Cambodian scholar suggests pernicious effects of aid dependence

By Albeiro Rodas 

The Asian Correspondent

Oct 13, 2012

 In Southeast Asia, Cambodia is probably one of the most aid dependent countries with 3,000 NGOs registered to the Ministry of Interior by 2011 according to The Phnom Penh Post, without counting on the billions of US dollars poured by donor countries in the different sectors of the country. In a 2002 report of the Council for the Development of Cambodia on NGOs at the time – in 2002 the number of local and international organizations did not reach 1,000 -, the reports stated: ‘NGOs continue to play a major role in supporting the provision of basic social services, often in remote areas and communities, and are present in every province in Cambodia. More importantly, NGOs bring alternative models and approaches to development, emphasizing participation, equity, gender sensitivity and environmental sustainability.’

Cambodian-American political economist Sophal Ear suggests aid dependency has pernicious effects in the Cambodian development. Photo courtesy by Oslo Freedom Forum 2012.

For political economist Sophal Ear, this view is more nuanced. In his book ‘Aid Dependence in Cambodia: How Foreign Assistance Undermined Democracy‘, published by the Columbia University Press (2012), years of dependency are not showing positive results in the rehabilitation of Cambodia, its democracy and war on poverty.

The Cambodian scholar suggests that international intervention and foreign aid did not stop problems like maternal and child mortality rates and unprecedented corruption.

Sophal Ear, an assistant professor of national security affairs in Monterrey,  California, accepted an email interview for Asiancorrespondent to elaborate his findings, emphasizing that these are his personal views and not those of the US government.

How we can determine that Cambodia is an aid dependent country? How we can prove this thesis?

There are many ways of measuring aid and aid dependence. Aid per capita; aid as percentage of GDP, and I use all these figures in my book, but the one indicator I point to repeatedly in my book is that between 2002 and 2010, for each dollar the Cambodian government spent, it received—on average—more than 94 cents on the dollar in net foreign aid. That’s like me saying to you that for every dollar you spend, I will give almost one dollar.

You link aid dependence with corruption and maternal and child mortality. How do you demonstrate it in the book?

Well, it’s not hard. You look at how much aid the country received over a period of time and how much corruption, maternal and child mortality there has been. You would think that after receiving more aid, maternal mortality for example would drop, but it didn’t. And it’s very disturbing. If you think about it, it’s like saying, I give you all this money for many years and all you give me is more death, worsening human development indicators.

And not just that but horrible corruption (it can’t be much worse, Cambodia is not too far from the bottom ever since it started being rated in the Corruption Perception Index in the mid-2000s) and increasing inequality to boot. And you do all this with really impressive GDP growth numbers (which confirms that GDP growth alone, as a measure of development, is really inadequate) for most of the decade… What are we to think about the role of foreign aid in this case?

There are some countries with a very low level of aid, for example Timor East or Sudan, at least this is the impression. They have also several problems. In their cases, what would be the explanation?

East Timor, where I worked as an Assistant Resident Representative for the United Nations Development Programme in 2002-2003 did not accept loans. They had a policy where they only took grants. I would argue the problems there were more along the lines of unity of nation following independence. Was East Timor already a traditional nation-state when the UN intervened? Was it ready? Up until 2006, the UN certainly thought “job well done”. Well, as we know, the job wasn’t done.

Sudan, well, that country has way more problems than just development, beginning with the Darfur genocide and ending with South Sudan oil revenue sharing and conflict. October 23, 2012 marks 21 years since the Paris Peace Accords on Cambodia; what have we achieved? It’s time to take stock.

Do you make a categorization of aid to Cambodia? I mean, can we talk about ‘good and necessary’ aid and a ‘negative’ aid?

I have an entire chapter about aid in response to Highly Pathogenic Avian Influenza for example, and in it, my argument is that this ended-up being a pretty awful deal for Cambodia’s farmers (which is just about everybody outside of big cities). Basically, when someone died from the disease, the government went out and culled (killed) poultry. And oh, by the way, there was no compensation for the culled poultry.

Can you imagine what happened to people’s incentives to report? It was like, “why don’t I call you to come over and ruin me financially?” So people didn’t. But yet the whole idea was to get to the animals before you had any dead people, kind of like the canary in the coal mine (canary dead, people should leave the mine). But the opposite happened! People dead, find sick poultry. And what did the donors do? They just wanted to make sure that awful disease did not reach their borders. Farmers be damned. What did the authorities do? No reports of outbreaks in the year before the July 2008 election… how curious. The virus knows how to stay out of Cambodia before the elections so as to not disturb the politics of Cambodia?

What should replace aid? Is it possible to recover the Cambodian economy? What should change?

Here’s one alternative I argue makes sense: how about collecting enough domestic revenues (mostly taxes) to do your own development? As I mentioned earlier, using data from the World Bank, my book shows that from 2002-2010, for every dollar spent by the central government, more than 94 cents of net foreign aid was received. This is not a good formula for owning your own development. This is a prescription for extremely serious aid dependence. If you add both current domestic revenues and estimates of corruption, Cambodia could develop on its own. If anything, foreign aid disrupts the link between the people and their government. The people don’t pay enough taxes (but plenty is stolen from them via corruption), the government doesn’t listen to them (but ends-up ranking as one of the most corrupt countries in the world on the Corruption Perception Index), and what do you have? Pretend democracy.

Here’s another alternative: Exports. Yes, exports. What I mean here is how does a country develop? How did Korea do it? How did Taiwan do it? They exported. Park Chung-Hee, who ruled South Korea with an iron grip from 1962 to 1979, when he was assassinated, had a billboard on the road to the airport that said, roughly, Export or Die. Cambodia needs foreign exchange. It can’t just live by the credo of Aid or Die. I’m not, by the way, condoning Park Chung-Hee’s rule, I’m just saying that if you are going to have some sort of leader for life arrangement, you might as well have the kind of growth that got South Korea to where it is today.

How do you evaluate the situation of exports in Cambodia?
I do not think Cambodia can rely only on garments; it has to diversify. From garments, what about car seats? There is little hope if we cannot produce more and more value-added exports. Cambodia needs these things to grow. Tourism alone cannot carry the economy. We cannot all be busboys and concierges.

According to you, the lack of a tax system can be linked to corruption and aid?

What I mean is that if you were a normal country that collects enough domestic revenues (mostly taxes) you would collect about what Cambodia collects already plus the corruption existing in Cambodia. But because corruption can’t be used for the country to develop, aid is necessary. I’m against aid dependence.

Would you be motivated to work if for every dollar you spent, I gave you nearly a dollar? Would you want to earn your own income? I argue that you wouldn’t  And that’s what has happens in Cambodia. Why try hard to collect taxes and raise domestic revenues when you’ve got a Sugar Daddy in foreign donors?

Why is there no tax system or salary policy (only garment factories have a minimum wage and a very low one)?

There is a tax system, it’s just not designed to collect enough revenues. Why? Because there’s no incentive to do so in the presence of aid.

Do you know that in order for a garment factory to pay its taxes, it cannot bring the money to the tax department? If it did, its representative would spend all day waiting because the tax officials cannot be bothered to count the money. Instead, they have to use intermediaries who have bank accounts setup with the tax department. That costs money. Why should it cost money to pay your taxes? Why make paying taxes complicated? Only because there is no private benefit to paying taxes!

When you are referring to a “salary policy”, I assume you mean a minimum salary policy. Why do you think garment workers (which you say are paid a minimum wage and a very low one) are paid more than many government employees? Because it makes sense for patronage reasons. Not enough to live, but not so little that it becomes completely ridiculous. Garment workers often only eat one egg per day, because they just don’t make enough after sending home money to their families. Do you think government workers are also eating only one egg per day? It’s very simple, as the vice president of Cambodia’s top private university told me in 2008 when I asked whether graduates might become civil servants, “If you look at government salary, unless you plan to be corrupted, you have no future in that.”

What is the position of donor countries before this situation in Cambodia?

They know what is going on, but they turn a blind eye. The rationale is usually that if we don’t help, people will starve. But the truth is more complicated. Oftentimes, there are other reasons to continue working—emoluments to such employment are fantastic—private school education, housing, incredible salaries. If someone makes $10,000 to $15,000 per month and points his finger at a civil servant making $50 per month for corruption, while screaming “Why don’t you live within your means? I live within my means!” Does that make sense?

Why is there no conscience over the resulting situation from a country like US or the European Community?

I am sure there is “conscience” as you put it, but there is also a tragedy of the commons. Who will be the first to say enough is enough. We cannot do it like this anymore?