Sometimes it’s hard to determine the value of a dollar in Cambodia. Retail exchanges can yield a variety of change combinations, and a $5 bill can be rendered useless by the smallest of tears.
In the wake of the collapse of US corporations Enron, Worldcom and others, the value of the US dollar is sliding, and that will have a greater effect on Cambodia than a few rips in a few bills. Cambodia’s economy is aligned with the US dollar, so any change in its value will have an impact here, from garment factories to tourism, and from shopping to house-building.
A weakened US dollar generally makes exporting to the US more difficult for countries with standing currencies because products produced in the US are more competitively priced. Cambodia, however, will not suffer any serious repercussions in its exports to the US because the prices will remain the same.
“By floating along with the dollar, we avoid a big shock,” Minister of Commerce Cham Prasidh said.
A stronger euro could mean greater opportunities to export to European markets, he said, but it is too soon to tell.
“It may have some impact on our exports for Europe, if the euro is stronger than the dollar,” he said. But that would take a sustained period of a low-priced dollar because many of the orders have been already placed.
Also, he said, many orders are purchased using US dollars, furthering cushioning any impact of depreciation.
The value of the dollar is “not to the extent to be worrisome,” he said.
So far, the garment sector, Cambodia’s major export earner, hasn’t felt any negative effects from the beleaguered dollar, said Van Sou Ieng, president of the Garment Manufacturers Association of Cambodia.
Manufacturers have greater concerns than the currency exchange, he said, including the difficulty Cambodian companies are having with the country’s lagging infrastructure, the cost of doing business and other competitive issues.
Cambodia’s second growth engine, tourism, could also potentially shine as the dollar dims, officials say.
A weaker dollar means more spending power for other currencies, including those of some of Cambodia’s most frequent visitors: Japan, China and Asean neighbors.
The Japanese yen has strengthened considerably against the US dollar in recent weeks. And while that may hurt Japan’s ailing economy when it comes to exports, it may give them the spending power to travel to Cambodia.
“Generally speaking [tourism] could be boosted by a stronger yen,” said Yutaka Aoki, first secretary at the Japanese Embassy.
Tourism Minister Veng Sereyvuth called the potential visits from other countries “a window of opportunity.”
Since the Sept 11 terrorist attacks on the US caused a huge downturn in world travel, Cambodia has been remaking itself as a destination for other Asian travelers.
Stronger currencies could mean more travelers from Asean and the Asian Pacific, which constitute a “substantial number” of foreign visitors each year, he said.
Outside of the garment and tourism industries, everyday Cambodians will also feel the impact of a dollar slide, especially from some goods imported from Thailand and other high-value goods from Japan or Europe for example, observers say.
A dollar-linked economy like Cambodia’s will also see an increase in the price of imported goods, Sok Hach said.
“If the dollar continues to depreciate against Asian currencies, particularly the Thai baht, yes, we will have some implications,” said Sok Hach, a macro-economist for the Cambodian Development Resource Institute. “If it continues for a few months, or weeks, people will adjust to the price.”
The Thai baht continues to strengthen against the dollar—$1 was worth 40 baht on Tuesday, strengthening nearly a full point since Friday.
That will mean that some goods imported from Thailand will be more expensive if the dollar continues to slide, Sok Hach said, adding that so far, prices have not been adjusted.
Competition with Vietnamese products on most household goods will make it difficult for the prices to rise, he said. But a heavy impact will likely be felt in construction materials, such as steel and concrete, much of which is imported from Thailand.
That will make the construction of houses, businesses and roads more expensive in a world economy with a weak dollar, Sok Hach said.
“It’s difficult to explain to people” about the decline of the dollar against the Thai baht, said Phiroum Muth, director of P&S Construction, a local company.
If people don’t understand about the increase of price on imports, it is harder to justify a price increase at the Cambodian level, he said.
“We can’t do that,” he said. “So the margin is going down.”
Other construction businesses have said the prices for their imported goods are increasing, and while some of them may be taking the hit on their profits, Sok Hach said that in Phnom Penh some of the costs were already rising.
It’s probably too soon to tell just how a sustained slip in the US economy could affect Asia as a whole, let alone Cambodia, which was hit hard by the 1997 Asian economic crisis, which coupled with the July 1997 fighting, caused foreign investors to retreat to their already financially ailing home countries.
But a healthier Asia would mean a healthier Cambodia, observers said, although they hesitated to predict any medium- or long-term outcomes.
