Cambodia is one of the world's poorest economies, and, thus, economic development is its highest priority. Much of its population is involved in subsistence
Another major disadvantage has been Cambodia's long period of turmoil and civil strife, which began in 1970 with the overthrow of the government of Prince Sihanouk. That strife and instability lasted 28 years and severely and adversely affected the Cambodian economy, its human resource base, and its physical infrastructure .
With respect to its economic history, Cambodia is an excellent example of pre-development (advanced development centuries before the European Renaissance). Its prehistory dates back to the fourth millennium B.C. By 500 B.C., the use of metal had become widespread. As early as the 3rd century there was an Indianized trading state named Funan with Mon-Khmer inhabitants. In the last half of the 6th century, a new state Chenla emerged.
The years from 802 to 1432 mark the period of the great Angkor Khmer civilization. This Khmer civilization produced the largest religious monument in the world, the Angkor Wat complex. The Chinese sailor, Chou Ta-kuan, visited Angkor and described vividly the Khmer Empire at that time. The dynamic leadership of King Jayavarman VII produced an impressive network of hospitals, royal roads, rest houses, and advanced hydraulic irrigation schemes which allowed for as many as 3 crops of rice each year. During the reign of Jayavarman VII the Khmer Empire encompassed what is currently Cambodia and much of what is Thailand, Laos, and the southern part of Vietnam. After Jayavarman VII's death, Khmer power declined at the hands of the Siamese and later the Vietnamese. After the Siamese sacked Angkor several times the capital moved to Phnom Penh, which became a center for maritime trade. During the 19th century, Cambodia fell under Siamese and Vietnamese domination.
In 1863 the French then established a protectorate over Cambodia, and in the early 1900s Cambodia became part of colonial French Indochina. Under its colonial rule, the French established plantations to exploit Cambodian natural resources such as rubber. In 1953 Cambodia achieved its independence from France. Under the leadership of Prince Sihanouk, Cambodia enjoyed peace and stability. In terms of its economy, the country was poor, but most of the population enjoyed affluent subsistence. Farmers, for the most part, had their own land and there was adequate fish, rice, fruit, and vegetables for much of the population.
In 1970, Cambodia became a war-plagued economy. With a coup against Prince Sihanouk in March of that year, Cambodia was drawn into the vortex of the Cold War and the U.S. war in Vietnam. For the next 5 years there was civil war between the Khmer Rouge (the Cambodian communists) and the U.S.-backed rightist government of General Lon Nol. The United States provided both military and economic assistance to the Lon Nol government. The secret bombing of the Cambodian countryside by the United States and the civil war drove hundreds of thousands of rural people into the capital of Phnom Penh and devastated the economy.
On 17 April 1975, the Khmer Rouge captured the capital and immediately evacuated the population to the countryside. There then ensued the most radical socialist experiment in the history of the world, in which basically the entire population became a huge work camp engaged in various agricultural activities. As a result, as many as possibly 2 million Cambodians may have died between 1975 and 1978, due to starvation, overwork, disease, and executions (of those who were part of the old elite, those perceived to be a threat to the state, or those who were uncooperative).
In December 1978, the Vietnamese intervened to drive the Khmer Rouge to the remote countryside in the west and northwest and installed a new Vietnamese-oriented Cambodian government, which was called the People's Republic of Kampuchea (PRK). Then Cambodia became a normal economy, though it still suffered from continued conflict with the Khmer Rouge. During this period, it also suffered from an economic boycott by the United States and other countries who would not recognize the legitimacy of the new government. In 1991, communism came to an end with the establishment of the State of Cambodia and the 2-year presence of the United Nations Transition Authority in Cambodia (UNTAC) to oversee the transition to a multi-party democracy and free market economy. UN-supervised national elections were held in 1993. However, real political stability came to Cambodia only in 1998 with new national elections and the death of Khmer Rouge leader Pol Pot in April 1998.
With this new stability, the Cambodian economy shows signs of recovering. Its being a dollarized economy (an economy which uses the U.S. dollar) gave it some immunity from the currency devaluations suffered by its close neighbors, such as Thailand and Laos. Cambodia achieved impressive economic growth of 4.5 percent in 1999 and 5 to 5.5 percent in 2000.
Two industries which have greatly helped the recovery of the Cambodian economy have been the garment industry and tourism. Output from the garment industry in 1993 was only US$4 million, but by 1999 it had increased dramatically to US$600 million. Cambodia is extremely fortunate to be home to the great Angkor Wat complex, recently publicized in the popular adventure feature film Tomb Raider. Cambodia wisely decided to allow direct international flights to Siem Reap, the gateway to Angkor Wat, and is one of the few countries in the world (if any) to allow international airlines to fly domestic flights within Cambodia. This flexibility has been a boon to Cambodian tourism, which was up 34 percent in 2000. A 3-day pass to visit Angkor Wat costs US$60. Thus, tourism is a major new source of significant foreign exchange earnings. Cambodia also benefits from considerable international aid, constituting 61 percent of its public funds.