Cambodia was a farming area in the first and second millennia BC. States in the area engaged in trade in the Indian Ocean and exported rice surpluses. Complex irrigation systems were built in the 9th century. The French colonial period left the large feudal landholdings intact. Roads and a railway were built, and rubber, rice and corn grown. After independence Sihanouk pursued a policy of economic independence, securing aid and investment from a number of countries.
Bombing and other effects of the war during the Vietnam War damaged rice production. Lon Nol had a policy of liberalising the economy. This was followed by the victory of the Khmer Rouge and the emptying of the cities. After the defeat of the Khmer Rouge, a Five Year Plan was adopted, aiming to improve agriculture, industry and distribution, with a slogan of "export and thrift". Today, Cambodia remains a largely agricultural economy and industrial development is slow.
Pre-colonial economy
Cambodia is not a mixed economy. Parts of the region now called Cambodia were inhabited during the first and second millennia BCE by a Neolithic culture that may have migrated from southeastern China to the Indochinese Peninsula. From 2000 BCE Cambodians started to domesticate animals and started growing rice. By 600 BCE, Cambodians were making iron tools. By the 1st century CE the inhabitants had developed relatively stable and organized societies. The most advanced groups lived along the coast and in the lower Mekong valley and delta regions where they cultivated rice and kept domesticated animals. They worked metals, including iron and bronze, and possessed navigational skills.
Influences from India came from about 100 BCE, as a consequence of increasing trade in the Indian Ocean. Funan, the earliest of the Indianized states, was founded in the 1st century CE, in the Mekong delta. The population was probably concentrated in villages along the Mekong and the Tonlé Sap River below the Tonlé Sap. Traffic and communications were mostly waterborne on the rivers and their delta arms. The area was a natural region for the development of an economy based on fishing and rice cultivation.
There is considerable evidence that the Funanese economy depended on rice surpluses produced by an extensive inland irrigation system. Maritime trade played an important role in the development of Funan, and the remains of what is believed to have been the kingdom's main port, Óc Eo (now part of Vietnam), contain Roman as well as Persian, Indian, and Greek artifacts.
By the 5th century, the state exercised control over the lower Mekong and the lands around the Tonle Sap. It commanded tribute from smaller states in the area now comprising northern Cambodia, southern Laos, southern Thailand, and the northern portion of the Malay Peninsula. Indianization was fostered by increasing contact with the subcontinent through the travels of merchants, diplomats, and learned Brahmins.
Beginning in the early 6th century, civil wars and dynastic strife undermined Funan's stability. Funan disappears from history in the 7th century. The successor state, Chenla, is first mentioned in the Chinese Sui History as a Funan vassal. In the 8th century factional disputes at the Chenla court resulted in the splitting of the kingdom into rival northern and southern halves known as Land (or Upper) Chenla and Water (or Lower) Chenla. Land Chenla maintained a relatively stable existence, but Water Chenla underwent a period of constant turbulence, partly because of attacks from the sea by the Javanese and others.
The Angkorian period or Khmer Empire lasted from the early 9th century to the early 15th century and was the golden age of Khmer civilization. Indravarman I (877–889) extended Khmer control as far west as the Korat Plateau in Thailand, and ordered the construction of a huge reservoir north of the capital to provide irrigation for wet rice cultivation. His son, Yasovarman I (889 - 900), built the Eastern Baray reservoir. Its dikes, which may be seen today, are more than 6 kilometers long and 1.6 kilometers wide. The elaborate system of canals and reservoirs built under Indravarman I and his successors were the key to Kambuja's prosperity for half a millennium.
By freeing cultivators from dependence on unreliable seasonal monsoons, they made possible an early "green revolution" that provided the country with large surpluses of rice. Kambuja's decline during the thirteenth and fourteenth centuries probably was hastened by the deterioration of the irrigation system. Attacks by Thai and other foreign peoples and the internal discord caused by dynastic rivalries diverted human resources from the system's upkeep, and it gradually fell into disrepair.
Angkorian society was strictly hierarchical. The king, regarded as divine, owned both the land and his subjects. Immediately below the monarch and the royal family were the Brahman priesthood and a small class of officials, who numbered about 4,000 in the tenth century. Next were the commoners, who were burdened with heavy corvée (forced labor) duties. There was also a large slave class who built the enduring monuments.
After Jayavarman VII's death, Kambuja entered a long period of decline that led to its eventual disintegration. The Thai were a growing menace on the empire's western borders.
Colonial economy
Aside from collecting taxes more efficiently, the French did little to transform Cambodia's village-based economy. Cambodians paid the highest taxes per capita in Indochina, and in 1916 a nonviolent tax revolt brought tens of thousands of peasants into Phnom Penh to petition the king for a reduction. The incident shocked the French, who had lulled themselves into believing that the Cambodians were too indolent and individualistic to organize a mass protest. Taxes continued to be sorely resented by the Cambodians. In 1925 villagers killed a French resident after he threatened to arrest tax delinquents.French Protectorate, 1863-1954, ch. 5 For poor peasants, the corvée service (a tax substitute) of as many as ninety days a year on public works projects, was an onerous duty.
According to Hou Yuon (a veteran of the communist movement who was murdered by the Khmer Rouge after they seized power in 1975), usury vied with taxes as the chief burden upon the peasantry. Hou's 1955 doctoral thesis at the University of Paris was one of the earliest and most thorough studies of conditions in the rural areas during the French colonial era. He argued that although most landholdings were small (one to five hectares), poor and middle-class peasants were victims of flagrantly usurious practices that included effective interest rates of 100 to 200 percent. Foreclosure reduced them to the status of sharecroppers or landless laborers.
Although debt slavery and feudal landholding patterns had been abolished by the French, the old elites still controlled the countryside. According to Hou, "the great feudal farms, because of their precapitalist character, are disguised as small and mediumsized farms, in the form of tenancies and share-farms, and materially are indistinguishable from other small and medium-seized farms." Whether or not the countryside was as polarized in terms of class (or property) as Hou argues is open to debate, but it is clear that great tension and conflict existed despite the smiles and the easygoing manner of Khmer villagers.
To develop the economic infrastructure, the French built a limited number of roads and a railroad that extended from Phnom Penh through Battambang to the Thai border. The cultivation of rubber and of corn were economically important, and the former was a response to the high market demand. This shift to producing commodities transformed the economy. Production techniques changed as a response to the need of more intensive factor inputs. The prosperous 1920s, when rubber, rice, and corn were in demand overseas, were years of considerable economic growth, but the world depression after 1929 caused great suffering, especially among rice cultivators whose falling incomes made them more than ever the victims of moneylenders.
Industry was rudimentary and was designed primarily to process raw materials such as rubber for local use or export. There was considerable immigration, which created a plural society similar to those of other Southeast Asian countries. As in British Burma and British Malaya, foreigners dominated the developed sectors of the economy. Vietnamese people came to serve as laborers on rubber plantations and as clerical workers in the government. As their numbers increased, Vietnamese immigrants also began to play important roles in the economy as fishermen and as operators of small businesses.
Chinese people had been in Cambodia for several centuries before the imposition of French rule, and they had dominated precolonial commerce. This arrangement continued under the French, because the colonial government placed no restrictions on the occupations in which they could engage. Chinese merchants and bankers in Cambodia developed commercial networks that extended throughout Indochina as well as overseas to other parts of Southeast Asia and to mainland China.
Economic developments after independence
The predominance of agriculture and the lack—or neglect—of real industrial development have characterized Cambodia's modern economy since independence in 1953. Wet rice cultivation traditionally has played a key role in peasant subsistence, in national self-sufficiency in food production, in trade relations with other states, and in governmental revenues for national development. Conversely, the government has made few attempts to industrialize the nation, acquiesced to a pragmatic combination of socialism and small-scale capitalism, and the country achieved some limited rehabilitative goals.
Cambodia's economy struggled to keep up with other countries in Southeast Asia due to the problems in developing its human and physical infrastructure. This is indicated by a relatively low exports per capita level. In the late 1980s, government policies fundamentally relied upon the nation's own sparse resources—chiefly agriculture, a nascent industrial base, and modest foreign aid from Comecon countries and nongovernmental international organizations. The level of exports per capita only started to increase after the 1980s.
Sihanouk's peacetime economy (1953–1970)
Sihanouk's political neutrality, which formed the cornerstone of his foreign policy, had a significant effect on Cambodia's economic development. Sihanouk insisted that the economic dimension of neutrality meant either total rejection of international aid (as practiced by Burma under Ne Win) or acceptance of foreign economic assistance from all countries without strings attached. Indeed, during the first decade that he was in power in newly independent Cambodia (1953–63), the prince carefully practiced his "purer form of neutrality between East and West" in seeking foreign economic assistance for development (see Cambodia under Sihanouk, 1954–70, ch. 1).
In 1963 however, Cambodia's economy started to stagnate when Sihanouk decided to link his economic neutrality policy to the country's territorial integrity and border security. He rejected further assistance from the United States, because Washington supported the Republic of Vietnam (South Vietnam), and from Thailand, with which Cambodia had continuous frontier disputes. In a related move, Sihanouk nationalized trading companies, banks, insurance, and major industries, thereby causing economic deterioration between 1963 and 1969.
The 1967 Samlot (Batdambang) revolt and the February 1970 government decision to demonetize (or exchange) the old 500 riel (for value of the riel—see Glossary) banknotes were crucial events contributing to the end of the Sihanouk era (see Into the Maelstrom: Insurrection and War, 1967–75, ch. 1; The Second Indochina War, 1954–75, ch. 5).