TAILIEUCHUNG - The Riel Value of Money: How the World’s Only Attempt to Abolish Money Has Hindered Cambodia’s Economic Development

The user cost framework, originally developed to measure the services of fixed capital assets, resolves the difficulty in attributing bank earnings to customer services by assum- ing banks charge implicitly for the services they provide to borrowers and depositors. The user cost framework has emerged as the most common method for estimating the nominal output of banks. Nominal bank output is measured as the imputed value of the services associated with banks’ loans and deposit accounts. 9 The price of the bank services is measured as the difference between the interest rate paid by the bank on deposits or the interest rate. | EAST-WEST CENTER The Riel Value of Money How the World s Only Attempt to Abolish Money Has Hindered Cambodia s Economic Development SHERIDAN T. PRASSO AsiaPacific ISSUES Analysis from the East-West Center No. 49 January 2001 The . Congress established the East-West Center in 1960 to foster mutual understanding and cooperation among the governments and peoples of the Asia Pacific region including the United States. Funding for the Center comes from the . government with additional support provided by private agencies individuals corporations and Asian and Pacific governments. The AsiaPacific Issues series contributes to the Center s role as a neutral forum for discussion of issues of regional concern. The views expressed are those of the author and not necessarily those of the Center. SUMMARY There are significant reasons why Cambodia has failed to establish a solid and stable economy including the fact that most of its professionals and educated elite perished in the 1975 79 period under the Khmer Rouge. But one reason that has not been fully considered is this Cambodia is the only country in the world ever to have abolished money. Pol Pot the leader of the Khmer Rouge abolished money markets and private property blowing up the Central Bank to underscore his point. As a result although the reissued Cambodian riel has been in circulation for almost two decades Cambodians remain distrustful of it and regularly convert their riel into gold jewelry or . dollars instead. This practice perpetuates the ineffectiveness of Cambodia s financial institutions banking systems and regulatory agencies. Cambodia needs to adopt a strong single currency not necessarily its own as the prevailing means of exchange or it will remain one of the least developed most impoverished nations in the world. 2 Analysis from the East-West Center Lawlessness corruption and the rule of the jungle have prevailed in business transactions The Cambodian Economy Today It is not surprising that

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