AFP/Getty Images
The Wall Street Journal
FEBRUARY 15, 2011
Phnom Penh should use its stock exchange opening later this year as an opportunity to formally adopt the U.S. dollar.
Cambodia doesn't get a lot of attention on the world stage, but it deserves a closer look because of the way its economy has quietly exceeded expectations in recent years. Growth has been running at near double-digit rates over the last decade, and the country is attracting significant foreign investment, particularly in the textile and tourism industries. A big part of this success is due to its use of the U.S. dollar as its primary currency.
The government didn't orchestrate this monetary reform; in fact it resisted most of the way. But Cambodians voted with their wallets, shunning the Cambodian riel and demanding dollars.
This is no doubt due to the country's tragic history, which made its people especially aware of the mischief governments can play with currencies and property rights. The same Khmer Rouge that killed one-quarter of the population in the late 1970s also abolished money and title to land. Though the riel came back into circulation in 1979, people preferred to use the Thai baht initially and then, once international aid poured into the country in the early 1990s, the dollar.
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The use of the dollar has soared since then, accounting for 90% of the currency in circulation today and 97% of banking deposits. Most banks don't even lend in riel.
This has brought the country a level of monetary stability it couldn't have achieved on its own. The Asian Development Bank notes that while inflation averaged 56% from 1990-98, it declined to 3.5% for most of last decade—a period the dollar took over.
That in turn created the foundation for greater investor confidence. The financial sector deepened, and foreign direct investment rose to $3.5 billion in 2007 from $38 million in 1990.
Now Cambodia faces an important decision as it prepares to start up a stock market in July. Last month, regulators convened a public workshop to decide whether to denominate stock prices in riel, dollars or both.
Not only would riel listings add costs and confusion in a largely dollarized economy, it would create an additional risk for international investors, driving them away. Instead, Cambodia could use the exchange opening as an opportunity to embark on formal dollarization.
In a neighborhood where governments debase their fiat money—Vietnam devalued the dong by 8.5% last week—Phnom Penh would stand out all the more by making a commitment to stick with the dollar. A stable unit of account for investment as well as trade after all was one key to Hong Kong's transformation from shanty towns to financial center in a single generation. Cambodia also shares Hong Kong's low, flat income tax and few barriers to trade and investment.
The country faces significant problems that Hong Kong never had though, including an autocratic ruler who has undermined civil liberties and the rule of law. But mitigating these shortcomings is part of the reason Cambodians use the dollar in the first place, and the fact that their savings cannot be held captive will gradually strengthen their ability to demand change from their government. Cambodia is providing a fascinating case study in the power of dollarization to promote development in even the most devastated and poverty-stricken of countries.
Cambodia doesn't get a lot of attention on the world stage, but it deserves a closer look because of the way its economy has quietly exceeded expectations in recent years. Growth has been running at near double-digit rates over the last decade, and the country is attracting significant foreign investment, particularly in the textile and tourism industries. A big part of this success is due to its use of the U.S. dollar as its primary currency.
The government didn't orchestrate this monetary reform; in fact it resisted most of the way. But Cambodians voted with their wallets, shunning the Cambodian riel and demanding dollars.
This is no doubt due to the country's tragic history, which made its people especially aware of the mischief governments can play with currencies and property rights. The same Khmer Rouge that killed one-quarter of the population in the late 1970s also abolished money and title to land. Though the riel came back into circulation in 1979, people preferred to use the Thai baht initially and then, once international aid poured into the country in the early 1990s, the dollar.
View Full Image
3cambodia
AFP/Getty Images
3cambodia
3cambodia
The use of the dollar has soared since then, accounting for 90% of the currency in circulation today and 97% of banking deposits. Most banks don't even lend in riel.
This has brought the country a level of monetary stability it couldn't have achieved on its own. The Asian Development Bank notes that while inflation averaged 56% from 1990-98, it declined to 3.5% for most of last decade—a period the dollar took over.
That in turn created the foundation for greater investor confidence. The financial sector deepened, and foreign direct investment rose to $3.5 billion in 2007 from $38 million in 1990.
Now Cambodia faces an important decision as it prepares to start up a stock market in July. Last month, regulators convened a public workshop to decide whether to denominate stock prices in riel, dollars or both.
Not only would riel listings add costs and confusion in a largely dollarized economy, it would create an additional risk for international investors, driving them away. Instead, Cambodia could use the exchange opening as an opportunity to embark on formal dollarization.
In a neighborhood where governments debase their fiat money—Vietnam devalued the dong by 8.5% last week—Phnom Penh would stand out all the more by making a commitment to stick with the dollar. A stable unit of account for investment as well as trade after all was one key to Hong Kong's transformation from shanty towns to financial center in a single generation. Cambodia also shares Hong Kong's low, flat income tax and few barriers to trade and investment.
The country faces significant problems that Hong Kong never had though, including an autocratic ruler who has undermined civil liberties and the rule of law. But mitigating these shortcomings is part of the reason Cambodians use the dollar in the first place, and the fact that their savings cannot be held captive will gradually strengthen their ability to demand change from their government. Cambodia is providing a fascinating case study in the power of dollarization to promote development in even the most devastated and poverty-stricken of countries.
2 comments:
Why do Kos Trol, sea and lands proximately over 10 000 km2 have been lost to Vietnam by who treaty? Why don't Cambodia goverment transparency explain to cambodia army at front line and the whole nation about this? Why don't they include this into education system? Why?
Cambodian army are fighting at front line for 4.6 km2 and what's about over 10 000km2 of cambodia to Vietnam. Nobody dare to talk about it! Why? Cambodian army you are decide the fade of your nation, Cambodian army as well as cambodian people must rethink about this again and again. Is it fair?
Kos Trol, Sea and lands over 10 000km2 have been lost to Vietnam by who treaty at 1979 to 1985 treaty! treaty! Cambodian army at front line as well as all cambodian people must rethink again about these issues. Are cambodian army fighting to protect the Cambodia Nation or protect a very small group that own big lands, big properties or only protecting a small group rather in the real name of protecting khmer nation?
Cambodian army at front line suffer under rain, wind, bullets, bombs,lack of foods, lack of nutrition, their families have no health care help, no securities after they die but a very small group eat well, sleep well, sleep in first class hotel with air conditioning with young girls message, have super health care from oversea medical treatment, they are billionairs, millionairs who sell out the country to be rich and make cambodian people suffer everyday as cambodian people know already.
Who signed the treaty 1979-1985 that result lost over 10 000 km2 of Cambodia??? Why don't they transparency inform all Cambodian and cambodian army at front line about these issues? Why don't include Kos Trol ( Kos Trol size is bigger than the whole Phom Phen with planty of natural resources ) in education program?
Valentine 's day is the day that all boys and girls making love to each other to show how deep are their love. Usually they don't use protection at all.
Valentine day is the day that all most khmer girls lost their virginity to their classmates or the boys next door.
All most 75% of cambodian teenage girl students are lost their virginity at valintine day of the year.
Most khmer girls think that valentine day is the day that they must sacrify their virginity to their lover at school.
We like to see more young cambodians have more fun in sexual relationship with their partners or friend at school because Khmer need more love.
Young cambodian generation at school should pratice for sex with their friends to grow more love in our country as well as more population.
Don't be shy young cambodian generation, even in our Angkor people promoted more sex than ever such as they respect Hindu God Penis and his wife Vagina. They used milk to pour over the penis and clean the vagina than hey drink that milk as holy water.
At that Angkor time all teenager girls are topless and naked shower with their boy mates as history told by the chinese guy at that time.
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