BEHIND THE CURTAIN

Veal Kandal is the kind of village the Cambodian government doesn't want anyone to know about. The 40 farming families that live among dusty, drought-stricken paddies were facing ruin last week as the crops they need to survive wilted before their eyes. Thirteen years after a historic United Nations-brokered peace agreement, and despite several billion dollars in foreign aid that's been doled out to Cambodia since the 1991 accord, the village, only 30 kilometers from the capital Phnom Penh, still has no electricity or running water. Veal Kandal is no model for postconflict development; it's painful evidence of the failure of the nation-building project in Cambodia. "The more elections we have," says San Siek, 67, a widowed mother of five, "the worse our living conditions are."

The plight of San and her neighbors will surely be weighing on the minds of donor nations and international lending institutions as they gather in Phnom Penh this week to pledge their annual aid package to Cambodia. The group is expected to promise around $600 million for next year--$100 million more than in 2003. They will hail a country that is free from war, has held three elections since 1998 and is slowly strengthening democratic institutions.

Cambodia, however, also remains a country with a corrupt and incompetent judiciary, where the rule of law is a dream. After years of turning a blind eye to the country's glaring problems because of its tragic history of genocide, foreign donors are now facing some uncomfortable questions: Why has the poverty rate increased by more than 20 percent since 1996, when it's steadily decreasing in neighboring Laos and Vietnam? How could infant mortality be on the rise? And why has bureaucratic corruption skyrocketed? "We have set up the democratic facade," says Sam Rainsy, opposition leader of Cambodia's Parliament. "[But] the country has gone backwards."

Two recent reports on Cambodia bolster that assessment. A corruption report by the U.S. Agency for International Development states that as much as $500 million in potential government revenues is lost annually to smuggling, embezzlement and other illegal activities. A World Bank paper, aptly titled "Cambodia at the Crossroads," cites numerous achievements by the government but notes that the state has failed to meet agreed-upon benchmarks in areas such as poverty reduction, health, job creation and good governance. "What is needed is a concerted effort to strengthen, and in many cases build from scratch, the foundations of a modern chain of accountability," the report says.

Cambodian activists say foreign donors must share some blame for the slow progress, because they've not put sufficient pressure on the government to stop corruption. The donors counter that cutting aid as punishment for malfeasance would only worsen poverty. Nearly 25 percent of all foreign aid is spent on health care and education, and given that more than 40 percent of the country's 12 million people live on a dollar a day or less, pulling the aid plug could have catastrophic consequences. "People ask donors to use leverage, set benchmarks," says Japanese Ambassador Fumiaki Takahashi, whose country is the largest donor to Cambodia. "But if you stop [aid money], what would happen?"

For the past decade, Cambodians have voted for stability over prosperity. But strongman Hun Sen's ruling Cambodian People's Party may not be able to rely on that tradeoff much longer; more than half of the population was born after the Khmer Rouge was toppled in 1979, and they have few memories of war. The new generation expects jobs, roads, schools. Hun Sen has released a detailed economic-growth strategy that centers on boosting agricultural production and improving infrastructure. But it's hard to know if the plan is a genuine blueprint or another ruse aimed at maintaining the perks of power. The donors have a little leverage--at best they might persuade the government to finally enact an anti-corruption law. Ultimately the country will move forward only if Cambodians themselves hold their government accountable for its failures.

© 2004