How to best activate economic growth in the developing world? I investigate four ways that can quickly stimulate rapid growth in a country and up-skill and transform a traditional primary economy into a secondary economy:

The injection of Foreign Direct Investment has the potential to transform an economy from zero to rapid growth. The transference of tacit knowledge and skills can help develop a country and increase the average income and standard of living. Four ways to transform an economy are as follows:
1. Provide a stable and competitively priced labour force:  
Provide a stable political and social environment with enough competitively priced employees to satisfy demand.  
2. Enact transparent laws with effective provisions to impose penalties and recoup business losses:  
Enact laws in English, which are consistent with western laws and regulations. An effective rule of law, especially in contract, underpins commercial trust and will provide foreign creditors with sufficient security to start and continue to invest in a country. Transparent and equitable laws should provide recourse for creditors against debtors if they fail to repay their loans.
3. Low taxation on foreign investors:  
Foreign investors will be induced to commence operations in a country with lower than average taxation.  
4. Create user-friendly taxation and accounting (reporting) standards:  
Provide accounting and taxation policies, which are simple and easy to navigate and use.   
5. Encourage Foreign Direct Investment (“FDI”) through education and marketing:
Educate and market to potential investors about the benefits of commencing operations in that country.  Make it easy for foreign companies to inject capital into a country and commence operations.  

Are donations enough to save Cambodia? Should the West be looking to substitute charity with more knowledge capital and foreign direct investment?

I just returned from a truly eye opening trip to Cambodia. A question lingers in the back of mind -- How can western nations better help these people? It was immediately evident that the next hurdle for Cambodia will be to convert charitable donations into sustainable / organic economic growth and entrepreneurial activity. The question is how?

As a tourist it is very easy to become lost in the solace of Angkor ruins, massage parlours, yoga studios and French-cuisine in the newly manufactured tourist hubs of Siem Reap and Phnom Penh. Rising scepticism is unavoidable amid the French croissants, tourist polish and glowing travel write-ups, juxtaposed to the real situation with 40% below the poverty line and strong bilateral ties with North Korea (i.e. the poverty line relates to less than USD$1 per day). The glitzy hotel polish, for western eyes does little to disguise the immense poverty, suffering and trauma of the Cambodian people. The country is plagued by deep rooted scarring (both physical and mental), the severity of which only becomes apparent from looking into the eyes of the street vendors, beggars and tuk tuk drivers.

It is quite apparent that the Khmer Rouge (1975-1979) and the Killing Fields are just the tip of the iceberg in a country where there has been a string of wars only officially ending in 1999. Experienced tourists and expatriates, whisper of continued civil unrest rumbling deep in the jungle. This hardly comes as a surprise to me in a country, where political turmoil and political unrest have become simply a way of life. Adverse poverty, physical injuries and post-traumatic stress disorder will continue to haunt the community for many years to come. It seems that everyone has a war story to tell; even my tuk tuk driver, Nga, fought for the Khmer Rouge as a child soldier. He was recruited when he was 12 years old and fought for about 17 years in the jungle near Seam Reap until the end of the war in 1999. I was somewhat shocked as he recounted his time in the Khmer Rouge with fond memories of guns and rocket launchers and complete apathy towards murder and death. This normalisation of war has a broader context in Cambodia as the community has developed an acceptance for many things which are normally perceived unethical or taboo (e.g. slavery, rape, oppression and murder). The ‘Wild-Wild East’ was coined by journalists in the 1990’s and this term is still very relevant in describing the country. Nga summed up Cambodia with one very brief sentence, ‘Phnom Penh have very nice hotels and tourist temples…then as you drive out of the city limits you can get anything that you want….cheap guns, grenades, tanks, drugs and [even] young girls’.    

Amid a renaissance of Angkor tourism, tens of thousands of disgruntled textile workers took to the streets of Phnom Penh in late December 2013 to protest against the minimum wage of USD$80 per month. Prime Minister Hen Sen has taken a very hard-line against the protesters by banning all future demonstrations and street marches in Phnom Penh. The Government’s decision to increase the minimum wage by a measly USD$15 per month was considered insufficient, with expectations for it to double to USD$160 (compared to China with a minimum wage of USD$260). Subsequently the demonstrations were quickly dispersed by a small army wielding steel bars, metal pipes, batons, sticks and axes yielding four deaths. This type of violence and oppression has become normalised in Cambodia and comes as a chilling reminder to the locals and the world of the Pol pot era.

Cambodia has a very dark past and will continue to have a very dim future unless the West steps up and helps. The West have made voluntary foreign aid donations from a combination of Governments and NGO’s, estimated at about USD$5.5 billion since 1993 (Charles 2013). The next challenge for Cambodia will be to convert charitable donations to sustainable economic growth and entrepreneurial activity. Although this is not impossible, in many ways donations and economic growth are competing ideologies. The main outputs that transpire from charitable donations in Cambodia are developments in health, nutrition, infrastructure and education. Once these basic needs have been satisfied, evidence suggests that donations are no longer constructive in terms of aiding development in a society. A number of academics write about the dark side to foreign aid in Cambodia and they talk about corruption, aid dependence and the failure of free handouts developing into true organic economic growth (Ear, 2012 & Keo, 2013). A key goal for the west over the next decade should be to start transferring donations to active foreign direct investment to provide opportunities and organic growth in Cambodia. This would hence provide a continuous drip stimulus of capital into the economy (i.e. capital refers to both knowledge and financial capital). This way, we can organically increase employment in Cambodia and avert another spiral into the grasps of another oppressive regime or worse still a war.