While the events leading up to the government’s formation on Thursday have prompted outcry from some democracy advocates and opposition lawmakers, businesses around town breathed a collective sigh of relief just days after political tensions caused some shops to close their doors.
“Businesses and foreign investors are very happy to see the results concluded—whatever the terms,” said Jimmy Gao, president of the Chinese Chamber of Commerce in Cambodia. “Everyone is looking forward.”
For months, business leaders blamed the deadlock for the decline in foreign investment and the country’s economic stagnation. Now, with a government in place that says it is committed to cutting corruption costs, ratifying the deal to join the World Trade Organization and establishing a commercial court, they are optimistic the economy will improve.
On Tuesday, however, the mood was much different. As truckloads of police surrounded the home of CPP President and acting head of state Chea Sim, memories of the violence that marred previous political transitions sparked panic among some local shopkeepers. Market vendors quickly raised the price of rice and noodles, gold shops in Phsar Thmei slapped deadbolts on their doors, and some frightened souls started withdrawing their money from banks.
“My neighbor who sells shoes next to me told me there was bad news and we should close our shops early,” said one vendor at Phsar Olympic, recalling Tuesday’s events. “I received phone calls from my family asking me to buy something in case their was no food the next day.”
But Wednesday, business was back to normal. Canadia Bank saw a slight increase in withdrawals on Tuesday, but nothing close to the number in the run-up to last July’s elections. “We saw some increase in withdrawals, but not so remarkable,” said Puong Khinh Hoa, Canadia’s vice president. “This situation is not strange in Cambodia. People can worry for a short time and then go back to normal the next day.”
In Channy, general manager of Acleda Bank, said the new government—whatever it looks like—is important for foreign investors. “It does not matter how the government is formed. Investors need the government,” he said.
Government or not, political tensions can flare up at any moment, as demonstrated by the anti-Thai riots in January 2003. After a night of destruction and looting by nationalist youths, 33 Thai-owned businesses were left damaged.
While political tensions are old news to domestic investors, foreigners may need more coaxing before throwing down their money. Nonetheless, convincing potential investors that a new government makes the country more stable is no substitute for passing legislation that can make their investments more secure.
“The lack of investors in Cambodia is not because of the political environment, but because we lack proper laws and law enforcement,” said Sok Kong, president of the Phnom Penh Chamber of Commerce.
The WTO should spur the country to pass and enforce a heap of legislation geared to help legitimate businesses, Sok Kong said.
The government expects investment to jump with the new government in place, said Soy Sokha, an economic adviser to Minister of Cabinet Sok An. “The door is now wide open for investors,” he said.
Others are more restrained, saying that while the economy was comatose with no government, its growth hinges on the new government’s actions. “The substance of policy will make a difference in the economy,” said Kang Chandararot, an economist at the Cambodian Development Resource Institute. “You cannot use the words ‘new government’ as a basis for new hope and new expectations. It’s impossible.”
Businesses are happy the government is formed because they hope it will bring some semblance of stability to an economy that is mostly guided by political events, Kang Chandararot said. “The situation between election years is usually quieter,” he said. “But unless you can predict the political arena, you are not able to predict what will happen with the economy.”