FEBRUARY 15, 2011
OPINION ASIA
Wall Street Journal
Phnom Penh should use its stock exchange opening later this year as an opportunity to formally adopt the U.S. dollar.
Cambodia doesn’t get a lot of attention on the world stage, but it deserves a closer look because of the way its economy has quietly exceeded expectations in recent years. Growth has been running at near double-digit rates over the last decade, and the country is attracting significant foreign investment, particularly in the textile and tourism industries. A big part of this success is due to its use of the U.S. dollar as its primary currency.
The government didn’t orchestrate this monetary reform; in fact it resisted most of the way. But Cambodians voted with their wallets, shunning the Cambodian riel and demanding dollars.
This is no doubt due to the country’s tragic history, which made its people especially aware of the mischief governments can play with currencies and property rights. The same Khmer Rouge that killed one-quarter of the population in the late 1970s also abolished money and title to land. Though the riel came back into circulation in 1979, people preferred to use the Thai baht initially and then, once international aid poured into the country in the early 1990s, the dollar.
The use of the dollar has soared since then, accounting for 90% of the currency in circulation today and 97% of banking deposits. Most banks don’t even lend in riel.
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