Background:
Most Cambodians consider themselves to be Khmers, whose Angkor Empire extended over much of Southeast Asia and reached its zenith between the 10th and 13th centuries. Subsequently, attacks by the Thai and Cham (from present-day Vietnam) weakened the empire ushering in a long period of decline. In 1863, the king of Cambodia placed the country under French protection; it became part of French Indochina in 1887. Following Japanese occupation in World War II, Cambodia became independent within the French Union in 1949 and fully independent in 1953. After a five-year struggle, Communist Khmer Rouge forces captured Phnom Penh in April 1975 and ordered the evacuation of all cities and towns; at least 1.5 million Cambodians died from execution, enforced hardships, or starvation during the Khmer Rouge regime under POL POT. A December 1978 Vietnamese invasion drove the Khmer Rouge into the countryside, led to a 10-year Vietnamese occupation, and touched off almost 13 years of civil war. The 1991 Paris Peace Accords mandated democratic elections and a ceasefire, which was not fully respected by the Khmer Rouge. UN-sponsored elections in 1993 helped restore some semblance of normalcy and the final elements of the Khmer Rouge surrendered in early 1999. Factional fighting in 1997 ended the first coalition government, but a second round of national elections in 1998 led to the formation of another coalition government and renewed political stability. The July 2003 elections were relatively peaceful, but it took one year of negotiations between contending political parties before a coalition government was formed. Nation-wide local elections are scheduled for 2007 and national elections for 2008.

Economy - overview:
Cambodia's economy slowed dramatically in 1997-1998 due to the regional economic crisis, civil violence, and political infighting. Foreign investment and tourism fell off. In 1999, the first full year of peace in 30 years, progress was made on economic reforms. Growth resumed and has remained about 5.0% during 2000-2003. Tourism was Cambodia's fastest growing industry, with arrivals up 34% in 2000 and up another 40% in 2001 before the 11 September 2001 terrorist attacks in the US. Cambodia expects 1 million foreign tourists in 2004. Economic growth has been largely driven by expansion in the clothing sector and tourism. Clothing exports were fostered by the U.S.-Cambodian Bilateral Textile Agreement signed in 1999. Even given Cambodia's recent growth, the long-term development of the economy after decades of war remains a daunting challenge. The population lacks education and productive skills, particularly in the poverty-ridden countryside, which suffers from an almost total lack of basic infrastructure. Fear of renewed political instability and a dysfunctional legal system coupled with government corruption discourage foreign investment. The Cambodian government continues to work with bilateral and multilateral donors to address the country's many pressing needs. The major economic challenge for Cambodia over the next decade will be fashioning an economic environment in which the private sector can create enough jobs to handle Cambodia's demographic imbalance. About 60% of the population is 20 years or younger; most of these citizens will seek to enter the workforce over the course of the next 10 years.

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