Event

The Supreme Court has dissolved the main opposition CNRP party (Cambodia National Rescue Party) and banned 118 of its officials from political activities for the next five years. Its parliamentary and local seats are to be redistributed among the other parties, primarily benefiting the ruling CPP party (Cambodian People’s Party). Meanwhile, CNRP leader Sam Rainsy remains in exile whereas his successor Kem Sokha was arrested last September for alleged participation in an international conspiracy against the government. Most CNRP members have resigned or left the country. No appeal is allowed.   

Impact on country risk

This decision by a court led by a CPP figure and finalizing a CPP lawsuit, concludes the CPP’s continued crackdown against media, civil society and the opposition since CPP’s relatively disappointing outcome at local elections last July. With merely a small opposition remaining, the CPP victory at next year’s parliamentary elections seems secured and will avoid a repeat of the 2013 polls which the CPP won by its closest margin ever. Therefore, Prime Minister Hun Sen is expected to add five more years to his long-standing rule. What is seen as a democratic setback has been followed by western condemnation and might pave the way to EU and US sanctions. They both have the capacity to put pressure on Cambodia as they are the two largest export markets for its key garment sector, and might in theory contemplate a suspension of their preferential bilateral trade regime. The US has already stopped aid. However, in the coming months, the US and EU attention will be focused on more urgent domestic issues. Thus, it remains to be seen whether any sanction threats, particularly hitting Cambodian exports, will materialize in the absence of fair elections in 2018. What is sure though is Cambodia’s continued and increasing reliance on its Chinese ally. Solid financial and political support from a stronger China makes indeed Hun Sen look more confident in rebuffing any criticism and potential western sanction threats. Moreover, a dissolved opposition and a tougher security policy should fuel political continuity and domestic stability, thereby contributing to keeping a stable investment climate and a strong growth trajectory. As a result and unless EU/US sanctions on exports are taken, political risk might in fact not deteriorate from those latest developments.

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