Amid some international and domestic scepticism that the now-familiar arrangement would last, a classic Cambodian compromise government composed of an uneasy coalition between the Cambodian People’s Party (CPP) of Prime Minister Hun Sen and the Funcinpec Royalist Party of Prince Norodom Ranariddh was appointed in July following 11 months of stalemate and stagnation after inconclusive national elections in 2003.

The ruling CPP and Hun Sen won a clear majority in the July 2003 election to the 123-member National Assembly, but lacked the two-thirds majority required by the constitution to form a new government. Funcinpec forged an alliance with another opposition group, the Sam Rainsy Party, to block attempts to form a new coalition. The country of nearly 13 million drifted for almost a year, based on a caretaker government unable to sign any new aid agreements and with no functioning parliament.

But all 24 Sam Rainsy Party parliamentarians have boycotted the National Assembly completely, claiming the other two parties violated constitutional procedures in forming the new government. And one a top non-governmental activist called it a “change for the worst,” citing the potential for confusion, unclear authority, slowness and cost in such an unwieldy government. The increased potential for corruption, which has also combined with political instability to hinder the country’s development were also cited in reports and analyses following the taking of office of the new government.

Promises to address poverty, health and education problems and the glaring economic disparity between the capital’s elite in Phnom Penh and the vast majority of rural poor were received with scepticism.

The agreement between the feuding rivals came only after the home of one reluctant politician was surrounded by security forces and he and a number of other figures were escorted to neighbouring Thailand, ostensibly for medical treatment. And there were persistent signs and unconfirmed rumours of political friction and infighting within the dominant CPP among Hun Sen and other political figures among those departing for Thailand. Thai security forces along the border were also instructed to be prepared for a possible influx of other departures. The Cambodian political accord also was hammered out largely without the participation or backing of the country’s revered monarch, ageing King Norodom Sihanouk, who remained in North Korea during most of the period. He signed the bill appointing the new government into office although he had sworn not to because he also doubted the legality of the maneuvering. And many shops in the capital remained shuttered in fear of possible instability and violence witnessed in 1997 when a coup deposed Ranariddh in a similar arrangement. An apparently-unrelated power blackout at the same time added to the sense of foreboding.

King Sihanouk, now 81 and in China, later threatened, as he has many times in the past, to abdicate unless the political infighting and instability was brought to an end. Various analyses circulated about whether he would resign, would be allowed to or could mount an effective political force to stabilise the country.

Much depends on the political stability of the country in the coming months, including the continued strong involvement of European governments, institutions and organisations in the development and reconstruction. Another key international issue weighing in the balance was the future trial of former Khmer Rouge leaders for their roles in the crimes against humanity perpetrated during that bloody period of Cambodia’s history in the 1970s and later. Hun Sen a former Khmer Rouge himself has been embroiled for years in negotiations with the UN over the issue.

The relations developed at an accelerated pace in the 1990s when the EU was active in the international effort aiming at the reconstruction of the country and channelled more than €260 million into the undertaking. The EU involvement passed through different phases. Initiated in 1992, the European Rehabilitation Programme (ERP) aimed to bring an immediate improvement in living conditions of Cambodians and lay the foundations for longer-term action. Working closely with non-governmental organisations (NGOs), the programme sought to facilitate the reintegration of around 375,000 former refugees by improving the socio-economic environment of recipient communities and included work on rural development, basic health infrastructure, education and demining.

After the United Nations-organised elections in May 1993, and the establishment of a new government, the European Union began to look into a longer-term commitment to co-operation with Cambodia. With this aim in mind, an €88-million European Rehabilitation Programme for Cambodia (PERC) was initiated in co-ordination with the Cambodian authorities.

The political instability of mid-1997 led to the suspension of assistance from many donors. The EU during this time, took a pragmatic approach, preferring to continue programmes which were making a substantial difference to the living conditions of Cambodians, particularly in the areas of rural development, education, de-mining and humanitarian assistance.

When new elections were called for July 1998, the European Union sought to contribute to the democratic process, while still expressing strong concerns over human rights issues. The EU's €10.75-million package to support the democratic electoral process in Cambodia helped provide a new electoral register for use in the 1998 poll and in subsequent elections.

Trade co-operation with Cambodia has been concentrated in the textile sector. Exports in 2000 were worth some 250 million euros, accounting for almost all Cambodian exports to the EU.

Cambodia also benefits from a number of programmes within the ASEAN and Asia-wide frameworks. These are generally of a different nature to those under the bilateral framework, being more of a partnership than the bilateral donor-recipient type relationship. Programmes focus on areas of mutual interest such as higher education; energy; science and technology co-operation; intellectual property rights and standards; investment promotion; and financial sector reform amongst others.

A Memorandum of Understanding ratifying the commitment of the European Union (EU) to allocate €68,7 million for Cambodia over the period 2002-2004 to finance activities in sectors identified in the EC-Cambodia Strategy Paper 2000-2003 was signed 2002 in Phnom Penh. The priority sectors agreed for the years 2002-2004 are rural development, the social sector and trade sector development