Wednesday, 14 May 2008

Dollarization and the Cambodian Economy

I just got back from Cambodia, and something which has definitely changed in the last two years since I first went is that it's gotten a lot more expensive, and things are really escalating right now (they estimate that official inflation is running at about 28% a year right now). There are a few main reasons for that that I can see.

The first thing is the effective and total dollarization of the economy. They use the US dollar for everything, and when I say that, I mean US dollar bills. This is a remnant of the UNTAC era in the early 1990s, when UNTAC employees were paid in dollars and were looking to spend them. These days, everything over a dollar is priced in USD, and the local currency (the Reil) is only used for change at an extremely constant rate of R4000/$1 (so if something costs $2.50, you pay $3, and get R2000 back).

While this has provided in general a far more stable currency and exchange rate than a developing country might otherwise have, these days the primary trading partners of Cambodia (in addition to the US purchasing garments) are all countries which don't have a USD fix (Thailand, Vietnam, China, Australia). All of those countries have seen their currencies against the dollar appreciate over the past few years as the USD has tanked, meaning that everything is more expensive in Cambodia.

Furthermore, inflation is picking up because by adopting the dollar, as we all know, Cambodia has adopted US monetary policy. While the extreme loosening of credit as a result of the credit meltdown has, if anything, only helped to avoid a much more severe and quick economic downturn in the US, in Cambodia it's put way too much money into the building industry, meaning that prices and wages are rising dramatically, putting an upwards pressure on anything that you, as a foreigner, are likely to buy.

In addition, they're getting hit by the global food shortage. Cambodia is a net importer of food, and they're buying from non-dollar economies. That means that they're having to buy food, which is going up in price due to shortage situations, with a weakening currency.

This has left you in a situation where a countryside-raised chicken (very little meat, mostly bones and feathers) costs about $6 in a market. I can buy one here for as little as about $3 (okay, maybe $5 for an organic free-range one).

And then there's oil. I don't need to say any more here, but Cambodia isn't an oil producer of any import. So it's buying in oil and petrol, and that's getting expensive.

Add into this the rapid development of certain parts of the economy (mostly tourism and construction in the major cities), and you have a situation where the places you're likely to go and things you're likely to do are all a heck of a lot more expensive than they were just a few years ago.

Still, for the most part, a bargain compared to anywhere you might live, but not the ultra-bargain that most people would associate with Cambodia in the past.

BKK Continues the War on Passengers

Cory Doctorow of Boingboing has an ongoing series of articles (for example, writing about the LHR Terminal 5 Preview) on the open hostility of airports to their customers who might want to use an electrical socket. While airports used to have some electrical sockets around (mostly for the convenience of staff), it's only been recently that they've determined that customers were using them for laptops and recharging battery-operated devices, and have started blocking them off wherever possible.

This is definitely a complaint I have with Heathrow, as well as the fact that Heathrow (particularly the vile Terminal 4, which I now have to fly through en route to New York) is nothing other than a shopping mall with some gates attached.

Bangkok's new airport, Suvarnabhumi, has managed to take things a step beyond that by being openly hostile to all passengers. BKK's layout is on multiple stories, and the main "departure" level is level 4. This is where you have to hang out until your gate is called. Once your gate is called, you go through security, go to your gate area, and sit and wait for your flight. This is not that different from Heathrow's Terminal 3, where there are separate waiting rooms at the gates.

The problem here is that BKK's Level 4 has, in addition to no electrical outlets, nowhere to sit. Oh, wait, no, sorry, there are places to sit, but they're all in bars and restaurants. Oh, wait, no, sorry, I lied, there are about 4 seats every 25 metres or so, in the middle of very busy interchanges. The idea, I guess, is to take the Heathrow experience even farther and make sure that you have NO option other than to spend money while you're waiting for your gate to be called. And you want to hang out in Level 4 as long as you can, because once you go to the gate area, you can't come back out, and there's nothing there except for seats and a toilet.

So essentially they've said that if you're not going to spend money in the shops, stay the heck out of the airport.

I think something that Cory is missing here is that while he thinks that this is a matter of hostility to passengers, and is thus a bad thing, unfortunately it plays right into the explicit intentions of the airport operators. They want terminals to be horrible, horrible places, for a couple of reasons.

First, the airport operators lose money these days on the flight operations themselves. They make money from the shops, which are charged a massive rent. So it's in their interest to keep revenues at the shops as high as possible, and if you've got no other option to do anything while waiting for a flight, you'll probably shop and spend money.

But here's the kicker. The second reason that they want you to be unhappy is so that you'll want to go to a lounge, which is an oasis of calm in any airport. This means that you'll spend money on a better class of service, or fly more with one airline, so that you'll get to use the lounge. Is it any wonder that many of the articles about how great Terminal 5 were actually writing about the lounges? Heathrow Terminal 5 has six of them.

There, you'll find comfortable seats, no shops, all the electricity and network access you could want.

In the meantime, if you happen to be flying coach, you're SOOL.

Saturday, 10 May 2008

Hilarious Money Doodles - Not always funny

I'm in Cambodia at the moment, and just a few days ago I was in Siem Reap going to see as many temples as I could in half a day (which was all I had allotted in this whirl-wind tour), and the time had come to pay the driver for the mass driving he had done. Came down to $75 for the whole afternoon, including two very far-away temples (Beng Melua and Bantey Srei for those who've been, more of which in another post), which seemed a little high, but whatever.

And when I say $75, I don't mean "$75 expressed in the local currency." I mean 75 US Dollars, in US Dollar bills. For those of who haven't come to Cambodia, they've effectively adopted the USD for every single transaction, and only use Reil for units below $1, using an effective exchange rate of R4000=$1. So since nobody carries that much Reil, we had to pay in good old fashioned greenbacks.

One of the $20 bills that we received when we got change from a $50 bill (which is what the ATMs here give out) had a very humorous Where's George? notation on the top. Very humorous, no? Wouldn't it be clever to find out when you check that your bill made its way to a petrol service station in Siem Reap, Cambodia? Hahaha. How humorous that would be!

Even better, what joy it would be if your Hilarious Money Doodle was to make it over here! How hilarious!


This bill was like the plague over here. Our driver point-blank refused to take it, claiming (probably not incorrectly) that it was useless to him, as nobody would ever take it here, because it wouldn't look real once it had been written on. Since they don't have their own currency, and since there's been so much change in the USD notes recently, I guess I can't really evaluate whether that's true or not, but he was very upset about this note. In the end, he wanted us to go into the hotel to change it for another note that was more acceptable to him, and after a very long and hot and tiring (started the day up at 5am in Phnom Penh) day of temple stomping we refused, but to do so we had to literally just walk away from him. I felt bad, because he probably figured he was going to be stuck with that bill for a long time, but over here, they don't have confidence that any old bill that's torn in half and taped together or something like that is exchangeable at the bank, because it probably isn't.

Oh, and US? Please think of poor countries when you finally get rid of the $1 bill. Coins are great (the smallest note in the UK is now worth about $10), but over here they don't have coins and don't want them, and given the dollarization of the economy, that will mean that the minimum price of most transactions will become $5 which will be a killer for the economy.