sell products freely at the market. This publication also said that the state had to fix prices that gave farmers a strong incentive to increase production. Therefore, at this time, price liberalization was not yet achieved. In addition, a foreign investment law was introduced in July 1989. (The government had previously announced in 1988 its intention to introduce this foreign investment law by mid-1989.7) The independence of the state enterprises' accounts from the national budget began and some reforms were introduced in late 1989.

The state had attempted reforms prior to 1989. According to the First-Five-Year Plan in 1985, the administration recommended private commercial activities after paying tax to rehabilitate the Cambodian economy. Collective farm management was dismantled slowly, too, as will be discussed later.

However, socialistic commercial nets had not been sufficiently established, largely because socialism had been introduced very loosely in Cambodia. The government had not been able to supply fertilizer and commodities at low prices, and a free market continued to exist throughout. $ ^{8} $

In July 1988, the state amended the constitution about trade from “trade is a national monopoly” to “trade set under the supervision and administration of the government.” The state also abolished the ministry of economic and cultural cooperation with other socialist countries, and installed a tourism general bureau under the cabinet in the next month. $ ^{9} $

## 1 -4-1 Outline of the Transition of Agricultural Sector

Though collective farm management had continued without having land and private property since 1979, this strict system had been loosened little by little from the mid-1980s. About 90 percent of farmers that possessed land became independent by 1989.

We cannot conclude definitely whether this change was made just as the government intended or if it happened naturally by the economic activities of farmers, since the socialism had not been firmly established.

We would like to explain the process of dismantling briefly.

Since 1979, collective farm management had dominated rural society, as individual farms were short of workers on account of the ravages of the 1970s. These collectives were known as “krom samaki.” In the early 1980s, about one third of the krom samaki had belonged to the group. There was no private property: they divided their harvests among members according to their finished work. By 1989, this group had vanished completely.

In place of this strict group, an intermediate group, of which members partitioned the land and equipment among them, (but important tasks such as harvesting were enforced jointly), and the loosest group, of which members were independent and owned the land, had increased gradually. By 1989, the latter group had expanded and accounted for 90 percent of all farmers. $ ^{10} $

## 1 -5 Assessing the Beginnings of Economic Reform

As mentioned above, some economic reform had taken place in Cambodia through the 1980s. The government adopted in the policy of reform twice since 1979.

The first was in 1985, when the administration introduced “the First-Five-Year Socio-economic Restoration and Development Programme.” At that time, the market economy had