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2.2 Economic Setting


Cambodia is currently encouraging foreign investment to help kick start its long dormant economy and to boost production, a strategy which has seen Cambodia’s economic growth rate hit 6% for the last five years. Presently, aid money represents about half of the US$407 million in revenue indicated in Cambodia’s 1995 budget (Far Eastern Economic Review 3/8/95).

All foreign investment coming into the country must be approved by the Council for the Development of Cambodia (CDC), which has claimed to be a “one stop” investment centre able to approve applications in just fourty-five days, the speediest response in the region. However, not even some of the world’s most liberal investment laws2 are succeeding in overriding the influence of the increasingly wide political split between the ruling coalition and Phnom Penh’s lawlessness which is discouraging many investors. In an attempt to smooth out the wrinkles, Hun Sen, wary of Funcipec’s dominance of the CDC, a major source of income for Funcipec, has pushed the CPP to the forefront of the decision-making process. Now Rannariddh, Hun Sen and three Finance Ministers must individually approve each investment deal. This demonstrates a lack ability to “isolate certain technocrats from politics” (Phnom Penh Post May 31- June 13, 1996). The public sector is generally distrusting of the CDC and fear losing their power of approval and income from graft. The Ministries have been persistent in their attempts to sabotage the success of the CDC.

Despite, Cambodia’s progress with respect to macro-economic stability, the International Monetary Fund (IMF) has frozen its funding to Cambodia because money from the sale of State assets, primarily the sale of logging concessions, is not finding its way to the Ministry of Finance. The IMF is insisting on a transparent and centralized State budget as a condition for its support. A $US 20 million IMF loan installment, due in March 1996 is being withheld.

The largest investors in Cambodia are Malaysia, Singapore, Hong Kong, Thailand and Taiwan. Cambodia’s preferencial trading status with Europe and very soon Amercia could be worth billions of dollars if the CDC and the government manage to streamline their practices. May 1996 has been the most unstable month for investors since the 1993 elections.


3. Geographical Setting

3.1 Location


Cambodia forms part of the southwestern portion of the Indochinese peninsula between latitudes 10 and 15 degrees north and longitudes 102 and 108 degrees east. The total land area is approximately 181,535 square km, making it the smallest country in Southeast Asia. Cambodia is bordered by the Kingdom of Thailand and Lao PDR to the North, Vietnam to the East, the Gulf of Thailand and Vietnam to the south and part of Thailand and the Gulf of Thailand to the West. The total boundary of the country is 2,600km of which approximately 5/6 is land and 1/6 is coast.

3.2 The Mekong Basin in Cambodia


86% of Cambodia’s total land area lies within the Mekong Basin, the hydrological features of which, consisting of the Mekong and Bassac Rivers and the Tonle Sap Great Lake system, form the main drainage system of the country and the backbone of Cambodia’s agricultural economy which provides livelihoods for 80% of Khmers. The coastal basin, southwest of the Cardamon mountains in the south is the only part of the country not within the Mekong Basin, and drains directly into the Gulf of Thailand. An average discharge of more than 300 billion m enters Cambodia annually through the Mekong River. It is estimated that with the contribution of the downstream tributaries, some 475 billion m33 discharges into the South China Sea. Statistics are not available for the contributions of the tributaries within the Cambodian basin, nor are watershed statistics collected. All available resource statistics correlate to provincial borders.

The Mekong basin in Cambodia can be divided into two distinct geographical units:

1- the central low lying land and plains, with a large part being less than 10m in elevation. The central plains are surrounded by savanna, gradually changing into densely forested and sparsely populated highlands and mountains, with the exception of the plains to the southeast which extend into Vietnam.


  1. The Mekong River and the Tonle Sap basin are the main features of this topographic unit. The Mekong River enters Cambodia from Laos in the north east. At Phnom Penh the Mekong divides into two main downriver branches, the Bassac River and the Mekong. Both rivers form the wide Mekong delta starting in southeast Cambodia and enlarging further in Vietnam. The Mekong runs for 486km in Cambodia.

  2. The Tonle Sap basin includes the Great Lake after which it was named, the largest permanent fresh water lake in South East Asia. The Tonle Sap connects to the Mekong River at Phnom Penh by the 120 km long channel-like Tonle Sap river and acts as a natural flood stabilizer system into which 20%3 of the whole Mekong river floods are regulated by reverse flow mainly during the wet season from June to September (Sin Niny 1994). At this time, the Tonle Sap increases in size from about 2,600 km square to about 10,500 km square and its depth from 2m to 4m at the height of the flooding. The lake also provides water in the dry season to feed the Mekong’s main river, helping prevent salt water instrusion in the dry season in Vietnam.

2- the catchment area consisting of the mountain ranges and high plateau surrounding the low lying land. The mountain ranges basically form a horse shoe shape around the Cambodian border opening in the east to Vietnam. Only the Elephant and Cardamon Mountains in the southwest lie outside of the Cambodian Mekong Basin. High rates of deforestation are occuring in large parts of the mountainous regions, reducing the water holding capacity of the catchment. This is contributing to siltation of the Tonle Sap and its tributary rivers, particularly the Stung Sangker in Battambang province.

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