Cambodia had for decades been one of the most isolated countries in the world, and it showed in 1993. There wasn’t a lot of business, but plenty of room for it.
Some of the economic changes over the last 15 years are obvious, from the ATMs to the rush-hour traffic to the groundbreaking for skyscrapers.
In 1993, when adjusted for inflation, Cambodia’s GDP was only $2.5 billion. In 2007, GDP was measured at $8.6 billion, with annual GDP growth of more than 10 percent from 2004 to 2007.
Opportunities and scarcity permeated the economy in 1993. The country didn’t produce enough rice to meet domestic demand. There were few banks or tourists.
It’s hardly news these days, but in 1995, The Cambodia Daily published stories about garment factories opening.
Then second Prime Minister Hun Sen noted at one factory opening that year: “In recent years we had to order athletic jerseys from Thailand.” In fact, it was hard to buy much in the country.
Last year, Cambodia’s garment industry exported $2.93 billion in goods.
In the beginning of the rainy season of 1995, up to 90 percent of Phnom Penh’s residents were left without power for as long as 22 hours a day, The Cambodia Daily reported.
In those early years many of today’s major firms were just local businesses focused mostly on importing. And the government, which had been on the paler side of communism for more than a decade, was just embracing capitalism.
Barbershops, corner stores and other small businesses all belonged to the government but as the free market was adopted they were sold off as private businesses.
The government’s petroleum distribution company was privatized and sold off to Sokimex for $10 million in 1996. In 1999, well-connected Sokimex obtained the concession for Angkor Wat ticket sales.
Private banks emerged, many dubious, in the 1990s, and The Cambodia Daily reported in May 1995 about a group of businesspeople-the owner of a cooking pot factory, an construction company, a fish sauce factory owner-all learning how to apply for their first ever bank loans.
In those years some major international companies had come to Cambodia and left saying the country wasn’t ready.
The government was divided and it was unclear who actually ran things in the coalition following the 1993 UN-organized elections.
The ambiguity had stalled investment and when fighting erupted between political factions in July 1997, it all but stopped.
Alongside the human cost, the ’97 fighting left factories burned out, businesses damaged and gas stations without pumps, but worse than that it ruined the country’s international image as a stable country and a place to investment.
“We have to be honest. Normal countries don’t have coup d’etats in 48 hours,” said an advertising executive at an Aug 22, 1997 conference on improving the country’s tarnished image. “We must say we are back to normal, that Cambodia is what it was before July 4,” the executive said, according to a Cambodia Daily report.
In an August 1997 story business school graduates told of their difficulty finding jobs. “No one is going to want to recruit when tanks are going up and down Norodom Boulevard,” said one recruiter.
Business also slowed as the 1998 election approached and the backwash from the Asian financial crisis was felt by some in Cambodia. GDP growth ticked over at about 5 percent in 1997 and 1998.
But gradually things improved.
In 1999, for the first time since before 1993, annual economic growth reached double-digits, registering at almost 12 percent.
It was also the same year that Cambodia joined Asean.
With stability came visitors, and by 2000, 466,000 foreigners had visited the country an increase of 400 percent compared to 1993.
Tourism had received a crucial boost from the government’s Open Skies policy which, in 2000, allowed direct international flights to Siem Reap town, whereas before most international flights were required to land in Phnom Penh first. The result: in 2007 more than 2 million people visited Cambodia.
Garment factories also mushroomed between 1999 to 2003 during which time garment exports increased from $653 million to $1.5 billion. Since then, garment exports have doubled.
In 2004, Cambodia joined the WTO, which, in theory at least, opened Cambodia to more international markets, and connected the country more closely to the global economy.
Economists at the time said the country would require major reforms, such as the tackling of corruption and creation of an independent commercial court to deal specifically with business-related disputes.
The country certainly had its work cut out.
In a 2005 World Economic Forum poll Cambodia was ranked as 112th out of 117 countries in terms of competitiveness in business. The report cited problems like civil servants bleeding business with bribe demands, a famously unreliable court system and an inadequate education system.
A 2005 World Bank study ranked the country 133rd out of 155 in terms of ease of doing business, which meant it wasn’t easy, or at least was perceived as such internationally.
But there was good news too.
Exploratory oil drilling began in 2005 bringing in international oil firm Chevron and many others, and probably creating a worldwide buzz much larger than probably even the estimated reserves that are under the country’s offshore sea-bed.
But beyond the hype, many observers have questioned whether Cambodia’s still-untapped oil will truly benefit the country, noting that the so-called “oil curse,” which despite the financial windfall had deepened Chad and Nigeria’s corruption and poverty.
Real estate began to pick up around 2005, causing its own set of problems as property prices have increased, so has the incentive to grab land that was previously thought of as worthless. Such disputes have brought villagers to the city to complain to the government.
But the developments have all been rapacious.
Ground has broken for a number of skyscrapers in the last year, including a $1 billion eight-building complex on the Tonle Bassac that will contain several towers topping 50 stories. The country’s current tallest building is the diminutive 15-story InterContinental Hotel.
So far this year several private equity groups have announced plans to invest a combined total of $450 million in projects in Cambodia.
Cambodia is also scheduled to have a stock exchange next year but some investors say investors are not yet ready, or transparent enough. But growth is still needed in many sectors.
Agriculture is still far behind its potential and critics say rice production could increase at least 50 percent if the government invests enough money in education and infrastructure and other services to help the sector grow.
Electricity is expensive and its supply massively inadequate for this country of 14 million, though several hydropower dams are in the works.
There is little office space. And far less parking space around the city, which many predict will be so choked with traffic jams in coming years that it will have a detrimental impact on the capital’s economy.
Business in Cambodia has come a long way since 1993, but there’s still a long way to go.