In Cambodia, the End of COVID-19 Will Heighten the Economic Contradictions

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In Cambodia, the End of COVID-19 Will Heighten the Economic Contradictions

Corruption and inequality are set to rise as the country emerges from the pandemic.

In Cambodia, the End of COVID-19 Will Heighten the Economic Contradictions

The facade of NagaCorp’s Naga World Casino in Phnom Penh, Cambodia.

Credit: Flickr/ Beth Kanter

Once lockdowns end and our lives return to something approaching normalcy, capital will stage a demonstration of its power over labor. In Cambodia, this campaign is already underway with NagaCorp, the billion-dollar company that has enjoyed a state-sanctioned monopoly on casino operations in Phnom Penh for decades, in the vanguard of capital.

On top of that advantage, its coffers have grown handsomely thanks to the Cambodian government’s preference until very recently for not properly taxing profitable businesses, but instead collecting donations from tycoons through which the ruling party can spend on “philanthropic” projects to burnish its own image. In 2019, NagaCorp turned a net profit of $521.3 million. That was after paying a paltry tax bill of just $30.4 million. Despite being closed for much of 2020 due to the COVID-19 pandemic, it returned $102 million in net profit last year. Things must be going well, as the firm has committed upward of $4 billion to building a third casino-hotel complex in Phnom Penh.

Yet this hasn’t stopped NagaCorp from engaging in “a rationalization program to improve cost efficiency.” On Tuesday, workers presented a petition to the Labor Ministry calling on the government to intervene to stop NagaCorp’s plans to lay off 1,300 of its 8,000 employees, which was announced to company shareholders the previous day. The union of NagaCorp workers, the Union of Khmer Employees of Naga World, reckons this is a plan designed to weaken it. Of the 1,300 workers it plans to fire, 1,100 are union members, Shaun Turton reported in Nikkei Asia this week. Its president Chhim Sithar, vice president, secretary, and treasurer, have all received notices of termination.

In part, this is a sign of times to come. Yet it also illustrates that only an eighth of NagaCorp’s workforce was unionized in the first place. After a high-water mark for labor activity in the early 2010s, Cambodia’s trade unions have been defanged and repressed nearly beyond existence. Even before this crackdown, unionism had barely expanded beyond the garment industry, arguably the only sector where union activity has brought lasting results in the form of a sectoral minimum wage. Added to this, the unions have lost their political ally, the Cambodia National Rescue Party (CNRP), the country’s only viable opposition party, which was forcibly dissolved in 2017 by the government, which spuriously alleged it had been plotting a U.S.-backed coup.

What can we expect once the lockdowns end? However systemic and pervasive corruption was pre-pandemic, it will be nothing like the scale of graft post-pandemic, as any investment will be rushed through and zero questions asked about where the money comes from or goes towards. I have previously described the 2010s as Cambodia’s “Gilded Age.” Mark Twain once satirized that period in American history thusly: “What is the chief end of man? – to get rich. In what way? – dishonestly if we can; honestly if we must.” But at least in 2010s Cambodia everyone was getting richer, even if the wealthy were getting richer quicker than the poor. But in the 2020s, Cambodia’s Gilded Age could become a Jilted Age.

Wealth will be accumulated even more into the hands of a few tycoons and conglomerates, which have been able to weather the pandemic with capital in the bank. Whatever power organized labor had pre-pandemic, it will be destroyed post-pandemic by union-busting and rampant competition for jobs, driving down wages and labor standards.

There is no way of knowing the actual unemployment rate in Cambodia today because even in normal times the majority of workers are in the “informal sector.” But a recent World Bank survey found that while only 10 percent of respondents reported having lost their jobs since the pandemic began, almost half of households reported a major loss in income. Remember, remittances back to the countryside from migrants to the cities was the lifeblood of the rural economy.

Nith Kosal, writing late last month in The Diplomat, argued that economists ought to be more concerned than they are about inflation, which the IMF reckons will be around 3.1 percent in 2021 and 2.8 percent in 2022. The reality is probably different. As Kosal noted, even before the strict lockdowns in March, rice prices in Siem Reap and Preah Sihanouk provinces rose by 33.33 percent and 17.56 percent, respectively, compared with the previous year.

Known as someone who never has a good word to say about the Cambodian government (though in my defense it has more than enough claquers and not nearly enough critics left), it has performed rather well in containing the pandemic. Cambodia’s (current) second-place in Southeast Asia’s vaccination rankings ought to be applauded.

Yet once something like normalcy returns, the authoritarian ruling Cambodian People’s Party (CPP) will have the sort of economic decisions to make that it has never liked making. Does the dovish central bank keep interest rates low, allowing smaller businesses to borrow but also allowing the larger firms to leverage themselves even more? Are tax holidays continued, allowing businesses to reinvest greater revenue but diminishing state coffers for social spending? Many urban workers re-migrated back to the countryside during the pandemic, as jobs dried up in the cities. But once they return, the housing market will be shaken. Do the authorities impose rent controls, which would be a very unpopular decision amongst Cambodia’s rentier middle classes?

The CPP, which without an actual challenger, no longer has a way of knowing how popular or unpopular it is, will face decisions that it rarely likes to make. Especially, that is, with local elections coming in 2022 and a general election in 2023, which will essentially become referenda on Hun Sen’s rule and, perhaps, his dynastic ambitions to hand down power to his eldest son, Hun Manet. A fraught economy, with spiking inequality, runaway capital accumulation, and depreciated working terms, won’t make for a successful campaign for the CPP. The end of the pandemic will surely test the government, which before 2020 had grown rather comfortable overseeing a symbiosis of elitism and populism.