Cambodia’s economy lost more than $4 billion to illicit financial outflows in 2013, more than a quarter of its gross domestic product that year, according to a report released on Wednesday by the Washington-based think tank Global Financial Integrity.
Based on trade data reported to the International Monetary Fund (IMF), the report says that the $4 billion that illegally left Cambodia in 2013 was part of $1.1 trillion that illicitly left the world’s developing countries that year.
For Cambodia, the report also says a cumulative $15.09 billion was lost to illicit outflows in the decade up to 2013, with large increases recorded each year: $930 million was lost in 2009, $1.27 billion in 2010, $1.73 billion in 2011 and $3.62 billion in 2012.
The figure of $4 billion in illicit outflows equals 26.3 percent of Cambodia’s $15.23 billion in total gross domestic product (GDP) as recorded by the World Bank the same year—a ratio that dwarves Cambodia’s neighbors.
Illicit outflows from Thailand in 2013 amounted to $32.9 billion, according to GFI—8.5 percent of its $387.25 billion in GDP that year, as calculated by the World Bank. Vietnam’s illicit outflows of $17.83 billion were 10.4 percent of its $171.22 billion GDP.
The report notes further that all foreign aid to developing countries in 2013 came to a total of only $99.3 billion—a figure less than 10 percent of the $1.1 trillion of the illegal outflows. For every $1 in aid to the developing world, it says, “over US$10 exited illicitly.”
The report recommends that governments of countries like Cambodia focus on efforts to eliminate illicit financial outflows leaving the country, as the legal use of the money in the country—or its proper taxation on the way out—can be a boon to economic growth.
“While the total value of this trade would not be applied to development programs, the tax associated with this illicit activity could be allocated to various poverty alleviation efforts,” the GFI report says.
“Curtailing even a small portion of these illicit flows would have a catalytic impact on a government’s ability to address the needs of its most vulnerable people.”
The think tank attributes $3.86 billion of the $4 billion lost here in 2013 to trade misinvoicing—a practice whereby companies misreport the value of an import or export to local officials in order to secretly shift money out of the country.
For example, an exporter may report to authorities a significantly lower sale price than the actual price its goods sold for, then receive that money legally into a domestic account and deposit the undeclared portion of the sale in a bank overseas.
The GFI report says this year was the first time that it has had access to bilateral trade data from Cambodia, allowing it to compare the country’s reported trade data to that of advanced economies trading with Cambodia to search for the discrepancies.
Commerce Ministry spokesman Ken Ratha could not be reached for comment on Wednesday. Finance Ministry Secretary of State Ngy Tayi said he wanted to see more details of the alleged illicit outflows before believing GFI’s report, but that he would keep an open mind.
“Let them show the details of the companies but the government may not be involved in this matter because it’s taxation [officials] that check the invoices,” Mr. Tayi said.
Stephen Higgins, managing partner at the Mekong Strategic Partners consultancy, said the illicit outflow figure seemed excessively high.
“$4 billion is a very large number,” Mr. Higgins said. “It does not strike me as a realistic figure. It’s not hard to get cash out of here anyway, so why anyone would take that approach, I am not sure.”
Opposition lawmaker Son Chhay, deputy chairman of the National Assembly’s banking and finance committee, said that he too would have estimated illicit outflows at a lower level, but that the GFI report shines light on a major issue.
“Cambodia has a lot of corruption, uncertainty, an unreliable system and no good opportunities. So people have to look for options. Also, for bad money such as the money from drugs or other dirty money— people always come here to launder it,” he said.
Mr. Chhay noted that the government’s total spending in 2013 came to just $3 billion.
“$4 billion is more than the national budget. It’s a very serious amount of money,” he said. “Where this money is going needs to be looked into.”
(Additional reporting by Kang Sothear)
