Cambodia: Long-serving PM’s handover of power to his son will maintain the family’s grip on the country and political stability

Event

On 23 July, the Cambodian People's Party (CPP), the party of Asia’s longest-serving PM and Cambodia’s incumbent head of government, Hun Sen, won again the general elections by a landslide, securing 120 out of 125 seats in the National Assembly. In early August, the king appointed 45-year-old Hun Manet, Hun Sen’s eldest son, as the country’s new prime minister.

Impact

The absence of any serious challenger, resulting from frequent crackdowns in the opposition, explains Hun Sen’s landslide victory. Last May, the candidacy of the Candlelight Party, the main opposition party, was rejected due to alleged invalid registration to the polls – two months after his leader had been sentenced to 27 years of prison for alleged treason. While those outcomes and developments look very familiar in the light of the country’s political history of the past decades, Hun Sen’s faster-than-expected handover of power to his son and army chief Hun Manet made the news, particularly after 38 years at the head of the government. While Hun Sen said he will remain the CPP’s president and a very influential political figure behind Hun Manet, the new strongman will consolidate the family’s firm grip on the country. Indeed, after a gradual handover preparation, no change of direction and political system – except the rejuvenation of officials – is expected in a country where the CPP’s iron rule and control of the judiciary and reduced fundamental freedoms are there to persist.

Furthermore, Cambodia’s close ties with China on all fronts – notably the military – will continue and potentially grow stronger amid rising geopolitical tensions. This comes with no surprise given Cambodia’s economic dependence on China as a major investor in the country, particularly in transport infrastructure in the framework of the Belt and Road Initiative, which leads in turn to high financial dependence on China as a top creditor, owing around 40% of its external debt. Therefore, unsurprisingly, the Chinese Minister of Foreign Affairs was the first head of government to pay a visit to Hun Manet, one week before his taking of office on 22 August. Meanwhile, over time, eroded democracy has harmed relations with the USA and the EU, its top export markets for garments, which, however, refrained from sanctioning the country, fearing to leave it even more into Chinese hands. Under Manet’s rule, it thus remains to be seen how bilateral relations will evolve, as he will probably be willing to keep a neutral stance in the volatile geopolitical environment. Manet’s ruling occurs in a mixed economic context. On the positive side, Cambodia enjoys a strong rebound in tourism, which could help further reduce the heavy current account deficit (28.6% of GDP in 2022), while domestic demand is strengthened by flat inflation. On the negative side, those developments are offset by the ongoing decline in manufactured exports amid weak Western demand and slow Chinese recovery. Hence, real GDP growth forecast for this year might just exceed last year’s performance of 5%.

Looking ahead, Credendo’s short-term political risk rating (3/7) has a stable outlook in the near term, with stabilised foreign exchange reserves. The business environment risk (F/G) has potential for upgrade if external conditions improve. As for the MLT political risk, political stability and continuity maintain the rating in category 6/7 for the time being.

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