Comparison
of the Economic System
of Thailand
and Cambodia



by  Leonards Subroto

 

I.        Overview of Cambodia and Thailand

1. Cambodia
 Cambodia is a relatively unstable country that had gone through difficult times. Since it gained independence, its history had been plagued with war and political changes. Before 1953 Cambodia was a French colony (subjugated in 1863), and then it gained independence and became a constitutional monarchy under French protectorate. The royal council later appointed Norodom Sihanouk as King. The newly sovereign adopted market economy system, which invited foreign investors in. With funds flowing from outside, Cambodian economy grew prosperous, it managed to build basic infrastructures such as airports, seaports, railways, electricity plants, schools, and even sport facilities. However, this prosperity was short lived; In 1970 Lon Nol, Cambodian defense minister, launched a coup d’etat against Sihanouk. This rebellion signaled the start of years of Cambodian turmoil.

Lon Nol’s government was brief; Sihanouk joined forces with the communist Khmer rouge and fought Lon Nol. War between the two devastated many of Cambodia’s farmlands. In 1975, Khmer rouge captured Phnom Penh and this started a new Khmer regime led by Pol Pot. The new government implemented Maoist communist system promoting ultra collectivism. Market system and private ownership were completely abolished, and so there was neither money nor trade. The regime then forced the entire economy to go into agriculture focusing in rice production. Most of what the Khmers did put Cambodia in a political, economy, and social vacuum.

Pol Pot’s regime ended in 1979, when Vietnam and anti-Khmer Cambodian troops drove the Khmer rouge out. A new government was established, named People’s Republic of Kampuchea. The party leader Heng Samrin adopted Vietnamese Socialist economic system, but it wasn’t successfully practiced. Because of this, implementation was then relaxed (i.e private ownership allowed in big cities, foreign trade and domestic trade allowed). In 1987, Norodom Sihanouk and Prime Minister Hun Sen began reconciliation efforts, which finally result in dual leadership between the two sides. At this period, Cambodia also started its move back to market economy, and right now, the transition process is still going on.

2. Thailand
Thailand is a country with a unique history. Every nation in South East Asia had suffered colonization; however, Thailand was the only one who escaped it.  The whole nation owe this fortune to two great Kings, Mongkut (1804-1868) and Chulalongkorn (168-1910), as they had a role in lobbying the French and the British to make such decision. The French had colonies in Indochina( Vietnam, Cambodia, and Laos) while the British had colonies in Singapore and Malaysia. Since Thailand sat perfectly between the two, both countries agreed to make Thailand a buffer state.

In 1932, The People’s party launched a bloodless coup ending the absolute Monarchy of Rama VII; thus, beginning the era of Constitutional Monarchy government. After this, political changes had been rampant in the country: During 1932 – 1992, Thailand had 50 different governments. Despite instability in politics, Thailand did not suffer as bad as Cambodia had. Thailand did not go into civil war, and thus its infrastructure and capital stays intact until these days. For its economic system, Thailand had been adopting market system since it switched to Constitutional Monarchy government. At the beginning (1930s- 1960s), state intervention in economic sector was deep and expanding; however, starting in 1960s intervention slowed down and privatization began on State Owned Enterprises. Currently Thaksin Shinawatra of the Thai Rak Thai Party led the government.

II.        The Monarchs of Cambodia and Thailand

Perhaps the strongest identity of both of these countries is their monarchs: King Bhomibol Abdulyadej of Thailand and King Norodom Sihanouk from Cambodia. There are no other countries in the world whose monarchy is still as strong as the two. Generally, Asian monarchs receive deeper respect compare to western monarchy. Most Asian nations believe that their monarchs are descendant of God, and so the subjects had to give their highest respect. Subjects of an Asian monarchy have to bow and kneel down to the ground in front of their monarch, while subjects of Western monarchy need not to do as much. Prince Charles of England would be afraid of losing his reputation if he were to ask the Prime Minister to close down the road because he wants to race his new sports car. A Thai Crown Prince will not mind to do such a thing, because the people respect the Monarchs highly as if they were still governed by an absolute King. Instead of the “absolutism effect” of their monarchs, subjects of the two monarchs also respect them because of their deeds.

King Bhomibol ascended the throne in 1946 when he was only 18 years of age. As have been discussed in the history overview section of this paper, rampant political changes plagued the country that causes instability. The fortunate thing was that none of them escalated into a war, and so Thailand’s economic infrastructures were spared. However, there was one occasion where Thailand’s political crisis peaked close to anarchy. This event happened in May 1992; Prime Minister Suchinda Krapayoon ordered the military to open fire to end pro-democracy demonstration in Bangkok. Since, this action was too far as to solve political differences between the government and the people of Bangkok, King Bhomibol summoned the two confronting sides to the imperial palace. Fifty million Thais watched the Prime Minister, Army officers, and demonstration leaders kneeled down in front of the King who sued them for peace. It was a great turning point in Thai history as later on both sides took steps toward normalization and stability. The role of the Thai monarch in the resolution of the May crisis is undoubtedly undeniable, and it proofs the Thai throne essential to the country’s stability.

Norodom Sihanouk assumed the throne of Cambodia in 1941 when he was only 19 years old. Although he started at relatively the same age as the Thai monarch, Sihanouk faced much more difficult challenges compare to Bhomibol. Cambodia started as a colony of France, and part of the reason why he was chosen was because France wanted to control the young King. Not long after his ascension, Japan took over Cambodia; Sihanouk then took his chance to declare Cambodia’s independence. This was his first step in establishing his image as the country’s leader. In 1953, France granted Cambodia’s independence and Sihanouk abdicated throne to become Prime Minister. He ruled Cambodia for 17 years until Lon Nol deposed him, and afterward Cambodia went into chaos. Sihanouk then retaliated by supporting the Khmer rouge to gain back his country, which was successful. However, the Khmer regime did not have any intention to have a King, and so he remained only as a political figure until after and during the Vietnam supported PRK regime. In 1993, an election was held, and Sihanouk’s party got the highest vote. The PRK (Hun Sen) did not want to give up their power, and so Sihanouk and Hun Sen decided to form a coalition government. Sihanouk decided to just become head of state to symbolize unity of Cambodia, and let his son Ranarridh become co-Prime Minister together with Hun Sen. Later in 1997, Hun Sen overthrew Ranarridh and installed a puppet from Sihanouk’s party to serve as co-Prime Minister. Sihanouk never once again ruled his country realistically after 1970, but he is still an important figure. His most contributing deed was his role as the brave young King who declared Cambodia’s independence in 1953, and although he has not much authority now, he still serves as a King, founding father, symbol of unity and a hero to Cambodia.

III.  Overall Comparison of Cambodian and Thailand Economy

Cambodia adopted centrally planned economy between 1975 and 1989. The start of centrally planned economy was not very good, as the civil war in the country had just ended, and to make things worse the regime was destructive.  War destroyed most of the infrastructures that had been built, and the economy was forced into agriculture ( mainly rice production ). In 1989, Cambodia gave up on central planning since it was hard to implement it idealistically (i.e collective farming during 1979 – 1985 ). As a replacement, the government attempted market economy and began steps transiting into it.

Economic situation in Thailand had been more stable relatively compare to Cambodia. Generally their economic system has always been market system with a slight exception during 1930s – 1960s. During this time state intervention in economy was deep and expanding, but not centrally planned. Although it is debatable, there is a good reason for overly intervened economy in a market system. Thailand just embarked into Constitutional Monarchy in 1932, and its economy sector consists of agriculture only with relatively no industry. Thus, it made sense if the government helped the economy by intervention. In 1961, privatization process began and currently only 59 enterprises were owned by the state.

GDP & GNI/capita in Thailand & Cambodia in 1996 (Current US$)

GDP & GNI/capita in Thailand & Cambodia in 1999(  Current US$)

From a quick glimpse economic performance of Thailand is better rather than Cambodia. Thailand’s GDP has always been larger compare to Cambodia, even after the Asian Economic crisis in 1997 in which Thailand’s economy collapsed drastically. Total GDP was USD 182.4 billion[1] in 1996 and in 1999 it was only USD 122.1 billion[2]. It seems that the Asian Economic Crisis did not affect Cambodia as bad; Its GDP was USD 3.1 billion1 in 1996 and relatively the same in 1999 which was USD 3.0 billion1. Even though Thailand suffered from the crisis, its economy is still better compare to Cambodia. Thailand’s GNI/capita was USD 3,0101 in 1996 while Cambodia’s was only USD 2801 in the same year. With the crisis in 1997, Thailand’s GNI/capita dropped to USD 2,0001 in 1999, which is still larger than Cambodia’s USD 2601. With GDP 40 times larger in 1999 and GNI/capita 7 times larger in the same year, clearly Thailand’s economy is far better than Cambodia.

From this statistics, two questions related to their economic system can be asked: Did economic system of both countries affect their economy?
Before anything about the economic system is discussed, it is also imperative to consider the stability in the two countries. Cambodia’s political situation has been unstable since the 1970 coup, and so it might affect the economy of the country. However, Thailand’s political situation, although much less bloody, is not stable. As outlined before, between 1930 and 1992 Thailand had 50 different governments, which is an average of one political change every two years or less. Compared to Cambodia that had only five political changes, Thailand is clearly more unstable. Thus, the relevant matter is infrastructures and capitals destroyed during the political changes. Cambodia suffered a great loss of farmland and infrastructures due to the political changes, and Thailand experienced none relatively. Even so, major destructions had practically stopped since 1979 where wars happened mostly in Cambodian-Thai borders afterward. There was also plenty of time from 1979 until present to rebuild the infrastructures and economy. In addition, there have been realistic examples of countries that had been destroyed but managed to restore its condition comparable to the United States such as Germany and Japan. Therefore, the relevant factor is then economic system and stability can be ignored.

Thailand’s GDP composition in 1996 & 1999

Cambodia’s GDP composition in 1996 & 1999

Current economic standing of the two countries is a product of their economic system. Thailand’s GDP using value-added approach during 1996 until 2000 consist of relatively 10 % from agriculture, 40 % from industry, and 50 % from services. Cambodia’s GDP in 1996 consist of 50.8 % from agriculture, 15.4 % from industry, and 33.8 % from services, in 1999 the pattern change with around 11 % reduction in agriculture to 39.6 %, around 3 % increase in industry to 18.8 % , and around 8 % increase in services to 41.6 %. Further, in 2000, the pattern switched again, agriculture decreases from 39.6 % to 37.1 %, which then transfers to about 2 % increase in industry, and a little increase in services. It is clear here that Thailand is more industrious rather than Cambodia. Thailand had been in market capitalism economic system since the start; it is thus not surprising that its GDP consist largely of industrial sector. Liberal market system allows private sector to compete heavily and brought the economy into industry fast. Meanwhile, Cambodia had just recently moved from centrally planned economy, and as the statistics show, agriculture dominates its economy. But as time passes, the figures change, industrial sector keep increasing with agriculture sector decreasing. This trend indicates a good progress after the country switched to market system. Before it changed, the economy must have consisted mostly of agriculture, but now it is growing more industrial.
Data Source: World Bank Data by Country on April 2002

IV Rice Production comparison between Thailand and Cambodia
Throughout the two nations’ history, agriculture and especially rice production had been central in their culture. Rice is the main diet in the two states, and so no matter how industrialized the countries get they will not abandon rice production. In 1975 Cambodia also went completely into rice production as a result of the centrally planned economy devised by the Khmer regime. During 1970s and early 1980s, Thailand’s economy was also still focusing on agriculture. Rice production in the 1970s and early 1980s is thus a good barometer to compare economies in the two countries. In addition, it provides a good setup to compare their economy as at this time Cambodia was still adopting central planning.

Thailand has more landmass, and so its harvest area is generally larger compare to Cambodia. Because of the civil war, Cambodia lost most of its farmlands, from 2,399,000 ha (hectares) in 1970 to only 555,000 ha in 1974. Thailand’s harvest area on the other although looks unstable, in general it is increasing. During 1976 – 1978, Cambodia’s harvest area stayed at 1,000,000 ha and in 1979 because of the war with the Vietnamese, it decreases to 774,000 ha. In 1980 after the new communist regime (PRK) was formed Cambodia began rebuilding its farmland, and so the harvest area increased to 1,346,000 ha. This was a good result; however, in the next five years, growth of farmland stagnated, it increased a little in 1983, but in 1984 and 1985, the harvest area decreased again to the same level as in 1980. The statistic clearly shows that market economy in Thailand performs better compare to Cambodia’s central planning. There are period of recessions but in general the farmland grow. Central planning gave a terrific jump in 1980 for Cambodia, but there is no growth in harvest area afterward.

The above chart contrast even more the differences between Thailand and Cambodia’s economic system. It also shows the general characteristic of market economy and central planning in which rice production fluctuates in Thailand and relatively calm in Cambodia. Comparable to the harvest area statistic, in general rice production in Thailand grows, although with unpleasant series of increases and decreases. Cambodia has always had stable rice production since 1976, but in general rice production does not grow. It is actually even worse in 1984 where Cambodia produces only 1,260,000 tons of rice while in 1983 it produces 2,039,000 tons of rice. This is not a good indication; it is bad enough that there is no grow, and now rice production has to decrease as if it is a fluctuation in a market economy system.
Data Source: FAO statistics

IV.  Conclusion
Economic system clearly affects economic performance in the two countries. Under market economy system, Thailand’s economy has grown to be more industrialized as apparent from its GDP composition. After Cambodia switched into market economy system, its economy has since then transformed to be more industrious. In 1970s and 1980s, statistical data shows how Thailand’s rice production has always been increasing although fluctuations accompany it. It also shows how Cambodian’s rice production has always stagnated, and even goes down drastically in one period of time in 1984. Stability issues might affect economy in both states, but politically the two countries have never been stable. Thailand has been through 50 different governments during 1930s – present, while Cambodia has had only five political transitions. Counting only from this comparison, Thailand is actually far more unstable than Cambodia, and so stability issue is not relevant. Thus, putting aside stability and focusing on the analysis alone, it is clear that market economy has made economic performance in both countries better.

Sources:

1. Westcott, Clay G. , Key Governance Issues in Cambodia, Lao PDR, Thailand, and VietNam , 2001 Asian Development Bank

2. Kato, Tosiyashu , et. Al, Cambodia: Enhancing Governance for Sustainable Development, 2001 Asian Development Bank

3. King Sihanouk’s biography , http://www.gocambodia.com/royal_family/king_sihanouk.asp

4. King Bhomibol’s biography,http://www.cs.ait.ac.th/wutt/rama9.html

5. FAO & World Bank Statistics