| |
Opening Address at the 2010 Cambodia Outlook
Conference: A Partnership of CDRI and ANZ Royal Bank: “Returning to a High
Growth Economy – Policy Priorities and Action for Growth and Sustainable
Development”
17 March 2010, Phnom Penh Hotel, Phnom Penh, Cambodia
Excellencies, Ladies and Gentlemen
It is my great pleasure today to participate
in the opening of the 2010 Cambodia Outlook Conference on “Returning to a
High Growth Economy – Policy Priorities and Action for Growth and Sustainable
Development”. This is the fourth occasion on which I have had the
pleasure of delivering the opening keynote address, and I would like to again
congratulate CDRI and ANZ Royal Bank on their initiative in hosting this
important annual conference, which each year brings together officials from the
Royal Government, the private sector, the research community, civil society and
international development partners to consider Cambodia’s achievements and the
challenges we face, and to seek good approaches we can work on together for the
benefit of our nation.
This year’s conference is of particular
importance because it is the 20th anniversary of the Cambodia
Development Resource Institute, CDRI, your co-hosts today, and now Cambodia’s
leading independent development policy research institute, playing a critical
role in providing evidence based development research and policy recommendations
to government and other stakeholders in Cambodia’s development. I am very proud
to have been involved in the establishment of CDRI all those years ago, and this
morning as I look around I am pleased to see also present Madam Eva Mysliewic,
CDRI’s visionary and indefatigable founding director, and the presence of other
distinguished people, who played such important roles in CDRI’s genesis.
As Cambodia has grown, developed, and changed
over those 20years, so has CDRI grown, developed and changed, but never losing
sight of its mandate - to do independent high quality policy relevant research,
but also to train and build the professional and other capacity to make a great
intellectual contribution to our nation. On the occasion of CDRI’s 20th anniversary I would like to extend my warmest congratulations and appreciation
to all CDRI Board members, management and staff, past and present, who have each
contributed to the success of this unique national institution.
Today’s conference and its theme, Returning
to a High Growth Economy – Policy Priorities and Action for Growth and
Sustainable Development, are very relevant in the current context. I
remember that, last year in this forum, we considered the impact of the severe
global financial crisis and global and regional economic downturn that, while
not of Cambodia’s own making, had such serious negative impacts on our economy
and its growth, on our development, and on the wellbeing of our people,
especially the poor and vulnerable. This year, while learning from the many
lessons of the crisis, and assessing the effectiveness of our responses, we look
forward, to what must now be done to return Cambodia to its former high levels
of growth, and to strengthen our achievements in sustainable development and
poverty reduction.
Though the world’s economy is recovering, we
have faced daunting challenges to find new markets beyond the US and European
ones and compete for funding in terms of ODA, FDI and other sources to finance
our growth and development. The economic structure has changed from an economy
that mostly relied on garment and tourism into a more diversifying broad-based
economy with improved domestic and regional linkages. Thus the key issue for us
now is how to improve our “competiveness”.
Indeed, at the current stage of development,
all the assistances from our official development partners either in
“preferential trade treatments” or “development cooperation financing” remain
very crucial to the development of Cambodian economy, and we are making our best
efforts to use those resources effectively and efficiently to create a strong
foundation for growth and poverty reduction among our people. We are also aware
that, if we are going to be thoughtless, hasty and lacking of ownership, we
cannot rely on the “preferential treatments” and such assistances to get rid of
the poverty. In other words, we can say: “nobody gives us money to become
rich, if we have no ideas on how to live on our own”. We must be
ambitious and aim high to graduate from a poor country and to become a
middle-income and then developed country in a realistic timeframe, with
effective and efficient use of all the opportunities and available potentials
while participating in the cooperation and competition with partners in this
globalized world.
Let me now start my deliberation with a brief
recap on the impact of the downturn on Cambodia and our Royal Government’s
responses.
After a decade of strong growth with
significant poverty reduction, the economy has been impacted by the global
financial crisis, affecting real key economic sectors. However, the overall
economic performance is not too bad, as recent preliminary estimates suggested
GDP growth in 2009 would remain positive but not significant at 0.1%, supported
by good performance in agriculture and service sectors at 5.4% and 2.3%
respectively, offsetting the decline in other sectors such as industry at -9.4%
especially the garment sector which dropped by -9%. It should be noted that all
the sub sectors of services have shown growth, except the real estate business
which declined by -2.5%. The tourism industry was hit by the crisis, with growth
slowed down to 1.8% for the hotel and restaurant sub-sector. Investments (FDI)
suffered some decline to around USD 500 million in 2009, but it is still
significant to support the Cambodian economy. Thus the economy has been impacted
not so much through the financial sector (which remains underdeveloped) but
through trades and investments.
I wish to reiterate that those key
macroeconomic indicators are preliminary and not yet official. Normally,
official economic performance figures will be finalized and released for
dissemination after June each year. Thus those numbers would be further changed.
Indeed, the impact of the crisis on
Cambodians’ livelihoods varies across the population and locations. Only
one-fifth of all households have a job in sectors directly affected by the
crisis, particularly in garments, construction, and tourism, where the
government has taken due measures to timely reduce their impacts. However, since
agriculture and rural economies performed well, we expect that the majority of
Cambodian people, who are making their living in rural agriculture, stand to
benefit from this growth and their living conditions would be further improved.
Growth is expected to recover in 2010, at a
projected 5% rate. Inflation has declined sharply, mainly due to lower food and
fuel prices, while the exchange rate has been kept stable in par with the US
dollars. Gross official reserves increased from US$2.1 billion to US$2.3 billion
covering 4 months of imports. Based on these latest indicators, we can
say with confidence that the Royal Government, like others in Asia, has already
led the Cambodian economy out of the difficult period of the crisis, while in
such difficult circumstances, we managed to strictly maintain financial and
macroeconomic stability as well as the stability in society and livelihoods of
our Cambodian people.
We are glad to see that our international
development partners maintained their strong commitment to supporting us during
the difficult time. The Royal Government has been working closely with them to
coordinate their cooperation assistance to implement the stimulus policy package
effectively and successfully. We have also been able to significantly increase
the development assistance especially from China and Japan in the context of
Greater Mekong Sub-region.
Cambodia has responded to the crisis
proactively with moderate fiscal intervention while maintaining monetary
stability and support sustainable economic growth. Cambodia is a small and open
economy, with capital account liberalization; Cambodian economy is highly
dependent on a sustained international trade expansion and foreign capital
inflow. More than 90% of the banking transactions are dollarized. It means that
we cannot use interest rate policy to influence the economy. With free capital
flow, on the other hand, foreign exchange intervention has been used to
stabilize the exchange rate and to increase international reserve position.
Policy response coordination, through the Committee for Economic and Financial
Policies, is crucial in a dollarized economy, in which fiscal policy also plays
a crucial role.
During the high oil and food price crisis in
2008, our Committee for Economic and Financial Policies set up a joint taskforce
involving the Ministry of Economy and Finance, the National Bank of Cambodia and
key economic ministries to enhance economic surveillance efforts and provide
more coordinated policy responses. Reserve requirement was increased from 8% to
16%, while commercial bank’s exposure to high-risk sector was capped. After the
onset of the Global Financial Crisis, we reduced the reserve requirement to 12%,
lifted lending restrictions, and increased spending to boost domestic demand. In
addition, the central bank has made further efforts to improve supervision and
regulation by tightening rules and regulations and enhancing onsite supervision.
Particular attention has been made to the banks’ solvency and liquidity
conditions. Further regulatory and supervisory measures will be implemented to
strengthen risk management and corporate governance at the banks to strengthen
enabling institutions to better anticipate, manage and ultimately withstand
adverse economic conditions and market trends.
We faced a daunting challenge on the fiscal
front. Cambodia has acted counter-cyclically to boost domestic demand, with
increased public expenditure towards improving social safety nets and providing
retraining and alternative employment for vulnerable population segments,
including those losing jobs in the affected export sectors. We have also
established the Fund for Agricultural Development in order to increase
agricultural productivity and diversify our growth base. Priorities have also
been given to public investment in physical infrastructure and supporting growth
in the agricultural sector. Against these backgrounds, the 2009 budget deficit
was expected to widen to 6 of GDP, due to the facts that expenditure levels have
risen sharply, with large increases in wage and locally financed capital
spending, though revenue collection has been broadly strong. In 2010, we aim to
maintain the budget deficit quite significantly though cautiously at 5% of GDP,
in order to sustain the recovery from the global economic crisis and to
strengthen the foundations for growth as well as to fast track our economic
diversification efforts.
We have learnt important lessons in going
through the crisis, which should be raised for consideration. I wish to
highlight some key issues as follow:
(i) Peace, political stability,
security and social order, as well as macroeconomic and financial stability are
key to high economic success. Cambodia has built a strong record of
macroeconomic management, especially the management of public finance and the
governance in finance and banking sector. In this context, I wish to sincerely
appreciate the steadfast efforts made by the Ministry of Economy and Finance
during the difficult time; and also highly appreciate the major contribution by
the National Bank of Cambodia.
(ii) Strong performance in
agriculture and rural economies helped us survive the crisis with insignificant
damages and it will remain a potential engine of growth and poverty reduction
over the medium to long term;
(iii) Promoting implementation of
reform agenda in all sectors especially in public financial management helped
strengthen our capacity to deal and respond to the crisis. Going forward, the
advancement of all the reforms especially in enhancing regulatory framework and
laws enforcement is the urgent priority of our reform agenda;
(iv) Deepening Cambodia's integration
and economic linkages in the region and the world has been fundamental to our
economic success and should remain an important priority going forward, in
particular in East Asia, ASEAN and GMS;
(v) Diversifying products and
markets for exports is a MUST if we are to compete in the global markets and to
build our economic foundation speedily; and
(vi) Enhancing agricultural
productivity & diversifying agricultural production, including the development
of irrigation and energy infrastructure, is needed to promote economic growth
and diversification.
(vii) Building a comprehensive social
safety nets system and programs are important to mitigate the adverse impacts of
crisis on people as well as to improve and increase productivity and capacity of
our labour force for the next stage of development, employing proactive human
resource policy and participation of private sector.
These priorities, I talked earlier, are now
reflected in the Royal Government’s updated National Strategic Plan 2009-13. The
Royal Government will encourage the implementation of those important activities
and other key measures to the success in an effective and efficient way.
In pursuing these broad strategies for a
return to higher growth, sustainable development and poverty reduction, in
partnership with the private sector and our development partners, we must focus
on the sectors of our economy that are critical for growth, for economic
diversification, for responding to the potential export markets of the dynamic
economies and societies of our East Asian region, and other promising global
markets. Key measures are to make further efforts in ensuring political and
macroeconomic stability, social stability and orders, as well as to implement
key reform programs in order to strengthen Cambodia’s competitiveness and to
attract quality domestic and foreign investments.
As the programme of today’s 2010 Cambodia
Outlook Conference reflects, the most promising and critical sectors for
priority policy responses and action by the government and the private sector
are agriculture and rural development, tourism, emerging industries such as
light manufacturing, and infrastructure and energy generation.
In agriculture, as indicated earlier, we
learnt a very important lesson from the economic downturn – that Cambodia’s
agricultural sector, both current and potential, is one of the great strengths
of our economy. It continued to grow at around 5% pr annum over the most
difficult of times. With a concerted strategic effort by government, its
development partners, the private sector and agricultural producers themselves,
we have made notable achievements in improving agricultural productivity,
especially in the quality and yield of rice production, and its milling for both
domestic consumption and export; in promoting diversification of crops to
respond to market needs in our Asian region; in improving rural infrastructure,
irrigation, water resource management, transport and access to markets, access
to credit and extension services. The Royal Government will make further efforts
to strengthen agriculture as an important engine of growth, and that will make a
significant contribution to rural economies, poverty reduction and wellbeing of
rural communities.
In the tourism sector, we will further
encourage and support the private sector to take advantage of recent government
initiatives in establishing a national airline, in reopening Sihanoukville
airport, and in the diversification of both cultural tourism, beyond the current
Angkor sites, and to other tourism nice markets such as beach tourism and
eco-tourism. We must also work with all stakeholders including the government
institutions, development partners, private sector, farmers, handicraftsmen and
all workers to create the ‘value chains’ that will provide quality service and
attraction for domestic and foreign tourists.
In emerging industries, we will explore
opportunities to further develop a light manufacturing base in the production of
consumer goods such as processed food, paper and packaging, rubber products,
bicycles and motor cycles, and the many small accessory items and processed
agricultural products for export and domestic consumption. To realize this, we
must learn from the experience of our neighbours on how to better manage and
promote investors using special economic zones, especially in strategically
placed border areas where the benefits of improved ‘hard and soft’
infrastructure are now flowing.
In infrastructure and energy generation we
will continue, in close cooperation with our development partners, the private
sector and local communities, to complete the rebuilding of critical rural
infrastructure to achieve better connectivity and logistics, for the movement of
both people and goods, within Cambodia and with our neighbours. The Royal
Government will give priority to greatly enhancing our energy generation
capacity to ensure a reliable affordable energy supply, while at the same time,
considering the need to ensure environmental sustainability and manage social
implication.
Going forward, especially in the post crisis
context, we also realize that Cambodia needs to take full advantage of its
favourable and strategic position in the regional and world geo-economic and
geo-political relationships. Cambodia is geo-physically well placed to be a
beneficiary of China’s economic development, the rapid recovery from the global
crisis and economic downturn in Asia, the great potential for growth in the
region, and the entrepreneurship of private sector of those countries in the
region. The potential for an integrated Greater Mekong Sub-regional production
network and market, extending from China, through the GMS countries to the rest
of ASEAN, provides compelling opportunities for Cambodia and for all the GMS
countries.
Through these priorities and partnerships I
believe Cambodia will be able to move forward towards realizing its long term
vision of building a Cambodian society with peace, political stability, security
and social order, sustainable and equitable development, strict adherence to the
principles of democracy and multi-party political system, respect for human
right and dignity, socially connected pillars of society with well educated and
culturally advanced population, appropriate standards of living and harmony in
society as well as in family; as all these are clearly defined in the
Rectangular Strategy for Growth, Employment, Equality and Efficiency.
Through the Rectangular Strategy, NSDP and
other relevant documents the Royal Government has set vision, policy, strategy,
and detailed plan of actions to lead the “Cambodian ship” on the path of peace
and democracy toward social progress and prosperity. In the difficult period of
this global economic crisis, the Royal Government has shown its maturity and
firm capacity in leading the Cambodian society to weather the storm and survive
its worse consequences. Indeed, we are grateful to all the concerned partners
either official development partners, either private sector or civil society who
have provided cooperation and assistance to the Royal Government and Cambodian
people in the difficult circumstances. Indeed, the climate has improved but the
sky is not clear yet. Thus we are required to take further precaution to ensure
that Cambodia remains stable to move forward on track of a sustainable
development and high economic growth toward progress and development.
We have learnt important lessons, in going
through the storm of economic and financial crisis, which allow us to make
adjustments and improve our works. With strong political commitment, in full
spirit of ownership and partnership with all the stakeholders, we will make the
best use of our capabilities, opportunities and potentials to overcome all the
obstacles, big or small, to realize the national vision and the humble
aspiration of our Cambodian people.
In the spirit of optimism and firm
determination, may I conclude my opening keynote address here; and I wish the
conference a success in exchanging views and dialogue on the future of Cambodia.
Once again, I congratulate the organizing partners of the 2010 Cambodia Outlook
Conference, ANZ Royal Bank and CDRI, and look forward to receiving good policy
recommendations and ideas for action generated by the conference.
Finally, may I again congratulate CDRI on its
20th anniversary and wishing it a long and productive life as a
unique and highly valued national and international Cambodian think-tank.
Thank you for your attention!
EndItem
|
|