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Remarks at the 9th Government-Private
Sector Forum
Government Palace, 14 October 2005
Samdech, Your Royal Highnesses,
Your Excellencies, Ladies and Gentlemen,
Today I have the great pleasure and honor to join
you all once again, Samdech, Your Royal Highnesses, Your
Excellencies, Ladies, and Gentlemen, the Members of the Royal
Government and the Representatives of the private sector as well as all
the distinguished national and international guests, at this
Government-Private Sector forum!
As in previous meetings, I would like to declare
today forum an open plenary cabinet meeting for us all, the government
and private sector, to work together in solving the outstanding issues
with the aim to improve investment climate to all the domestic or
foreign business people, and investors.
Thus, the objective of our today meeting is to
conduct a joint review of tangible progress and improvement in private
sector development since the 8th government-private sector
forum held on 14 March 2005, and to evaluate at what extent the issues
to be will be addressed today have been so far solved. We will also
consider new issues that investors are facing.
Before touching upon specific issues that we must
address together, I would like to share some views and comments with
regard to Cambodia position in the regional and world economic and
business community.
As reflected in the key macroeconomic indicators
and the forecasts for the year 2005, Cambodia’s macroeconomic situation
is stable with a growth rate of 6.3%, regardless of the negative
external impacts of higher oil price, and terrorism. In this robust
growth, the tourism sector, garment exports and construction activities
still play an important role in improving the higher growth of 2005.
This growth will be achieved thanks to the growth
of the agriculture sector of 2.4% in which rice production will increase
by 3.3% after the drop down of 13% in the year 2004. The industry sector
will increase by 10.7% due to a garment manufacturing export increase of
13%, the construction sector by 13%, the service sector by 4.5% due to
the increase of the hotel services of 15%, and the number of tourists
visiting Cambodia will increase by 30-35%. Actually, the numbers of
tourists in the first 8 months of the year 2005 have increased by 36.43%
compared to the same period of 2004.
On the
other hand, thanks to the concerted efforts of the government, of the
development partners, and of the communities in expending and
strengthening the irrigation networks, our farmers are able undertake
their tasks normally.
Indeed, we have noticed that the increase of oil
price on the international market has put pressure on the goods and main
services prices in Cambodia which have increased as well. Oil prices
have increased by 84% from US$ 33.7/gallon in early January 2005 to US$
62/gallon in early October 2005. In the mean time, the Royal Government
has supported indirectly by limiting the tax base at only US$ 320/ton
while the price on the market has reached US$ 500/ton. The increase of
the oil price has had negative impacts on the economic growth, the
inflation and the exchange rate. According to our forecasts the average
inflation rate in 2005 will be around 5%. From the beginning of the year
to October, the exchange rate has increased from 4,035 Riels/USD to
4,230 Riels/USD. The Riels value has dropped down about 4.8% during that
period. The Royal Government has strived to maintain the macroeconomic
stability.
Revenue collections are expected to reach 11.3% of
the GDP. In the first semester of year 2005, due to the governance and
reform measures, revenues have increased, especially, the tax department
and the customs and excise department have collected 1,044 million riels
or the equivalent of 60% of the amount budgeted in the 2005 financial
management law. The tax revenues have increased by 28% compared to the
first semester of 2004 which amount to 812 million riels. The customs
and excises department has endeavored to implement the measures to curb
illegal activities by cracking down 406 cases of large smuggling and
other 1,025 smaller cases. Thus, in comparison to the first semester of
2004, there is an increase of 70% of such interventions.
It is clear that the increase of revenues reflects
the result of the reforms of the public finance management, which will
enable the smooth implementation of the 2005 budget. Moreover, through
those reforms we have been able to reduce our debts queuing at the
National Treasury, at a lower level as compared to last year, and have
increased expenditures on priority projects of the Royal Government, in
particular on irrigation projects.
As I have raised in the 8th Government-Private Sector Forum the major Cambodian issue is the
strengthening of good governance and institutional capacity in the
development management. I wish to
inform the private sector representatives and development
partners attending this forum on the results of the implementation of my
recommendations in the 8th forum:
First,
Improvement of Trade Facilitation and Investment: following
the recommendations of the 8th forum, the Ministry of Economy
and Finance has issued the prakas number 298 dated 17 June 2005 on the
implementation of VAT for supporting industry or subcontractors who are
supplying goods or services for garment export, textile, and shoes
industries.
As
provided in that prakas, for supporting industry, the duty on inputs for
the calculation of VAT on the import of production inputs and equipments
used for the direct supplies to the garments, the textile and the shoes
industries should be born by the government. The VAT on products and
services used for export is at the 0% rate.
As for the
entreprises under the real regime of taxation, supplying directly 80% of
its production or services to exporters of the garments, textiles and
shoes industries, the VAT on their production outputs is at 0% rate.
Second, Promoting of Market Infrastructures and
Deregulation:
During the
first semester of 2005, in the framework of the steering committee for
private sector development, the Ministry of Economy and Finance, the
Ministry of Commerce, the Ministry of Industry, the Ministry of Tourism,
the Ministry of Public Works and transportation, have cooperated with
other ministries and institutions for the consultations with the private
sector, in order to discuss important draft of laws and regulations.
Some of those drafts have been adopted by the Council of Ministers while
others will be submitted soon
First, the draft of the concession law:
this law will set up the framework for private participation in the provision of
infrastructures.
Second, the sub-decree on the
establishment of provincial-municipal sub-committee on investment,
the sub-decree on the implementation of the law on the amendment to
the investment law.
Third, the SME development framework.
Fourth, the sub-decree on the
establishment and management of special Economic zone.
Fifth, the establishment of a joint
customs and Camcontrol office for the inspection of documents and
goods, and the production of a joint report on the nature of
exported garments products, this will streamline the administrative
procedures for import and export as compared to previous practices.
Moreover, the Royal Government will continue to emphasize on trade
facilitation through the establishment of the single window whereby
the Customs and Excise Department will fulfill its tasks accordingly
the Kyoto Convention.
In order to support to the development of financial
market infrastructure, the Ministry of Economy and Finance is
implementing efficiently and smoothly related regulations, including:
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Accounting standard
and International auditing
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Sub-decree on the
establishment of the national accounting council whose function is
to control the standard and regulations of the accounting
profession.
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Sub-decree on the
establishment of the National Accountants and Auditors Institute
aiming at promoting the profession of accountants and auditors, and
at monitoring the compliance of practionners with the rules and the
code of ethics. The Institute will also provide training to the next
generation of accountants and auditors.
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Sub-Decree on the creation of the code of ethics to be implemented
by the Cambodian Institute of accountants, and auditors.
Cambodia has also
developed other key legal infrastructure to sustain the development of
financial sector such as the "Law on Commercial Companies". This Law can
be implemented without further sub-decree. The Draft Law on Government
Securities, the Draft Law on Issuance and Trading of Public Securities,
and the Draft Law on Bankruptcy will
be soon submitted to the Cabinet, the Draft Law on the Secured
Transactions has been already adopted by the Cabinet. Meanwhile, the
Ministry of Economy and Finance and the National Bank of Cambodia are
preparing the Draft Law on Leasing.
3. Institutions Building and Strengthening of
the Banking Sector
To sustain the well-being of the entire banking
system, the National Bank of Cambodia has strengthened its monitoring
capacity through the issuance of new regulations aiming at more
transparency, by creating the unified charts of accounts and by
preparing the Draft Law on Anti Money Laundering. In order to improve
its operations and management, the National Bank of Cambodia has
modernized the Central Bank by introducing information technologies.
Such move has improved the confidence of the public vis a vis the
banking system. In this regard, in 2004 the foreign currencies deposits
have increased by 34% as compared to those of 2003. Similarly, in the
first semester of 2005, those deposits have increased by 10% as compared
to those of the first semester of 2004. The indicator of velocity of the
Riel is at 4.3, decreasing from previous years, due to the larger amount
of national currency injected in the banking system reflecting the good
condition of the economy.
As H.E Keat Chhon, senior Minister, Minister of
Economy and Finance and First Vice Chairmen of the CDC has just reported
to the Forum, the Royal Government has strengthened the 7 Sectoral
Working Groups and the 3 Sub-Steering Committees mechanism thus
providing investors the opportunities to raise their concerns and
issues. I have noted that this mechanism allows us to endorse some
measures to facilitate trade and improve the investment climate. It also
allows us to exchange experiences and realize the transfer of knowledge
through this dialogue.
However, we have to acknowledge that we are living
in difficult circumstances full of challenges. The regional and global
landscapes have changed significantly since the Asian Financial Crisis.
The changes of the economic situation in East Asia, the growing
uncertainty caused by terrorism, troubles, wars, diseases and natural
disasters around the world, and the ending of the Quota system under the
Multi Fiber Agreement and the recent increase of oil price represent the
new challenges for Cambodia. In this context, to reduce the negative
impacts of the instability and the oil price increase’s threats, the
Royal Government endeavors to diversify the production and supply of
energy by promoting investment projects in hydropower in Kam Chay and in
other regions of Cambodia. Moreover, despite the achievement of a
remarkable economic growth, the base of this growth being relatively
narrow, makes Cambodia's economy vulnerable to the adverse external
factors. On the other hand, although Cambodia's trade regime is very
liberal by the regional standard, Cambodia has the obligation to
continue implementing other reforms in order to get the benefit and to
bring prosperity to its people.
In that context, we acknowledge that the
sustainable economic growth of Cambodia in the future must rest
primarily on the capacity of the Royal Government to strengthen its
economy and expand the base of its growth. The challenges for Cambodia
in the future is to improve governance in order to attract more private
investments and insure the competitiveness of enterprises in Cambodia in
order to benefit from our potential in agriculture, agro-industry, labor
intensive industry, processing industry, tourism, manufacturing, and
other services.
I would like to take this opportunity to sincerely
thank the Government of Japan for sending experts, in recent months, to
study and push for the creation of the Special Economic Zone in
SihanoukVille. We strongly believe that the mechanism which will be
implemented in those Special Economic Zones will help streamlining the
administrative procedures and reduce considerably the inspection
activities, as would wish investors. I would like to inform the Forum
that the Royal Government has approved the request of the Societe
Concessionaire de l'Aeroport (S.C.A) to expand its activities in
Cambodia by investing in SihanoukVille. With this new airport, we will
be able to diversify our tourism products by implementing our
triangular tourism strategy based on the connexion of the 3 main poles
of Cambodia ie Siem reap, Phnom Penh and ShihanoukVille. It must also be
noted that during the past year, we have received applications for
mining activities and cement plants.
All in all, we note that all the tasks that I have
pointed out above require a Participatory Approach, promoting
discussions, consultations and dialogues between all partners.
Therefore, I would like to appeal to all the members of the Working
Groups from the Government side as well as from the private sector side,
foreigners as well as Cambodians to actively involve in such dialogues.
I think it is now time for me to give the floor to
the co-chairmen of the Working Groups from the private sector to frankly
and constructively speak and raise concerns, requests and make
recommendations. We have first to identify the problems in order to
understand and solve them. These problems can be solved if we determine
to work together, by jointly seeking for ways and means, for the
benefits of our people and for the future generation.
Thank
you for your attention. EndItem. |