Kem Ley’s murder puts Cambodia politics, economy at risk as unrest looms

Thousands of people take part in a funeral procession in Phnom Penh on July 24, 2016 for Kem Ley, a Cambodian political analyst and pro-democracy campaigner who was shot dead in broad daylight on July 10. Kem Ley's murder sent shudders through Cambodian civil society in a country already bristling with political tensions and where activists are frequently threatened by powerful interests.
TANG CHHIN SOTHY | AFP | Getty Images
Thousands of people take part in a funeral procession in Phnom Penh on July 24, 2016 for Kem Ley, a Cambodian political analyst and pro-democracy campaigner who was shot dead in broad daylight on July 10. Kem Ley's murder sent shudders through Cambodian civil society in a country already bristling with political tensions and where activists are frequently threatened by powerful interests.

Cambodia, one of Asia's fastest-growing economies, is at a tipping point amid an environment of volatile politics that threatens to disrupt the country's move to democracy and put its key industry in the firing line.

At the center of events is the murder of a popular political commentator.

Government critic and analyst Kem Ley was gunned down on July 10 in broad daylight at a Phnom Penh coffee shop. A suspect was quickly arrested and confessed to the crime, but speculation has remained high that it was a political assassination.

Kem Ley was known for criticizing both sides of Cambodia's polarized political landscape, which is dominated by the ruling Cambodian People's Party (CPP) and the opposition Cambodia National Rescue Party (CNRP), but the lion's share of his reproval was aimed at the former.

Widespread protests erupted following his murder, and human rights groups such as Transparency International have called for an independent investigation.

"Cambodia's politics have veered dangerously out of control," Joshua Kurlantzick, senior fellow for Southeast Asia at the Council on Foreign Relations, warned in a note last week. "The government's brutal tactics of the 1990s and early 2000s, when political activists were routinely murdered and opposition parties nearly put out of business, have returned."

Cambodia has a deep history of politically-motivated violence, stretching from the Khmer Rouge's totalitarian regime in the 1970s up until as recently. Last October, when two opposition parliamentarians were brutally attacked outside the National Assembly building, with Human Rights Watch warning that the act bore the hallmarks of an operation carried out by state security forces.

"Politics is at a critical juncture, the current situation is an absolute shamble," Jonathan Bogais, associate professor at the University of Sydney, told CNBC, of the currently volatile situation.

August 15, 2016: Activists protest outside the Phnom Penh Municipal Court  calling for the release of two prominent land rights activists Tep Vanny and Bov Sophea. The two were arrested by authorities for insulting a public official and sentenced to jail.
Satoshi Takahashi | LightRocket | Getty Images
August 15, 2016: Activists protest outside the Phnom Penh Municipal Court calling for the release of two prominent land rights activists Tep Vanny and Bov Sophea. The two were arrested by authorities for insulting a public official and sentenced to jail.

The CPP, led by Prime Minister Hun Sen, is one of the world's longest-ruling parties, having governed Cambodia since 1979.

But the regime is synonymous with allegations of corruption, fraud, censorship and human rights violations. Justice Minister Ang Vong Vathana was named as a shareholder in an offshore company incorporated by law firm Mossack Fonseca in the Panama Papers leak.

Opposition leader Sam Rainsy of the Cambodia National Rescue Party (CNRP), who has been in self-imposed exile in France since 2008 to avoid arrest on an old defamation conviction, called Kem Ley's murder an act of "state terrorism" in a Facebook post on the day of the killing, leading PM Sen to sue Rainsy for defamation.

According to The Cambodia Daily newspaper, the most recent suit was the third defamation case filed against the opposition leader in the past year alone.

Undeterred, Rainsy doubled down on his accusations on August 1 with another Facebook post, warning that the government was responsible for as many as 18 killings since 1997, The Cambodia Daily reported.

Civil unrest a risk

Recent developments indicate the country's transition toward two-party politics has seemingly collapsed, leaving young Cambodians with no outlet for grievances and creating a potentially explosive situation, Kurlantzick said.

In 2013, the CNRP nearly defeated the CPP, an outcome that had raised hopes for a more democratic system. The CPP has since promised reform and dialogue but progress has yet to materialize.

"More protests could be likely as people get fed up of corruption, and further violence is the worst-case scenario," Bogais agreed."There is a strong consensus among young people that there is a need for change."

Even with 2018 general elections on the horizon, the CPP is likely to emerge victorious despite suspicions over the murder case and general disillusionment with its autocratic regime.

"The opposition is dysfunctional. They've never been able to have any form of cabinet or shadow ministry and Rainsy, residing in France, has little role to play in politics," explained Bogais. "Even if new parties were to emerge, the PM would ensure their failure."

Economic danger

Political tensions were to blame for the closure of more than 70 garment factories this year, nearly equal to the number of factories that opened in 2015, the Garment Manufacturers Association in Cambodia (GMAC) told local media on Tuesday.

The production and exports of garments, ranging from footwear to apparel, is one of Cambodia's key growth drivers and economists have long warned the government to diversify away from the industry.

"I think the political situation has affected business, both businessmen and investors. When one country has instability in politics, it is difficult to make investments and there are concerns, especially from buyers," the Khmer Times quoted GMAC operations manager Ly Tek Heng as saying.

Moreover, only 20 new factories have opened so far this year, he added, noting a near-30 percent drop in orders from buyers.

If the closures restricted garment producers' ability to meet their orders, deterred investors or resulted in a visible impact on export growth, they could pose constraints to Cambodia's B2 sovereign credit rating,Moody's analyst Anushka Shah said.

Should political tensions continue for a prolonged period,resulting in a policy deadlock or distracting the government from economic reform efforts, that would also pose credit constraints, Shah warned.

Bogais explained, "The [garment] industry is run by partnerships with the government and companies set up by foreign investors so if there's a fear of political unrest, no doubt foreign investors will rethink their presence."

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