Nobel Laureate Says US Protectionism May Hurt Cambodia

Nobel Prize-winning economist Joseph Stiglitz was today to conclude three days of UN Develop­ment Program-organized consultations in Phnom Penh with senior government officials. He spoke to Douglas Gillison on Thursday.

Q: The growth of Cambodia’s economy has received steady banner headlines. But your view is that this doesn’t necessarily measure success.

A: It doesn’t measure standards of living. Standards of living have to do with lots of other things that are not necessarily captured. For ex­ample, GDP could go up but pollution could be going up so that people are dying younger. You could have GDP going up be­cause you’re selling logs. But that means your country’s getting poorer be­cause one of the important assets is timber and you don’t have that timber anymore. Thirdly, it doesn’t talk about who gets the income. Most of the in­crease in the income could go to foreign mining companies, foreign oil companies. GDP could be going up but most people in the country could be worse off.

Q: You’ve said that fairer income distribution is key to long-term sustainable growth. According to a 2006 study, the poorest 40 percent of Cambodians own 5.5 percent of privately held land while the top 20 percent own 70 percent of it.

A: I think that one of the elements of success in many of the East Asia countries, Japan, Korea, Taiwan, was land reform at the beginning of the development strategy. Land reform is extraordinarily difficult to do well because you have to not only provide access to land, but access to credit, access to technology.

I think that in a country like Cam­bodia, these issues become all the more important as the crowding of the population increases. Finally, if you think that one of the real problems is land pressure, that also means that you need to relieve that pressure by trying to create non-farm employment. Equality is a concern in its own right but it becomes particularly important when there aren’t other opportunities.

Q: You were World Bank chief economist from 1997 to 2000. The Bank was recently criticized by The Wall Street Journal for allegedly failing to sanction the corruption it claimed to have uncovered last year.

A: In general, the Bank procedures have been designed to make them very highly corruption-resistant. That doesn’t mean they’re perfect but they are among the best procedures of any institution in the world. They are far, far better than the Defense Depart­ment in the US, which has used sole-source procurement and is rife with corruption.

Q: US housing prices are expected to drop 10 percent in the next 18 months. You’ve said that as a re­sult, there will be decreasing credit and consumer spending, meaning that slowing US and global econ­omies are likely to accept fewer Cam­­bodian garment exports.

A: A majority of garments go to America. So as America’s income gets lower they may buy fewer of these goods. I’m not worried about this too much but at least it’s a problem. Secondly, as the American econ­omy slows, unemployment will increase and protectionism in America increases. That means America will be less willing to open up its markets. There are some important initiatives to open up America to Cambodian exports free of tariffs. Those initiatives will find it more difficult getting through Congress. They may succeed but they may fail. There’s no doubt. Protectionism is growing.

Q: So you’re urging Cambodia to find more ways to make money?

A: Cambodia’s growth has been relatively narrowly based on garments. The big advantage of be­ing a small economy is that Cam­bodia can continue to grow and at the same time make a relatively small dent in the global market. That’s its advantage.

But the disadvantage is that still you have to expand your market in a relatively narrow niche, competing with many other countries with various advantages and disadvantages. Africa has free access to the US under the [US African Growth and Opportunity Act of 2000].

It is conceivable that some of the international companies may say, “We know we can be assured of free access via Africa. Maybe we ought to be putting more effort into developing Africa at the expense of Cambodia.”


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