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Prime
Minister
Samdech Hun Sen
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| Invest in Cambodia Interview... |
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Can Cambodia maintain economic
growth and social development against the backdrop of the global
economic recession?
The global recession has taken us
by surprise, but it seems to be a good test of our economic
fundamentals. Cambodia’s economy is running some risk of slowing
down amid the current crisis and as part of the business cycle. Real
GDP growth is expected to be around 6.5 per cent for 2009, a bit
lower than the growth rate for 2008. Key sectors like garments,
tourism, construction and agriculture have been affected. The
garment sector has been threatened by the sharp drop in demand in
the US and EU; tourist arrivals declined significantly during
late-2008 and early 2009; the construction sector has been slow; and
the price of Cambodia’s main agricultural products, such as rice and
rubber, has also dropped. Whilst we cannot eliminate the impact
entirely, we can, however, lessen the magnitude of the impact on our
economic and social development.
What actions are you taking to
lessen the impact?
We have put in place a response mechanism,
adopting a two-pronged approach – short term and long term actions.
The first response is through a policy mix, i.e. stimulus fiscal and
accommodative monetary policies, which have been instrumental in
maintaining macroeconomic stability, in particular in ensuring the
soundness of the banking system.
The second order response involves addressing
long term issues through improved competitiveness. In order to build
resiliency against the current global economic downturn and to
sustain economic growth, Cambodia needs to look at ways to improve
its competitiveness in the regional and international arena through
diversifying existing growth and stabilising burgeoning sectors.
This requires Cambodia to explore new economic frontiers while
nurturing existing and emerging sectors such as telecommunications
and ICT (Information Communication Technology), light manufacturing,
financial and securities market; and potential sectors such as
alternative energy sources, oil exploration, mining; and processing
technology to sustain productivity and competitiveness.
How do you envisage investment in
Cambodia developing over the next 5 years?
Firstly, let me emphasise that the foundation of
our economy remains strong, that will help us to overcome the
negative impacts of this global financial and economic crisis. Much
untapped potential remains and it is our real economy that is the
target for investment while the global financial sector suffers.
We have worked hard to secure peace, political
stability, security and social order, while maintaining
macro-economic stability and international integration. The series
of reforms that the government has undertaken is to improve the
business climate and good governance. On behalf of the Royal
Government of Cambodia, I can assure everyone of our commitment to
ensure long term stability and improve the business climate.
Cambodia is open equally to all investors, local and international.
We welcome investments in all sectors, including banking, insurance,
and telecommunications. Investors can own 100 per cent of their
business here, in most countries 100 per cent foreign ownership is
not allowed.
Our labour force also provides a competitive
advantage in terms of salary and productivity. Cambodia’s low labour
costs are very attractive to investors. Although minimum wage rates
have increased over the past year, they still average out at only
$45-$50 per month. Cambodia has a strong dynamic labour force in
comparison to other countries within the region and that helps to
encourage more investments.
The global financial crisis tends to impose more
risks to all sectors of economy, and therefore investors are more
interested in the real economy. The trend of economic growth in
Cambodia is still high due to the fact that this country is in the
development stage and therefore investors can see many opportunities
to fulfil their business goals.
Which sectors offer the most
potential to foreign investors?
I would say that any investments have strong
potential in a developing country like Cambodia because of the
country’s stability, market potential and growth.
Potential in agriculture is high. The sector
contributes 31.8 per cent of GDP. Most of the population are farmers
yet there are no large scale investments in this sector. There is
still much room for improvement. Our yields are low in comparison to
those achieved in neighbouring countries. Increased productivity can
only be achieved through investment in physical infrastructure, such
as irrigation systems, and by promoting agricultural
diversification.
Cambodia also needs to develop a processing and
packaging industry for its agricultural products in order to become
more competitive in the region. The agricultural sector in Cambodia
today is unexploited and offers tremendous potential, but without
investment our cultivated land remains largely unproductive and
idle.
Light industry and manufacturing also offer great
potential. Our low cost labour force is ready and waiting. As a
nation we have already shown what can be achieved, as our experience
in developing a highly successful garment industry clearly proves.
Garments are the Kingdom’s largest export and
account for around three-quarters of export earnings, but this
sector alone cannot guarantee sustainable growth because of
increasing competitors in the region.
The Royal Government needs more investors in
light industry and manufacturing, and we also want to see more
investment not only in the garment sector but also in textile
factories. Our labour costs are still low in comparison to labour
costs in the region.
Other potential investment sectors include
infrastructure. Investment opportunities in the medium term include
the following sectors: telecommunications and ICT, banking and
finance, mineral exploration (including oil and gas), road
construction and energy supplies. All of which will help to boost
the economy, make the country more attractive to tourists, and
improve the standard of living of the population.
Could Cambodia be doing
more to promote itself internationally?
Cambodia is doing more everyday to promote itself internationally in
terms of political, economic and trade reform. For instance, the
government’s domestic policy strictly respects and adheres to all
principles of a liberal multi-party democracy and market economy.
Cambodia’s integration into the region and the
world and linking trade to labour standards has created a favourable
environment for the development of agriculture, tourism, and
industry – especially the garment industry – and has facilitated
Cambodian farmers to export their products to the regional and world
markets. Also, Cambodia’s membership of the World Trade Organisation
(WTO) has accelerated internal reforms, attracted both domestic and
foreign investments, and strengthened the foundation for
socio-economic development.
The Royal Government will make further strides on
the path of trade liberalisation aimed at the free movement of goods
and services within the country and between Cambodia and her trading
partners; creating access for Cambodian products, without barriers
and obstacles, to extensive regional and world markets. This will
create opportunity to avail of economies of scales and bring other
benefits to the Cambodian economy in terms of an increase in
investment, jobs, income and economic growth as a whole. All these
are critical to reduce poverty among our people.
The Royal Government will pay particular
attention to the further integration of Cambodia into the region and
the international community by pursuing membership of Asia-Pacific
Economic Cooperation (APEC) forum and participating in the building
of the Asean Community. All ministries/agencies are expected to
fulfil the duties of Cambodia’s membership of the WTO by adopting
laws and regulations and ensure their effective enforcement to meet
the requirements of the WTO.
The Royal Government will promote the
implementation of new measures including: establishing a National
Productivity Centre in order to improve productivity and reduce
production costs; establishing a National Standards Institute to
ensure that product quality conforms with regional and international
standards; establishing national testing laboratories for physics,
chemistry, micro-biology and mechanics in order to evaluate quality
and set prerequisite criteria for products; strengthening an
industrial property rights protection mechanism in order to promote
innovation, adoption of new techniques and new technology; imparting
training to improve skills; and, strengthening the relevant legal
framework.
What affect do you think the
introduction of an Anti-Corruption Law will have on foreign
investment?
The Royal Government’s main priority in improving
good governance is to increase capacity and efficiency of the public
sector, including combating corruption. The government clearly
understands that an Anti-Corruption Law can improve the perception
and confidence of the business environment.
Moreover, an Anti-Corruption Law would help to
prevent leakage, favouring efficient producers, promote fairer and
equitable distribution of scarce public resources, and minimise the
leakage of revenue from government coffers to private hands.
Cambodia’s ‘one-stop service’ or a ‘single window
service’ would reduce transaction costs and add measures of
predictability to investment decisions, making the country
inherently more attractive.
Our achievements in drafting and adopting many
fundamental laws such as the civil code and penal code, and our
efforts to strengthen the court and build human resources have
indicated noticeable progress in the Royal Government’s effort.
Having said this, I insist that the law must go
through its due process – to be consistent with the organic and
other existing laws and to follow the adoption of the Criminal Code
– to ensure it will work effectively in curbing corruption as we
intended.
How will Cambodia use and benefit
from the recently-pledged $951 million of foreign aid?
For 2009, the Royal Government of Cambodia
mobilised approximately $ 1 billion in Overseas Development Aid
(ODA), which was the highest in the last 10 years. In fact, ODA is
instrumental for Cambodia during this difficult time of global
economic crisis and downturn. Thus our commitment to make full use
of the pledged funds will be important. Therefore, the government
recently put in place a mechanism to speed up the process of
disbursement and implementation.
Our priority in using ODA is to build capacity
and institutions, invest in infrastructure and pillars of growth
especially agriculture and in human development such as health and
education. These are important for long term economic growth.
In the context of the crisis, the increased
support from ODA gives us a big relief – a fiscal space to intervene
in and stimulate the economy in the areas where it is needed. In
related aspect, the crisis has given us a sense of urgency thus
prompting the joint efforts of government and development partners
to take action. This is a good opportunity for both sides
(government and donors) to speed up reforms and make things happen
quickly.
Are the Millennium
Development Goals achievable for Cambodia by 2015?
It is our commitment to make this
happen. Cambodia has made substantial investment in key sectors such
as agriculture, rural development, health and education, all of
which have a direct impact on achieving the MDG targets. The poverty
rate declined from an estimated 45–50 per cent in 1993 to 30 per
cent in 2007. This is good progress and I expect we will meet the
target by 2015. The maternal mortality rate was 437 per 100,000
deliveries while the child mortality rate declined to 66 per 1000 in
2005. This is a challenge as the indicator remains too high compared
to CMDGs. Thus we need to do more in the health sector.
Education is on track, the number
of new schools, training centres and universities has increased
significantly. Our challenge is to channel more resources into rural
education to ensure that more children can go to school. In summary,
I believe that we are in good standing to make further strides to
realise most CMDGs targets. Nevertheless, I could not rule out the
possibility of a failure, given the circumstances beyond our control
like the current global and financial crisis which keep on
distracting our efforts.
How do you expect Cambodia to look
in 20 years time in terms of economic success, infrastructure, and
lifestyle?
In the next 20 years, I expect Cambodia will be
one of the world’s best performers in terms of improved income and
living standards, better infrastructure and a lifestyle on par with
middle income countries.
Cambodia will become a competitive economy in
terms of human capital, openness and trade, and in the quality of
its institutions and regulations within a broader regional and world
context. My efforts to promote growth through improved
competitiveness by investing heavily in infrastructure and education
as well as social development will help bring the country to that
level.
I envisage the advance in agriculture, growing
tourism; expanding light and medium industries, a well-managed
mining industry (including oil and gas) and ITC to be the key
drivers of our future growth. Cambodia will succeed in growth
diversification and trade, resulting in a rapid growth of income and
welfare.
Agricultural productivity will be significantly
improved and will play a key role as food and energy issues become
more severe globally. Improvements in infrastructure will focus on
improved and modernised roads, maritime and air transport links
regionally and internationally, large scale irrigation, public
health and education systems.
Lifestyle will change rapidly, reflecting
across-the-board improvements in human indicators and the speed of
regional and world integration.
External Links:
Prime Minister's Office
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