BY MR. HOEM SEIHA
February 15, 2010
By the early decade of 2000s, Cambodia saw a stable pace of gasoline prices of around 1500 riels per liter. By the late 2000s, however, the prices of gasoline changed the pleasant moments to the painful ones due to the substantial growth of global demand for gasoline.
The prices of refined oil have tripled, reaching the highest of 5250 riels per liter for premium gas, according to Radio Free Asia 2008, and the currently-stable price of 4150 riels. These soaring prices of gasoline have adversely contributed to economic recessions in the whole country.
One of the adverse impacts of steeply raised prices of gasoline is a reduction in macroeconomic growth. According to Cambodia Economy Profile 2009, economic growth rate dropped below 7% in 2008 as a consequence of the global economic downturn partially caused by the rises in oil prices.
Ms Kim Reasmey, 31, a professor of economics at IC, said, ' The rising of oil prices has indirect impacts on not only small but also large scale economy.' She added, 'The growth of GDP has slightly dropped as a result of raised oil prices.'
Industrial growth rate lagged behind in productions by only 8% in 2008, compared to the past seven years when oil prices were threefold low, according to the same source.
Cambodia's industry depends largely on garment sector. Garment factories depend on exports of their products to neighboring countries, but due to global crisis partially induced by oil prices, the demand for redundantly-imported garment products has then decreased.
Agricultural sector has been also affected by the rises in oil prices. A report in the Thirty-first session of IFAD's Governing Council, 14 February 2008, stated that the increases in fuel prices have raised the costs not only of producing agricultural commodities, but also of transporting them.
'Most farmers currently employ modern technology such as tractors, harvesters, and other farm machinery, all of which are activated by fuel,' said Professor Kim Reasmey. She added, 'They spend a lot of money to buy petroleum for their agricultural productions, but at harvesting season, it yields unfavorable results.'
Another adverse impact of high price gasoline is a reduction in microeconomic growth. Some companies and service providers have to maintain their prices of products or reduce their spending by laying off redundant staff because of the decreases in the number of customers or clients and workloads.
Mr. Tin Sophal, 25, a marketing supervisor of Paramount Angkor Tours, said, 'Though the prices of gasoline have risen sharply, the company has still maintained the prices of transportation offered to the clients.' This can reflect that the company has currently profited less when compared to the time of low prices of gasoline.
Public spending increased compared to the last four years. The high gasoline prices lead to sharp rises in the costs of transportation, foods, services and other general imported products, which contributes to high expenditure on public administration and other operations of the government.
Heng Reaksmey reported in September, 2005 in VOA that the government is also trying to cut down 10% of the fuel used by the government institutions to help the farmers in tilling their farms, and pumping the water for the people. This reflects that, though gaining from tax on imported fuel, government's annual spending over-increases.
In addition to a reduction in micro and macro-economic growth, according to Radio Free Asia 2007, Rong Chhun, President of CITA, told RFA that the soaring prices of gasoline directly affect households, especially poor people, teachers, government workers, soldiers, factory workers, and those who earn slightly more than $1 per day. Motorists and taxi drivers are also observed to be affected by the rises in gasoline prices.
Mr. Rattana, 29, a tuk-tuk driver said hopelessly while sitting on his three wheel tuk-tuk along with other tuk-tuk and motor taxi drivers, 'The prices of gasoline have increasingly gone up, but we can't raise our prices of transportation services in accordance with the rising gasoline prices, though.' 'If we do so, the clients won't ride our tuk-tuk', he added in a desperate way, 'so we earn less than before.'
Hike prices of gasoline has been still a big issue for the health of economy, both micro and macro and household levels. 'If the prices of gasoline still continue rising, the ones who suffer the most are the vulnerable grassroots,' said one of the tuk-tuk drivers, who desperately propose a reduction in oil prices.
