796.6 million converted at SUR 0.6 per U.S. dollar and is eligible for an “up-front discount” of 70 percent; (iii) the new debt bears no interest; and (iv) Naples terms are applied to discounted debt, and post-cut-off date debt is rescheduled in line with the 1991 agreement.

In the wake of this initiative, illegal exports to the Lao P.D.R. seem to have diminished, but no significant changes have taken place on the borders with Thailand and Vietnam. To the contrary, several sources reported that illegal exports to Vietnam, for local use and transit to other Asian countries, intensified dramatically in the second half of 1997.

Some progress was made in seizing illegal logs and felling equipment, including 2,000 cubic meters of logs, some trucks, tractors, boats, chainsaws, as well as sawmills. However, lack of personnel and, more importantly, the absence of firm political support, hampered effective implementation of this policy.

For a more general overview of the government’s concession policy, see IMF Staff Country Report 97/9 “Cambodia—Recent Economic Developments,” March 1997.

These legal requirements include: having discussed and agreed with the government on an inventory and a master plan, having signed a declaration that their forestry management is in line with the environmental impact agreement, and having agreed that the logs will be shipped to production sites in the country.

The cutting quota for 1998 is 288,000 cubic meters, based on current concession contracts.

The World Bank estimated in 1996 the potential annual revenue at $100 million, based on better control of illegal activities and a significant increase in the average royalty (at the time of publication of the World Bank’s report, the world average was about $75 per cubic meter).

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