Cambodia and the International Monetary Fund

In order to gain global economic recognition from the International Monetary Fund, Cambodia was required to make fiscal structural reforms that mimic the mechanisms of a liberal-market economy.[3] With that said, Democracy in Cambodia has little to no legitimacy in its economy. Following independence from French colonization in 1954, Cambodia has undergone four major economic and political changes.[7] Firstly, the abdication of the constitutional monarchy in 1955 by Sihanouk established Cambodia as a Socialist state. Then Sihanouk was overthrown by the Lon Nol dictatorship who was supported by the United States.[8] Subsequent to the Vietnam war, President Nixon secretly bombed Cambodia.[9] This bombing invigorated the Khmer Rouge, a communist party, with anti-modernization, and anti-western ideologies. As a result, the Cambodian Civil war and Genocide began. The organization ultimately oust Lon Nol and formally established Cambodia as a self-contained communist country. Pol Pot, the Khmer Rouge leader, systemically abolished money, private property, emptied cities and killed approximately 2 million Cambodian citizens.[10] The communist party's goal was to reinstate Cambodia's "golden age" before colonization. The time when Ancient Khmer Empire ruled South-East Asia and heavily relied on the agricultural sector.[11] By December 1978, Cambodia was invaded by Vietnam who implemented Hun Sen, as the new leader of the People's Republic of Kampuchea, a former Khmer Rouge commander.[12] Guerrilla warfare still ensued post-war which cause Cambodia to suffer international economic isolation. In the 1990s the United Nations convened a Paris Conference and achieved a comprehensive international settlement for the Cambodian Conflict. Currently, Cambodia once again is a constitutional monarchy in name but is ruled exclusively by the Coalition government controlled by Hun Sen.[13]

Everything But Arm is an international trade order created by the European Union to support developing countries with quota-free export of their produce to the EU market. Everything But Arm refers to every product but not arms — weapons. With the support from the EU through the EBA policy, Cambodia receives a colossal benefit from zero tariffs on exporting, which draws a ton of investors from other countries, for example, China, in the textile industry. Chinese investors have started investing in Cambodia, which creates job opportunities and training skills for Cambodian workers. However, the EU withdrew the EBA from Cambodia in 2022 due to concerns about human rights issues. The commissioner for Trade, Phil Hogan, said: “We have provided Cambodia with trade opportunities that let the country develop an export-oriented industry and gave jobs to thousands of Cambodians. We stand by their side also now in the difficult circumstances caused by the pandemic. Nonetheless, our continued support does not diminish the urgent need for Cambodia to respect human rights and labor rights. I stand ready to continue our engagement and to restore fully free access to the EU market for products from Cambodia, provided we see substantial improvement in that respect.” (European Commission). With that being said, Cambodians still can export their products into the European market but with the same tariff as many other countries in World Trade Organization, which cause a huge disadvantage to the Cambodian economy. [14]

Under the Khmer Rouge regime, there was no currency, no bank, and no international trade, which was influenced by Chinese leader Mao Zedong [15]— one party, no private property, and rejecting modern development. After the dark period passed, Cambodia needed to rebuild the country as well as its financial institution. Still, without the framework, it would be a big challenge for the Cambodian government to restructure its government system. Cambodia started from scratch; it took a very long time to restore everything. In 2004,[16] IMF sent the expertise to advise and help the Cambodian government to strengthen its law and fix the banking system. This is a reason why many developing countries want to be a part of an international organization like the IMF, World Bank, or World Trade Organization — less or more; the developing countries gain the benefit from the international organization. With a stable financial institution, there are many great opportunities for foreign investment, which greatly impact Cambodia's economy.

IMF technical Assistance is help from world-class IMF economists who provide expertise and advice on macroeconomic policy issues, central banking, monetary and exchange rate policies, public financing, budgeting, tax policy and administration and statistics.[23]

One benefit of IMF membership is countries are entitled to technical assistance in banking, fiscal affairs and exchange matters, and one way they help is through country surveillance and Article IV consultations. During these consultations a team of IMF economics visit countries with IMF membership and assess economic and financial developments.[27]

In September 30 through October 11, 2019, Mr. Jarkko Turunen lead an IMF team to Cambodia's capital of Phnom Penh and released a comprehensive report of staff findings to be reviewed and presented to the IMF's Executive Board for discussion and decision.[6]