In early June, Hun Sen’s ruling party the CPP won about 70% of commune councils in the local elections. The turnout was impressive at 90% (compared with 65% in 2012) with peaceful polls, despite a tense climate, questionable fairness and institutions being controlled by the CPP. The opposition party the CNRP nevertheless made further electoral gains compared with the previous local ballot.   

Impact on country risk

Long-serving PM Hun Sen has mixed feelings after his first major political test since the national elections in 2013. He welcomes his party’s victory – as does the investor community – but the outcome shows a further erosion of his electoral base to the benefit of the CNRP. Therefore, the probability of a close result in the 2018 national elections has further increased. In 2013, after the CNRP won 45% of seats thanks to support from young people, the urban middle class and garment workers, it accused the CPP of fraud and boycotted Parliament during a year-long political crisis. Now, until the next elections, it is feared that the regime will be more repressive, with an increase in intimidation, crackdowns against the opposition and protests. Hun Sen is indeed determined to use all legal and military means to stay in power and has threatened to trigger a civil war if the CPP is defeated. His opponent could be Sam Rainsy, the former opposition leader, who has been allowed to return from exile as from mid-June. However, since he had to resign last February after the CPP threatened to dissolve his party, he may leave his candidacy to Kem Sokha, the new CNRP leader. Although the political outlook is uncertain, Hun Sen is still expected to remain in office but at the cost of a prolonged and risky period of social instability, worse than in 2013. It could have a negative economic impact, particularly on Cambodia’s dominating garment sector. In such a context, Phnom Penh will rely more than ever on China, its closest ally and financial partner, while facing potential criticism and sanctions from the EU, its most important garment market, in the event of the elections being deemed unfair. Thus, until the elections in July 2018, Credendo will wait before considering a potential upgrade of Cambodia’s MLT political risk rating from 6/7.

Analyst: Raphaël Cecchi, r.cecchi@credendo.com