With assistance from the United States, Cambodia passed a law providing for prosecution of senior leaders of the Khmer Rouge in a mixed tribunal and is in discussion with the United Nations about making it operational. Cambodia was admitted to the Association of Southeast Asian Nations (ASEAN) in 1999 and joined the World Trade Organization in late 2004.

The past decade witnessed the establishment of important governing institutions, including a new constitution and national assembly. Regular national elections have been held, starting in 1993 and again in 1998 and 2003. In a move toward decentralization, Cambodia’s first multiparty local elections were held on February 3, 2002.

Cambodia's struggle to rebuild comes after 30 years of civil strife and war, including the genocidal Khmer Rouge period. Educated Cambodians—teachers, managers, doctors, nurses and other skilled professionals—were specifically targeted by the Khmer Rouge and almost completely wiped out. A new generation of Cambodians will have access to better educational opportunities. However, the harsh legacy of the past still endures.

Cambodia ranks 130th out of 173 on the United Nations Development Program’s 2002 Human Development Index. Annual per capita GDP is less than $300. Agriculture remains the main source of income for most Cambodians, more than 80% of whom continue to live in rural areas. Approximately 36% of all households live below the poverty line.

Social indicators are among the worst I the region. Life expectancy is only in the mid fifties. Infant mortality stands at 95 per 1,000 live births. Maternal mortality rates are among the highest in Asia. Cambodia’s also faces the most serious documented HIV/AIDS epidemic in the region. Official adult literacy rates are placed at 55% for females and 71% for males. Only one in three girls complete primary school; for boys, the rate is just over 50%.

Not surprisingly, Cambodia's shattered society, ravaged infrastructure and decimated human resource base from the many years of war and neglect constitutes a serious constraint to development. As a result, improving skills and building institutions is a key concern in virtually every area of society.

Cambodia is now a country in transition at many levels. Politically, it has shifted from communism toward democracy. Economically, it has moved from being one of the most closed economies in the world to one of the most open. After years of conflict there is now relative stability and peace. Cambodia is also strengthening international ties within the region and beyond. Among developing countries and especially transition economies in the region, Cambodia stands out for having a dynamic civil society. The social, political and economic fabric of the country has changed radically over the past decade, creating many new opportunities. The entrepreneurial skill, the determination to survive and succeed, the maturation of civil society, the willingness to try new ideas, the resilience of the Cambodian people—all provide grounds for hope, despite the tragedies and violence of the past.

High Population Growth Rate
Cambodia’s population now exceeds 13 million. While the population declined during the Khmer Rouge period, these losses have been more than made up by high fertility over the past two decades, especially in the baby boom of the early 1980s. Cambodia’s population growth still exceeds 2% per year, high by ASEAN standards and out-paced only by Laos within the region.

Depleted Human Resource Base
Cambodia’s human resource base is seriously depleted following years of fighting and inadequate financial resources for education. The situation is especially striking in comparison to other countries in the region. For example, the UNDP Development Report for 2001 placed literacy levels for the population over age 15 at 68%. By contrast, the same report places literacy rates at more than 93% in Vietnam, more than 95% in Thailand and more than 83% in China.

Rapid Growth of the Labor Force
High rates of population growth mean more and more Cambodians are entering the job market each year. The population aged 15-64 was estimated at 7.04 million in 2001; by 2011, it should reach 9.68 million. In other words, there will be some 230,000 new entrants into the labor force each year for at least the next several years, most of whom will have only the most rudimentary skills. Providing productive employment for these new entrants will be difficult, underscoring yet again the importance of economic growth in meeting Cambodia’s employment and income requirements.

High Percentage of Households Headed by Women
Nearly 20 percent of all households in Cambodia are headed by women. This very high percentage of female headed households includes older women whose husbands died or disappeared during the Khmer Rouge period, as well as younger women affected by high rates of divorce, separation and abandonment.

Growing Pressures on Land and Common Property
Land tenure is one of the most critical issues facing Cambodians. Within the past decade, with refugee repatriation, increased population growth and the advent of free markets, new pressures and demands have been placed on land. Following market forces, maximum demand has been placed on commercial, roadside, productive and urban lands. Rural households are coming under increased pressure from loss of access to what have been common public resources. Forest concessions, licensing of fishing lots and private management of irrigation canals are also cutting off access to critical sources of livelihood.

A rational and equitable system of registering land and recognizing land ownership rights has yet to be developed to replace the land tenure system that was dismantled during the Khmer Rogue regime. This uncertainty leads to bitter disputes over land ownership in various regions of the country. In some cases, it has resulted in the confiscation of land by the military, former soldiers, and the rich and powerful. These disputes have spread from traditional agricultural areas into lands that have recently been de-mined as well as into former Khmer Rogue areas where in some areas fighting continued until 1998.

A dual system of control and ownership is emerging in areas where land is being acquired by people and institutions outside of the community for purposes other than mere subsistence farming. Land use rights are recognized locally by people within the community and formal legal rights are recognized by people outside of the community. The supply of formal institutional mechanisms in the form of land certificates has not kept pace with the demand. In many cases, the poor have become increasingly marginalized in the process.

Landlessness is an increasingly critical development and human rights issue in Cambodia. Land ownership is becoming increasingly concentrated, and landlessness in rural areas is accelerating rapidly. When land was redistributed in the early 1980s, families received land based on family size. With the rapid increase in young persons marrying and entering the labor force, family land holdings can no longer be divided to meet the needs of new family units (22%). Household health care expenses are also forcing the sale of land (21%), as well as general economic pressures related to poverty (13%). Growing landlessness is a significant factor in increasing migration.

According to an Oxfam survey, landless families represented about 3% percent of total families in 1983. By 1999, this ratio had increased to about 12%, with landlessness in female-headed households much higher at 21%. Within fishing communities, landlessness can be as high as 24%. Oxfam estimated that this trend would continue with the rate of landlessness reaching about 15% of total households in 2001.

A new land law is in the process of being implemented. It is designed to help address land tenure issues. However, in the absence of a fair judicial system and access to justice, it could also be used as an opportunity to exercise unfair practices to secure questionable land tenure claims.

Underemployment
Formal employment statistics tend to underestimate the problem. In fact, underemployment is an important issue, especially in the unproductive agricultural sector.

Migration
Migration is an increasing in virtually every form: seasonal migration from rural to urban areas to supplement agricultural income; internal migration between rural areas (57 percent of all internal migration), predominately from provinces with high rural population densities; migration from rural to urban areas, particularly Phnom Penh; and, international migration, primarily to Thailand. This movement reflects growing under-employment and landlessness in rural areas. Promoting development in rural areas and better land and natural resource management are crucial to address this issue.

Youth and young adults are disproportionately represented among migrants. The relatively high number of female migrants to Phnom Penh in recent years reflects rapidly growing job opportunities in light manufacturing. This shifting population has many implications, including increased vulnerability and isolation away from the extended family. It also results in new social and economic networks within areas that are receiving the most in-migrants.

Trafficking of Women and Children
Trafficking in persons is one of the leading human rights issues facing Cambodia. It also damages Cambodia’s international reputation, harms society and threatens the country’s future. Most trafficked women in Cambodia move from rural to urban areas for the purposes of forced prostitution. As many as one-third of the commercial sex workers in Cambodia are Vietnamese. Donor programs are increasing awareness about trafficking issues and are beginning to deal with some of the most pressing concerns. Nonetheless, this issue will continue to pose significant challenges to Cambodia in the years ahead.

Persistent Corruption and Culture of Impunity
Corruption is a significant concern from both a political and economic perspective. All too often, wealth and political power, rather than an underlying concept of justice and fairness, serve as the basis on which disputes among individuals and between individuals and the state are resolved. Political actors play the game of politics following a set of rules on which there is at least in principle general agreement. Yet in practice candidates are killed and political actors serve at the whim of their party leaders.

Personal and property security is of great concern, as rights of all kinds are generally not respected by governmental institutions or powerful economic actors. Human rights abuses are common. Notorious offenses like trafficking of women and children undermine fundamental rights. In recent year, logging, fisheries, land management and customs have emerged as the focus of the international community’s efforts to reduce corruption. The pernicious effects of corrupt practices in each of these areas are now fairly well documented. Ultimately, it requires sustained, high level commitment to address this issue.

Low Domestic Saving and Declining Foreign Direct Investment
New investment needs to be mobilized to expand employment opportunities and increase productivity. Cambodia’s financial services infrastructure is still in its infancy. As a result, formal financial institutions have little capacity to mobilize domestic savings for investment. Foreign direct investment increased markedly from 1994 to 1996, rising to just under $300 million in 1996. It then was then affected by domestic political strife and the Asian financial crisis in 1997 and fell to just slightly over $200 million. Although foreign investment recovered somewhat in 1998 reaching $248 million, it has steadily decreased in more recent years.

Several factors adversely affect the investment climate in Cambodia. Chief among them is an unattractive commercial environment, including high levels of corruption, difficult administrative procedures and poor implementation of announced policy positions. In addition, Cambodia is facing increased competition from other countries in the region, including China and Vietnam, both of which are providing more attractive to potential foreign investors.