Tips and Tricks from Cambodia

September 28, 2012

The content you are going to read below is wholly written by Thierry Schwarz, on May 10, 2012. This is his sample answer of a final exam : Monetary and Fiscal Policies: Implication for Cambodia, one of the subjects that I learned during my master in Public Management. 

I believe that it is important for all Cambodians to know about some pertinent history, drawbacks of the dollarization, and the some suggestions on how to de-dollarize. Thus, I would like to share them here. 

Dollarization in Cambodia
ADB Report

Cambodia is a country typical of what economies call the Multiple-Currency Phenomenon (MCP). Four currencies are used in Cambodia, one of them - the US dollar (USD) - being predominant: 

The national currency, the riel, represents now less than 10% the money circulating in the country; the riel is a declining currency in the Cambodian economy. The share of the dollar among the currencies used in Cambodia has increased with the growth of the country; Cambodia is now a "dollarized" economy.

The situation is not the result of an explicit decision made by the RGC; it is the consequence of a loss of trust in the value of the riel dating back to the period of very high inflation during the years 1988-1991. Massive Central Bank financing of current budget deficit led to inflation in the range of 90-177% a year. Inflation and devaluation eroded public confidence in the national currency, and economic agents looked for a substitute currency capable of being used as a reliable unit of account, mean of payment and store of value.

The trend was reinforced by the arrival of UNTAC whose spending reached about 2 billion USD - when the GDP of Cambodia was no more than 4 billion USD. The dollar then became the de facto curerncy of the country.

Dollarizaiton has one main drawback: a loss of a part of our sovereignty in the determination of our monetary policy. It has one main benefit: macroeconomic and financial stability, but this benefit can one day a handicap if Cambodia stops being a net receipt of USD and if growth does not materialize for a few consecutive years.

1/ Dollarization reduces the independence of Cambodia monetary authorities and imposes on all economic agents discipline and competitiveness.

2/ Because dollarization can be sustained only in a context of continued inflow of dollars and high growth, Cambodia must strengthen confidence in the riel in order to be ready to face possible deterioration of the international and/or of the domestic economic context.

Since dollarization can be sustained only in a context of continued inflow of dollars and high growth, Cambodia must strengthen confidence in the riel in order to be ready to face a possible deterioration of the internatioal and/or domestic economic context. 

a/ a dollarized country must permanently attract dollars and sustain growth
Since USD cannot be 'printed' in Cambodia, dollarization can only be maintained by a permanent inflow of USD. That inflow of USD allows the Central Bank, the RGC and the commercial banks to keep a stock of USD to stabilize the value of the riel, to balance the capital account, repay the debt, pay the imports and provide liquidity to the economy; it allows the RGC to balance its budget deficit with grants and loans in USD. The inflow is provided by exports, tourism, development partners, Foreign Direct Investment (FDI) and remittances from Cambodian working or residing abroad.

Exports in 2010, mostly paid in USD, reached 5 bilion USD; almost 3 million tourists visited Cambodia in 2011; funding by development partners was about 1 billion USD; FDI was around 800 million USD. Amount of remittances are not known.

But among these five sources of USD, at least three of them are fragile:

  • Cambodia exports have a very narrow based - mostly garments - and depend on trade arrangement with the US and the E.U;
  • Development assistance will gradually decline in line with Cambodia development;
  • FDI are mostly dedicated to the garment sector and are as fragile as the sector itself.
In short, the system works as long as US dollars continue to flow in, but it will show its weaknesses as soon as the favorable current international context will start to deteriorate.

The sample applies to growth; if growth came to a halt, or slowdown for two or three consecutive years, Cambodia would be confronted to a brutal decline of its GDP/capita. Cambodia would be in a position to conduct a monetary and a fiscal policy that would smooth the impact of a crisis. Demand driven policy or monetary easing would not be an option for Cambodia. 

b/ Cambodia must strengthen confidence in the riel in order to be ready to face deterioration of the international context and/or of the domestic economic context. 

Dollarization can only be a temporary solution. At one point or another Cambodia will have to engage a "re-rielization" policy. But experiences of other countries have shown that de-dollarization is a long-term process that requires, first, restoring the confidence in the local currency and, second, more sophisticated financial markets.

Some measures into that direction have already been taken:

  • Civil servants and public contracts are paid in riels;
  • The price of listed companies at the Phnom Penh stock exchange is in riels (although actual transaction are USD dominated or USD based);
  • Interest rates on deposits in riels are higher than for USD deposits. 
But the RGC and the NBC could in due time take further steps:
  • Expand the obligation to quote all prices of goods and services in riels;
  • Create a new riel that would be worth 4 or 40 USD instead of 4000 today;
  • Expand the means of interbanking payment demoniated in riels; check-books and banking cards;
  • Abandon the "near fixed exchanged rate" and move towards a Currency Board Arrangement (CBA): the NBC would issue currency that is fully backed by foreign assets at a fixed exchange rate;
  • Make operations in riels more attractive in terms of security and costs;
  • Issue treasurey bills in riels;
  • Set Reserve Requirement Ratio (RRR) and deposit ration in riels;
  • Provide bank refinancing in riels and help foster lending in the national currency.
  • And, expand regional cooperation in order to protect our currency from sudden crisis or speculative attacks. 
Monetary experts use the expression "seigniorage revenue" to name the difference between the face value of a currency and the cost of producing it. A dollarized country does not benefit from seigniorage revenue; but that loss revenue is not the main issue. The real issue is that by abandoning our seigniorage rights we also abandon part of our sovereignty. A carefully and gradually managed "re-rielizaiton" process would take us on the path towards a fully recovered sovereignty.

September 23, 2012

I was thinking it should be time to change my job. I already finished my master in Public Administration and is about to finish another one at the end of 2012. Even if I haven't found a new job, still I decided to resign as I knew that the workplace will need to recruit more staffs for the next academic year. So, I needed to inform my supervisor before the day of interview for employees which means I was trying to help.

I went to my workplace at 10:40 AM and found my supervisor was waking up from sleep and ready to leave the office. I didn't know if he was working earlier. :P I went in and talked as below: 

" Me: How are you, Mr. A? 
Supervisor: Yeah. I am fine. How are you, dear? Anything I can do for you? (Smiling) 
Me: I am fine too, Hmm I would like to resign. (Speaking with fear) 
Supervisor: Yeah. That's good. (Smiling even harder)
Me: What do you mean by that? (Start frowning) 
Supervisor: I mean it's good that you tell me now because I am in the process of recruiting new teachers.
Me: Oh, how many teachers are you going to recruit this year?
Supervisor: Sorry. This 
is my job. I cannot tell you. (Still smiling)
Supervisor: (Rushed to grab a pen and paper and asked) Do you still have any books or any materials at home?
No, I already returned everything to you and I would like to request you to write a letter of recommendation and certificate of employment.
Supervisor: You have worked here for one year ...
No. I have worked here for two years.
Okay. That's fine.
So, I will have to write by myself or you do it for me?
You write it and I will see if it's like your performance here.
Thanks. That's it (Still frowning face)
Supervisor: Yes. That's it. "

Conversation ended there. I left quietly without saying bye. Maybe I deserved such response, but not after the three months break because I have done nothing wrong, but to ask him for resignation legally. 

I have been questioning myself what I have done to make him hate me that much. All of the staffs used to make mitakes, don't you think so? Whether mine was horrible or whatever, I already took the blame.

If I happened to own a company, I would not insult my staff on their resignation day. It's all over, isn't it? It's not worth talking about, what to value is the friendship after one is leaving.

He did not even ask me what I am going to do next or what my new job is. He was simply very happy to let me go. I mean at least, act as if I mean something to the institute even if he doesn't think so. Moreover, he did not even know that I have worked with him for two years. PFfff !!!

After all, 
I took it as an insult. There is no need to keep in touch with such person. I just don't get it when he responded to me that way after a very long break.

Pheww ... I am out of hell, but hey! I do like my colleagues there and the students. It was so much fun and loving that I think I will never get at any other workplaces. :D :D :D

September 20, 2012

On boulevard like Norodom or Monivong, we can see both traffic and street sign indicating its name, but there is never a street sign for Street No. 338 or 438 or whatever number. If a driver is not familiar with the street, he has to browse by driving around the area. Normally the number of these streets come in order.

This extract of Phnom Penh Street map indicates that the street number is somewhat jumbled
However, it does not apply to every street. Some order might be odd, even, or even jumbled but that is not the case since not everywhere is the same.

My suggestion is to place Street Sign on every corner of the street so that people know whether they should go straight, turn left, or turn right. We do have it, but it only exists on boulevard. It can be attached to a traffic sign, for example, in the picture shown below "Stop Sign". 

Somewhere near Olympic market
It could help save people time; and it also looks nice when we have standard street signs everywhere on the street.

September 13, 2012

There are thousands of companies in Cambodia, but not all of them have Human Resource Department (HRD) as some are so small and don't want to spend money on HR staff. Without HRD, some of the HR tasks are left to administrative staff to control the employees which I think is horrible. Some companies are equipped with HRD, but still the way they act is not so friendly to the staff or staff-to-be. For the word staff-to-be here, I mean those who wish to work there or already applied a job application and in the process of waiting for their HR staff's mercy to inform even if they could not make it. 

There are many ways that I consider as unfriendly or not so welcoming for those companies or institutions. First, they never respond to your e-mail no matter what you ask; yet they consider themselves as a professional. If I'm not wrong, they are the one who typed their e-mail in the job announcement in newspaper. Second, they will never let you know when you happen to fail the interview. Here I mean you might spend a couple of weeks checking your email curiously and hell they stay calm as water.

From that, I could feel how selfish and arrogant those HR staff are. They only care about the company's benefit by informing the successful candidate, leaving out others and they are simply lazy to inform as they consider it useless.    

However, not all of the institutions are bad, I had a very good experience with the HRD in DFDL Legal & Services for its standard Human Resource management. I remember they were so friendly with the recruitment process. First, I did not see any advertisement for the recruitment of Legal Assistant. They did post it over the internet - job classifieds in major recruitment agency website. However, I was unaware of that, but I had uploaded my CV to DFDL server. Later, I was informed via email that DFDL received my email and it will be kept in their database for job opportunity. A week after, I was contacted by its HR whether I am interested in the position available at DFDL. I went for the interview, but I did not make it. A week later, I was informed that I could not make to the second interview; and therefore, they would keep my data in their server for later opportunity. I think this is the coolest HR I have ever encountered. 

In short, I do hope that any other companies could do the same - value other's time. No one should be left ignoring and assume that they fail. That's not how a professional HR staff do! You know what assume actually means? It actually stands for ass + u + me, that means when you assume someone has done something wrong, you actually make an ass of you and him. Things don't work out that way, right? If I happen to own a company, I would definitely follow DFDL management style such as follows:

1. Inform the candidates after the company has received the application - some people might misspell the targeting email address, and they will never know if you have already received. If you are not that hardworking, you may set an auto-response which only takes a couple of minutes.

2. Include the salary that you may provide in the announcement. You may consider it not professional, but again think about the time a candidate has to ask for permission from their current workplace for your probably-less-pay interview. If things are clear, it will help your company as well as some of them don't have to come and surprise with what you've gotta give them. Oh, by the way, there are some organizations which pay interviewee 10$ per interview! I do remember it. Well, I do not expect all of the companies to do so. So, please just state your salary in the announcement.

3. Inform those who fail the interview as well. Do not leave out anyone. I call it "Respect" and "Professional" because there is an accountability in there.

That's it from me. Criticisms and Suggestions are welcome in the comment box below :)

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