Economic History of Cambodia free essay sample

Economic history of Cambodia Cambodia was a farming area in the first and second millennia BCE. States in the area engaged in trade in the Indian Ocean and exported rice surpluses. Complex irrigation systems were built in the 9th century. The French colonial period left the large feudal landholdings intact. Roads and a railway were built, and rubber, rice and corn grown. After independence Sihanouk pursued a policy of economic independence, securing aid and investment from a number of countries. Bombing during the Vietnam War damaged rice production. Lon Nol had a policy of liberalising the economy.This was followed by the victory of the Khmer Rouge and the emptying of the cities. After the defeat of the Khmer Rouge, a Five Year Plan was adopted, aiming to improve agriculture, industry and distribution, with a slogan of export and thrift. Today, Cambodia remains a largely agricultural economy and industrial development is slow. Wartime economy, 1970-75 The war that engulfed the rest of Indochina spread to Cambodia in April 1970, shortly after the coup that deposed Prince Sihanouk. Wartime conditions had a major impact on the countrys economy, especially on the export sector. Production and export of virtually all commodities dropped sharply, as insecurity spread throughout the countryside. Intense combat in the nations most densely populated farming areas caused a large segment of the peasant population to flee to cities and to towns. By 1975 the population of Phnom Penh had swollen to 2 million, from just 50,000 in 1955. Moreover, the war seriously dislocated the economic system. Food shortages arose as insurgents interrupted the transportation of crops from the countryside to the main marketing centers.Increasing budgetary expenditures, skyrocketing inflation, shrinking export earnings, and a rising balance-of-payments deficit plagued the war-torn economy. The wars most damaging effect was on rice production. In 1972 Cambodia needed to import rice (from Japan and from Thailand) for the first time since independence. Fighting reduced the amount of land under rice cultivation to fewer than 800,000 hectares in 1972, far less than the approximately 3 million hectares that had been under cultivation in 1969. The 1972 rice harvest amounted to only 26. percent of the 1969 harvest. Exports of natural rubber, the countrys second leading foreign-exchange earner, ceased shortly after hostilities began in 1970. The war destroyed extensive rubber plantations and damaged rubber-processing facilities. In late 1970, Lon Nol, who succeeded Sihanouk, continued to liberalize the economy in an effort to save the country from economic disaster. This endeavor was a continuation of the policies he had enacted as head of the government of national salvation in August 1969.Under Lon Nols direction, Phnom Penh limited the control and the authority of the state export-import agency (Societe nationale dexportation et dimportation—SONEXIM), which had been established in 1964 to administer foreign trade, to denationalize banks and industries, to encourage private foreign investments, and to allow greater private participation in the economy. The new economic policies of the Khmer Republic gradually reversed the pattern of state socialism that had formed the keystone of Sihanouks domestic policies.On October 29, 1971, the government implemented a comprehensive program of reforms to stabilize the economy. These reforms included increased import taxes on all nonessential commodities; increased interest rates on bank deposits and on commercial loans; elimination of credit to state enterprises and to public utilities; introductio n of a flexible currency exchange system; and simplification of the import system to facilitate the movement of goods. The emphasis of the program was to restore monetary stability in the face of rising inflation, financial speculation, black markets, and other economic problems caused by the war.In a change of policy, the government also moved toward greater involvement with international and with regional organizations and sought support from the World Bank (see Glossary), the International Monetary Fund (see Glossary), and the Asian Development Bank. As the war progressed, Lon Nols government aimed major economic measures mainly at improving the overall food supply situation and at maintaining public confidence in the continued availability of essential consumer items. To ensure adequate domestic supplies, in November 1971 Phnom Penh suspended grants of export licenses for major export commodities, such as rice, corn, and cattle.Although the move helped maintain stocks of essential commodities in the capital and in provincial centers, supplies were small relative to demand. The Lon Nol government had earlier declared in principle that it maintained a policy of strict neutrality and would accept foreign assistance from all countries which love peace and justice. As early as April 20, 1970, Cambodia formally requested military and economic aid from Washington to help cope with growing war expenditures and with an increasing budgetary deficit. As military activity in the country intensified, the United States became Cambodias larg est donor and supplier.Moscow, however, sent medical equipment and, in October 1971, the Soviets renewed a financial agreement with the republican regime. The Economic Support Fund, to which the United Nations (UN), the United States, Britain, Japan, New Zealand, Thailand, and Malaysia pledged their contributions, provided US$21 million in auxiliary relief. Other nations, including Italy, Israel, West Germany, and Switzerland, provided funds mostly to assist war victims. France earmarked its aid for the maintenance of French educational programs and cultural institutions. Nevertheless, these palliative measures fell far short of what was needed.By 1975 the economy had collapsed, and the country was surviving mainly on imported food financed by the United States government. Under the Khmer Rouge, 1975-79 Under the leadership of the Khmer Rouge, Cambodia underwent a brutal and radical revolution. When the communist forces took power in Phnom Penh in April 1975, their immediate goals were to overhaul the social system and to revitalize the national economy. The economic development strategy of the Khmer Rouge was to build a strong agricultural base supported by local small industries and handicrafts.As explained by Deputy Premier Ieng Sary, the regime was pursuing radical transformation of the country, with agriculture as the base. With revenues from agriculture we are building industry which is to serve the development of agriculture. This strategy was also the focus of a doctoral thesis written by future Khmer Rouge leader Khieu Samphan at the University of Paris in 1959. Samphan argued that Cambodia could only achieve economic and industrial development by increasing and expanding agricultural production.The new communist government implemented the tenets of this thesis; it called for a total collectivization of agriculture and for a complete nationalization of all sectors of the economy. Strict adherence to the principle of self-reliance constituted the central goal of the Khmer Rouge regime. A Phnom Penh radio broadcast in early May (about a month after the Khmer Rouge arrived in the capital) underscored the importance of Cambodian self- reliance and boasted that during the war the Khmer Rouge had used scrap iron and wrecked military vehicles to manufacture their own bullets and mines.The statement made it clear that the policy of self-reliance would continue in peacetime. In another move aimed at reducing foreign influence on the country, the regime announced on May 10 that it would not allow foreigners to remain in Cambodia but that the measure was only temporary; and it added, We shall reconsider the question [of allowing foreigners to enter the country] after the re-establishment of diplomatic, economic and commercial relations with other countries. Although Cambodia resumed diplomatic relations with a number of nations, the new government informed the UN General Assembly on October 6, 1975, that it was neutral and economically self-sufficient and would not ask for aid from any country. On September 9, however, the Chinese ambassador arrived in Cambodia, and there were soon reports that China was providing aid to the Khmer Rouge. Estimates of the number of Chinese experts in Cambodia after that time ranged from 500 to 2,000.The policy of self-reliance also meant that the government organized the entire population into forced-labor groups to work in paddies and on other land to help the country reach its goal of food self-sufficiency. The Khmer Rouge, as soon as it took power on April 17, 1975, emptied Phnom Penh (of its approximately 2 million residents) as well as other cities and towns, and forced the people into the countryside.This overnight evacuation was motivated by the urgent need to rebuild the countrys war-torn economy and by the Khmer Rouge peasantrys hostility toward the cities. According to a Khmer Rouge spokesman at the French embassy on May 10, the evacuation was necessary to revolutionize and to purify the urban residents and to annihilate Phnom Penh, which Cambodian peasants regarded as a satellite of foreigners, first French, and then American, and which has been built with their sweat without bringing them anything in exchange. The only people who were not ordered to leave the city were those who operated essential public services, such as water and electricity. Other Khmer Rouge leaders rationalized the evacuation as a matter of self-reliance. They told the Swedish ambassador in early 1976 t hat they didnt have any transportation facilities to bring food to the people, and so the logical thing was to bring the people to the food, i. e. , to evacuate them all and make them get out into the ricefields. Indeed, when the evacuees reached their destinations, they were immediately mobilized to clear land, to harvest rice crops, to dig and restore irrigation canals, and to build and repair dikes in preparation for the further expansion of agriculture. The rice crop in November 1976 was reported to be good in relation to earlier years. At the same time, plantations producing cotton, rubber, and bananas were established or rehabilitated. While the Khmer Rouge gave high priority to agriculture, it neglected industry.Pol Pot sought to consolidate and perfect [existing] factories, rather than to build new ones. About 100 factories and workshops were put back into production; most of them (except a Chinese-built cement plant, a gunnysack factory, and textile mills in Phnom Penh and in Batdambang) were repair and handicraft shops revived to facilitate agricultural development. Cambodias economic revolution was much more radical and ambitious than that in any other communist country.In fact, Khmer Rouge leader Premier Ieng Sary explained that Cambodia wanted to create something that never was before in history. No model exists for what we are building. We are not imitating either the Chinese or the Vietnamese model. The state or cooperatives owned all land; there were no private plots as in China or in the Soviet Union. The constitution, adopted in December 1975 and proclaimed in January 1976, specifically stated that the means of production were the collective property of the state (see Democratic Kampuchea, 1975- 78, ch. 1). The Cambodian economic system was unique in at least two respects. First, the government abolished private ownership of land. The Khmer Rouge believed that, under the new government, Cambodia should be a classless society of perfect harmony and that private ownership was the source of egoist feelings and consequently social injustices. Second, Cambodia was a cashless nation; the government confiscated all republican era currency. Shops closed, and workers received their pay in the form of food rations, because there was no money in circulation.On August 12, 1975, fewer than four months after the Khmer Rouge had taken power, Khieu Samphan claimed that, within a year or two, Cambodia would have sufficient food supplies and would be able to export some of its products. To achieve this goal in record time, large communes comprising several villages replaced village cooperatives, which had formed in the areas controlled by the Khmer Rouge in 1973 and which had spread throughout the count ry by 1975. Unlike China and Vietnam, which had introduced collectivization gradually over several years, Cambodia imposed the system hastily and without preparation.The Khmer Rouge, in line with the slogan, If we have dikes, we will have water; if we have water, we will have rice; if we have rice, we can have absolutely everything, organized the workers into three forces. The first force comprised unmarried men (ages fifteen to forty) who were assigned to construct canals, dikes, and dams. The second force consisted of married men and women who were responsible for growing rice near villages. The third force was made up of people forty years of age and older who were assigned to less arduous tasks, such as weaving, basket-making, or watching over the children.Children under the age of fifteen grew vegetables or raised poultry. Everyone had to work between ten and twelve hours a day, and some worked even more, often under adverse, unhealthy conditions. On September 27, 1977, in a major speech celebrating the anniversary of the Kampuchean (or Khmer) Communist Party (KCP—see Appendix B), Khmer Rouge leader Pol Pot asserted that, Our entire people, our entire revolutionary army and all our cadres live under a collective regime through a communal support system. He then listed the governments achievements in rebuilding the economy and concluded that, Though not yet to the point of affluence, our peoples standard of living has reached a level at which people are basically assured of all needs in all fields. Measuring the economic performance of the Khmer Rouge regime was impossible because statistics were not available, and no monetary transactions or bookkeeping were carried out. The economic life described by foreign diplomats, by Western visitors, and by Cambodian refugees in Thai camps ranged from spartan to dismal.Phnom Penh became a ghost town of only about 10,000 people. There were no shops, post offices, telephones, or telegraph services. Frequent shortages of water and of electricity occurred in all urban areas, and the government prohibited movement across provincial borders, except for that of trucks distributing rice and fuel. Conditions in the cooperatives varied considerably from place to place. In some areas, cooperative members had permission to cultivate private plots of land and to keep livestock. In others, all property was held communally.Conditions were most primitive in the new economic zones, where city dwellers had been sent to farm virgin soil and where thousands of families lived in improvised barracks (see Democratic Kampuchea, 1975-78 , ch. 1). Cambodia made progress in improving the countrys irrigation network and in expanding its rice cultivation area. Phnom Penh radio claimed that a network of ditches, canals, and reservoirs had been constructed throughout the country like giant checkerboards, a phenomenon unprecedented in the history of our Cambodia. Still, rice production and distribution were reported to be unsatisfactory. Rice harvests were poor in 1975 and 1978, when the worst floods in seventy years struck the Mekong Valley. Even after the better harvests of 1976 and 1977, however, rice distribution was unequal, and the government failed to reach the daily ration of 570 grams per person. (The daily ration of rice per person actually varied by region from 250 to 500 grams. ) Party leaders, cadres, soldiers, and factory workers ate well, but children, the sick, and the elderly suffered from malnutrition and starvation.There also were reports that the government was stockpiling rice in preparation for war with Vietnam and exporting it to China in exchange for military supplies. This diverted rice could have been one explanation for the peoples meager rice ration. At the end of 1978, when Vietnamese troops invaded Cambodia, the ensuing turbulence completely disrupted the nations economic activity, particularly in the countryside, which once again became a war theater traversed by a massive population movement. Agricultural production was again a major casualty, with the result that there was a severe food crisis in 1979.Economic role of the Kampuchean Peoples Revolutionary Party After the fall of Pol Pot and the establishment of the Peoples Republic of Kampuchea in January 1979, the Kampuchean (or Khmer) Peoples Revolutionary Party (KPRP—see Appendix B), led by General Secretary Heng Samrin, set Cambodias economic development policies. Party congresses adopted these policies at meetings in January 1979, May 1981, and October 1985. A new Constitution, which the National Assembly approved in June 1981, defined Cambodias new socialist direction and the role of the state in economic affairs.Then, after six more years of struggling with an economy of survival and subsistence, KPRP leaders presented their First Plan, which represented a systematic and rational party effort at centrally planning and improving the economy. New economic policy and system In contrast to Pol Pots radical, doctrinaire approach to economic development, Heng Samrin and the leaders of the Kampuchean (or Khmer) National United Front for National Salvation (KNUFNS—see Appendix B), the umbrella group of anti-Pol Pot forces sponsored by Hanoi, sought to rally public support by formulating a policy that would be pragmatic, realistic, and flexible. In an eleven-point program promulgated shortly before the Vietnamese invasion of Cambodia, the front articulated the economic guidelines that would mark its tenure in power. These guidelines advocated a gradual transformation to socialism; a planned economy with markets; the restoration of banks, of currency, and of trade; the abolition of forced labor; the introduction of an eight-hour workday; and pay based on work performed. The KPRP socialist economy accepted the private sector.At a May 1980 agriculture conference, Samrin reviewed the effectiveness of the solidarity groups (krom samaki), production units of seven to fifteen families, united in a common endeavor to raise food or to produce goods. These production units had been organized in line with the policy of moving toward socialism. He affirmed that each member of these groups would receive at least one hectare of land to cultivate for communal purposes, plus a private plot not exceeding a quarter of a hectare on which to gr ow vegetables or to graze livestock.Also, a July 1980 planning conference called for a policy of simultaneous development of family (private) economy and national (socialized) economy. The conference also decided that the state should buy agricultural products from the peasants and should sell them manufactured goods at free-market prices. The KPRP further clarified its economic policy at its Fourth Party Congress (its first since taking power in Phnom Penh) from May 26 to May 29, 1981. It declared that the nations economic system had three main parts—the state conomy, the collective economy, and the family economy, and that each of these parts had its own significant role. The state economy covered large-scale agricultural production, all industrial production, the communications and transportation networks, finance, and domestic and foreign trade. To facilitate economic transactions nationwide, the state restored the banking system in November 1979, and it reintroduced currency in March 1980. The KPRP acknowledged that the state economy was small and said that it should be expanded.The party leaders, however, aware of the pitfalls of central planning, w arned against over-expansion and disregard for real needs, production conditions, management ability, and economic capability. The collective economy—the largest of the three elements—was assigned an important role in agricultural rehabilitation and development. It consisted of solidarity groups in agriculture, fishing, forestry, and handicrafts. These groups also assumed the task of collective purchase and sale. The family-run economy included the home economies of the peasants, most retail businesses, individual artisans, handicrafts, repair shops, and small trade.Although the 1981 Constitution stated that the land and other natural resources were state property, it gave the citizens usufruct rights to land allotted for a house and garden by the state. In some cases, agricultural workers were also allowed to borrow an extra plot of land from the state, to produce food on it, and to keep the harvest for their own consumption. Private enterprise also made a modest beginning under Cambodias hybrid economic system. Citizens were allowed to buy and to sell agricultural produce and handicrafts. The law guaranteed workers the right to keep their wages, their other income and their property.Encouraged and protected by the state, hundreds of small shops and factories, each employing a few workers, opened for business in Phnom Penh and in other urban areas. This inchoate private sector played such an important role in the national economic recovery that party leaders urged its official recognition, at the Fifth Congress in October 1985, as a means of mitigating the weaknesses of the state-run economy. Thus, the government added a fourth component—private economy—to the economic system and legitimized it with a constitutional amendment in February 1986. First plan, 1986-90The First Five-Year Program of Socioeconomic Restoration and Development (1986-90), or First Plan, originated in February 1984, when the heads of the state planning commissions of Vietnam, Laos, and Cambodia met in Ho Chi Minh City (formerly Saigon) and agreed to coordinate their 1986 to 1990 economic plans. Heng Samrin formally announced Cambodias plan in his political report to the congress. The plan was intended to open a new phase of the Cambodian revolution; it gave highest priority to agricultural production, calling it the first front line, and focused on the four sectors of food, rubber, fishing, and timber.It set production targets for each sector. During the plan period, food production was to increase 7 percent a year to keep up with a targeted 2. 8 percent annual population growth rate, which did not seem to have been reached by 1987. The plan projected that by 1990, rubber farming would expand to 50,000 hectares in order to produce 50,000 tons of latex; timber production would reach 200,000 cubic meters; jute production would increase to 15,000 tons; and fish production would amount to 130,000 tons.As in the past, the plan labeled agriculture and forestry as the real force of the national economy. The plan was less specific for the industrial sector. It did not set industrial production targets, except that for electrical output, which was projected to reach 300 million kilowatt hours per year in 1990. The plan called attention to the need for selective restoration of existing industrial production capabilities and for proposed progressive construction of a small to medium industrial base, which would be more appropriate to the countrys situation.The plan placed increased emphasis on the distribution of goods. Trade organizations were to be perfected at all levels, and socialist trading networks were to be expanded in all localities. In particular, the trade relationship between the state and the peasantry was to be improved and consolidated in accordance with the motto, For the peasantry, selling rice and agricultural products to the state is patriotism; for the state, selling goods and delivering them directly to the people is being responsible to the people. The plan also required that investment be directed toward the impro vement of the infrastructure, particularly toward the reconstruction of communication lines and waterworks. About half the factories operating in 1969 were rice mills, or were otherwise engaged in rice processing. In 1985 the government news agency (Sarpodamean Kampuchea) announced that fifty-six factories had been renovated and had been put back into operation. In the capital itself, about half of Phnom Penhs prewar plants had reopened by 1985. Most industries were producing at far below capacity because of frequent power cuts, shortages of spare parts and of raw materials, and the lack of both skilled workers and experienced managers.Industrial revival continued to be difficult and extremely slow because it was based mainly on the use of limited local resources. National Programme to Rehabilitate and Develop Cambodia, February 1994 In the course of economic development, industrialized countries have taken many twists and turns. It would be tempting to characterize development as merely path-dependent, historical or unique for all countries. But this simply isnt the whole story. To be sure, there are innumerable differences in how countries industrializejust as there are similarities. For Cambodia, this will not be different.With the exception of OPEC countries (Saudi Arabia, Kuwait, Brunei, etc. ), the role of natural resources has paled in comparison to labor, capital and technology, because most countries are simply not natural resource gold mines. The industrialized countries of the world have undergone transformations which have taken them from agricultural to industrial economies. And from there, it would seem, the move to services has already taken place for the United States. This is not to say, however, that America is no longer agricultural (one need only look at Kansas and Nebraska). 10] Forward, backward, and final linkages are indubitably important since the agricultural, industrial, and services sectors all contribute to one another. [11] This chapter intends to draw a brief outline from the theoretical works of a number of development economists in order to set the foundation for the application of these theories to the case of Cambodia in both the past and the present context (see chapters 3 and 4). The Agricultural Context We begin our analysis with an evolutionary model of the path of agricultures contribution to economic growth by presenting Peter C.Timmers The Agricultural Transformation (1988). Timmers conceptual framework integrates four economic environments from Moshers to D. G. Johnsons. The four phases in the agricultural transformation call for different policy approaches. In the earliest stage of development the concern must be for `getting agriculture moving, to use Arthur Moshers vivid phrase [Mosher (1966)]. [12] In the Mosher environment, a country begins to develop by investing heavily into agriculture, a process colloquially called priming the pump. Today, Cambodia may actually be back to the Mosher phase once more (when priming the pump of agriculture takes place). There are few precedents for this, and fewer instances still of successful development (this late in the game). Therefore, the main analytic emphasis will be placed on the past because things were then less complicated or mired for Cambodia. Were there to have been no starvation, war, or revolution in Cambodia during the 1970s, the bulk of this paper would have likely focused its attention on these years instead. The theories of economic growth xamined next all relate to an economy past the Mosher environment (beyond the green revolution). The implications for which include the possibility for industrialization and rapid economic growth. Three Growth Theories Theories of economic growth abound. [15] Modern theories have divided themselves into three types, stressing one of three factors: (1) civil institutions, (2) the State, (3) the market. This thesis examines three cornerstone economic models that have wide-ranging implications for the market and the State, and to a lesser extent for civil institutions.They are the Harrod-Domar, the Solow growth, and the Dual Sector Economy models (which includes classical and neoclassical components). Although the mechanics will be stressed, it is the economic and policy implications that will be central to our analysis of Cambodias economy, past and present. There were a series of three major Irish bank strikes between 1966 and 1976 in all totalling about a year affecting most of the retail banking sector. Surprisingly these had very little effect on the growth of the economy. However the boom did not last for long.Industrial relations disputes, inflation from the oil crises of 1973 and 1979, overspill from the Troubles in Northern Ireland, new capital taxes and poor management of the economy by the government took their toll in the 1970s. By the 1980s Ireland was referred to as the sick man of Europe [1][dead link] and was far behind its European rivals frequent changes in government compounded the situation. The government, often led by the now disgraced Charles Haughey, presided over a decade of high emigration, unemployment (about 18% for much of the decade) and economic mismanagement.At one point the International Monetary Fund considered imposing strict economic measures. [edit] 1980s The 1980s in the Republic of Ireland was one of the states bleakest times. An extremely irresponsible budget by the majority Fianna Fail government in 1977, which included abolition of car tax and borrowing to fund current spending, combined with some global economic problems to ruin the Irish economy for most of the 1980s, causing high unemployment and mass emigration.The Charles Haughey and Garret FitzGerald governments made this bad situation much worse with more massive borrowing and tax rates as high as 60% (with one Fine Gael finance minister suggesting people were not being taxed enough). After joining the ERM in 1979, Ireland was also saddled for much of the 1980s with an overvalued currency, which wasnt rectified until the 1986 devaluation. Much of the capital borrowed in the 1980s went towards propping up this overvalued currency. Foreign investment, in the form of risk capital, was discouraged by all the evident difficulties.This was also an era of political instability and extreme political corruption, with power alternating between Fianna Fail and Fine Gael, with some governments not even lasting a year, and in one case, three elections in eighteen months. The problems were eventually dealt with starting in 1987 under a minority Fianna Fail government but with help from the opposition led by Alan Dukes of Fine Gael under what was known as the Tallaght Strategy, with economic reform, tax cuts, welfare reform, more competition and a reduction in borrowing to fund current spending.This policy was largely continued by succeeding governments. Considerable support from the European Union was the only positive aspect. [edit] Celtic Tiger (1990s-2007) In the 1990s, the Republics economy began the Celtic Tiger phase. High FDI rate, a low corporate tax rate, better economic management and a new social partnership approach to industrial relations together transformed the Irish economy. The European Union had contributed over â‚ ¬10 billion into infrastructure. By 2000 the Republic had become one of the worlds wealthiest nations, unemployment was at 4% and income tax was almost half 1980s levels. During this time, the Irish economy grew by five to six percent annually, dramatically raising Irish monetary incomes to equal and eventually surpass those of many states in the rest of Western Europe. [edit] Recent economic circumstances Over the past decade, the Irish government has implemented a series of national economic programmes designed to curb inflation, ease tax burdens, reduce government spending as a percentage of GDP, increase labour force skills, and reward foreign investment. The Republic joined in launching the euro currency system in January 1999 along with eleven other European Union nations.The economy felt the impact of the global post-Dot Com economic slowdown in 2001, particularly in the high-tech export sector – the growth rate in that area was cut by nearly half. GDP growth continued to be relatively robust, with a rate of about 6% in 2001 and 2002 – but this was expected to fall to around 2% in 2003. Since 2001, GNP growth has been much worse, with an almost threefold decrease in 2001 from the previous year. After a near stagnant year in 2002, growth started to pick up once again in 2003. [6] By 2005, growth rates had increased to around 5%.During 2007, Irelands economic progress was however again affected by a wider global economic slow-down, with the construction sector being particularly affected. During the Summer of 2007, Irish residential property prices fell by over 2% and subsequently continued to fall by approximately 1% per month, leaving property prices down 9% by February 2008. This has impacted consumer spending and investment confidence across the Irish economy generally. In July 2008, a predicted Euro 3bn shortfall in 2008 annual government revenues