Download Kingdom of Cambodia Nation Religion King 7 Statement by Deputy

Kingdom of Cambodia
Nation Religion King
7
Statement by
Deputy Prime Minister Keat Chhon, MP
Minister of Economy and Finance
The 19th International Conference on the Future of Asia
“Asia’s Search for Steps toward Stronger Ties and Integration”
Friday, May 24, 2013, 11:10 am-11: 55 am
The Imperial Hotel Tokyo
1. I am very happy to be here today at the 19th Conference on the Future of Asia. I am
honored to present, with Dr. Hang Chuon Naron, Permanent Vice Chairman of the Supreme
National Economic Council (SNEC), the views of the Royal Government of Cambodia in
such distinguished company. This year marks the 60th Anniversary of Diplomatic tie
between the Kingdom of Cambodia and Japan. I would like to convey congratulations and
warm feeling of friendship of Cambodian people and the Royal Government of Cambodia to
the people and the Government of Japan.
Current State of Cambodia's Economy
2. During the last two decades since the general elections in 1993, Cambodia, under the
leadership of Samdech Prime Minister Hun Sen, has undergone major transformation
from a war-torn, least developed country (LDC) to emerge as a middle-income country in
the next few years. As you may know, in mid-1990s Samdech Prime Minister Hun Sen
launched a “win-win” policy designed to end thirty years of war and integrate all warring
factions into the Cambodian society. As the result of this “win-win” policy, the military and
political organization of the Khmer Rouge was dismantled. The restoration of peace and
political stability at the end of 1998, the integration of Cambodia into ASEAN and the WTO
global trading system created unprecedented opportunity for economic reform and social
progress. During this period, economic growth averaged 8% per annum. According to the
World Bank, Cambodia ranks 10th among 174 countries for best growth during the last
decade. Rapid growth has been supported by a steady rise in investment related to exportoriented textile industry and to investment in infrastructure. Foreign direct investment and
support by development partners, including Japan, has played a crucial role in Cambodia’s
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development. In addition, development of the financial sector has been crucial in sustaining
this high growth. Financial intermediation increased from 12% to 50% of GDP during the
last decade.
3. Cambodia’s economic takeoff has been achieved without building macroeconomic
imbalances, as reflected in declining inflation, more competitive exchange rates, and lower
public and external debt accumulation. Cambodia’s debt to GDP ratio remains low, at 32%
in nominal term in 2013. It is also associated with a faster pace of implementing
productivity-enhancing structural reforms and strengthening institutions.
4. More importantly robust economic growth has resulted in rapid reduction in poverty, by
the rate of 4.5% per annum on average during the last 8 years, among the best poverty
reduction in the world. This impressive poverty reduction was possible due to pro-poor
growth that lowered inequality, due to better performance of the agricultural sector. The
government’s investment in development priorities – such as rural infrastructure and human
resource development – has contributed to the dramatic decline in poverty.
5. After a decade of heavy investment in social and economic infrastructures, Cambodia has
experienced rapid improvement in social indicators. Out of the 8 Millenium Development
Goal (MDG) targets, Cambodia already achieved 5 before the 2015 deadline, in the area of
promoting gender equality and empowering women, reducing child mortality, improving
maternal health, combating HIV/AIDS, malaria and other diseases and developing a global
partnership for development. We are making progress to achieving universal nine year basic
education and poverty reduction as scheduled. In this regard, Cambodia’s growth has been
inclusive and an MDG Progress Index ranked Cambodia as the fifth best performer.
6. Looking forward, there remain many challenges facing Cambodian economy, including
the concentration of growth in only a few sectors, such as agriculture, garment, tourism and
construction. Nevertheless, there have been promising signs of diversification in the
manufacturing sector. It is noteworthy that investment from Japan has ushered Cambodia
into the era of electronics. Japanese investments increased rapidly from US$20 million in
2010 to US$500 million in 2012.
7. The main challenges of our financial sector include the lack of an adequate and wellcoordinated system of financial supervision, the rapid growth of bank credit to the private
sector with limited availability and use of instruments of control, the absence of an interbank
market, high level of dollarization limiting effective monetary policy and the central bank’s
limited capacity to act as a lender-of-last-resort.
8. The overall macroeconomic outlook remains positive for Cambodia. Real GDP growth is
projected to reach about 7% over the medium term. The nominal exchange rate remains
stable and inflation is under control. Fiscal consolidation continues and Cambodia is
committed to increasing steadily domestic revenue to finance the needs to invest in
infrastructure. The overall debt sustainability outlook remains favorable.
Plans for Cambodia to Become the Next Emerging Economy in Asia
9. International trade and foreign direct investment are crucial for Cambodia’s industrial
upgrade. To maintain strong growth performance and prepare for the establishment of the
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ASEAN Economic Community by 2015 and developments in the Greater Mekong Subregion (GMS), the Royal Government of Cambodia has prepared an industrial policy in
order to build the foundation to compete with other emerging economies in the region, and
the rebalancing in global macro-economic situation. The challenge for Cambodia is to catch
up with the economic level of the neighboring countries, namely ASEAN nations, and to
increase its presence in the global economy. Samdech Prime Minister Hun Sen has
announced Cambodia’s vision of achieving the status of high middle income country by
2030 and moving towards developed country by 2050.
10. Cambodia’s future depends on both Asian and global economy. We have witnessed that
the share of Asia in the global GDP began to re-emerge. By 2050, Asia is expected to
become half of the world GDP. Two trends will emerge: domestic rebalancing, shifting from
external to domestic sources of growth, and regional rebalancing, i.e. shifting demand
towards south-south cooperation. Cambodia sits in the middle of this growth dynamism.
Cambodia has the potential to achieve the high middle-income status by 2030. But it
depends on progress with domestic policy reforms and meeting challenges of external
sector.
11. In this regard, our strategic objective is to build the foundation of the Cambodia’s selfsustainable manufacturing sector to be part of East Asian production networks, by
strengthening industrial potentials through FDI and the development of Special Economic
Zones, modernizing agriculture to promote agri-business industry, bringing up domestic
manufacturing sector to achieve the global competitiveness, and diversifying our industrial
sector to contribute to sustainable economic development.
12. Cambodia is committed to further strengthening macroeconomic policies, improving the
business climate and logistics, facilitating trade and cross-border transportation,
mobilizing fiscal revenue to increase investment in infrastructure and human capital. Our
key priority now is skill training. We will further reform our vocational training system and
higher technical education in order to provide skilled labor to investors.
13. We are also working with the international financial institutions to strengthen regulation
of the financial sector in order to promote financial stability and intermediation by focusing
on effective implementation of risk-adjusted capital adequacy principle and introduction of
an interbank market to provide instrument for monetary policy operation.
14. Our objective is to diversify the manufacturing sector from a simple labor-intensive sectordominated, based on garment and footwear, to technology- and labor-intensive sectorcentered, focusing on machinery assembly and processing sectors, and further to
knowledge-intensive sector-centered.
Japan’s Role in Cambodia’s Economic Transformation
15. During the last two decades, Cambodia has overcome many obstacles and challenges. Japan
played an important role in the restoration of peace in Cambodia during the implementation
of the 1991 Paris Peace Accord. After the 1993 general elections, Japan has again played a
key role in Cambodia’s economic and social development. Now Japan has accompanied the
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Royal Government of Cambodia’s efforts to promote economic takeoff by encouraging
Japanese companies to invest in Cambodia.
16. Japan’s has been the number one ODA provider to Cambodia. Japanese ODA accounts for
20% of the total ODA inflow received by Cambodia, making Japan the biggest donor in the
country. During 1992-2012, the Government of Japan has provided a total US$1.5 billion
for the development of Cambodia. With this generous support, Cambodia has overcome the
difficulties and transformed itself into a country full of peace with improved social order,
stability, cooperation and development. They have taken deep roots in the Cambodia’s
socio-economic foundation and contributed to rapid expansion of the national economy. I
would take this opportunity to comment on key strategic areas that Japan has played a
crucial role in Cambodia.
17. First, hard and soft infrastructure development. Japan’s ODA has extensively focused on
both hard and soft infrastructures that are important for economic and social development.
The construction in Cambodia of three major bridges donated by the Japanese Government:
Chrouy Changvar, Kizuna and Neak Leoung bridges marks physical integration of
Cambodia into one country in terms of inland transportation. This has also contributed to the
construction of the Asian Highway. Moreover, Japan has helped us building port, roads,
schools, water supply facilities, power plants, irrigation and flood protection system,
hospitals, demining and many others areas. On the soft side, the projects are seen to have
good results in term of quality and sustainable management.
18. Second, the influx of Japanese investors into Cambodia that has created thousands of job
opportunity for Cambodian youth. Japan’s ODA has prepared the foundation for Japan’s
private sector to come and invest in Cambodia. This time, they will not just bring
technology and job opportunity, but also know-how, skills development, management
techniques and harmonious employer-employee relations, and culture. This is the soft
infrastructure, which is another side of the same coin of hard infrastructure in context of
Cambodia, whose capacity remains weak.
19. Finally, the extensive supports to human resources development. Hundreds of scholars
both within the government and outside have been graduated from Japan under auspices of
Japanese government. The large pool of those capable scholars will significantly contribute
to development process of this country. My personal experiences show that they have been
trained at high qualification and many of them are active and becoming part of decision
making in many ministries. Undoubtedly, this is a significant contribution to human
resources development in Cambodia.
20. I am grateful that at the policy level, Japan International Cooperation Agency (JICA) has
helped us to prepare the inputs into many Cambodian government policy documents. As you
may know, Japanese investments have transformed South-East Asia since the 1980s from a
backward region into a zone of prosperity. I am happy now to see that since 2010, a new
wave of Japanese investors are coming, among others are Minebea, Yasaki, Mikasa and
AEON. The coming Japanese FDI will also bring changes to Cambodia’s labor standards, in
term of wage, working conditions, training and abiding to labor law.
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21. It is therefore important to improve and upgrade investment climate in infrastructure as
an essential base to promote FDI, especially investment from Japan. Our special attention
will be paid to the key infrastructure both for logistics and production such as electricity,
water supply, port facilities, and roads and railways. At the same time, actions will be taken
to strengthen soft infrastructure, which facilitates maximum use of the physical
infrastructures. This is especially important for the logistics where transaction at the border
or ports may significantly affect the time and cost required for the logistics. We will also
undertake proactive policy support to ensure the effective operation of Special Economic
Zones.
22. It could be said that we have witnessed the nexus between Japanese ODA and FDI. In
Cambodia we could see the mushrooming of Japanese factories and companies around
Phnom Penh, in addition to infrastructures, schools and hospitals that have been provided by
Japan. I can conclude that the works of JICA and the Japanese Government have profound
impacts on social and economic development in Cambodia, particular during the most recent
years. On behalf of the Royal Government of Cambodia and the Cambodian people, I would
like to express our heart-felt thanks to the Government and People of Japan and JICA for
providing their continuous support for the causes of peace, stability, development and
prosperity of Cambodia and the region.
Japan-ASEAN Strategic Relations and the Regional Trade and Financial Architecture
23. This year marks the 40th anniversary of relations between Japan and ASEAN. For
ASEAN countries, growing ties with Japan and other countries in the region are important.
In the past Japan played a critical role in industrializing South East Asia with the transfer of
Japanese technology to local corporations. At present, Japan has introduced Cambodia into
the regional supply chain network. In this regard, Cambodia is pleased to note that the
relationships between ASEAN and Japan have developed at all levels, and Japan has
become ASEAN’s strategic partner. Hence, we should continue to actively strengthen our
cooperation and coordination in order to further the existing cooperation mechanisms, such
as ASEAN+1, ASEAN+3, East Asia Summit, and other regional and sub-regional
cooperation initiatives such as the Cambodia-Laos-Myanmar-Vietnam (CLMV) summit, the
Cambodia-Laos-Vietnam (CLV) summit and the Ayeyawady-Chao Phraya-Mekong
Economic Cooperation Strategy (ACMECS) summit, in which Japan has been actively
involved. Moreover, I think we should start considering of East Asia community building
from now on.
24. Concerning the building of regional economic architecture, strengthening the Chiang Mai
Initiative Multilateralization (CMIM), as both crisis resolution and crisis prevention
facility, has been crucial in maintaining economic stability in the region given remaining
uncertainties surrounding the global economy. In this regard, the institutionalization of
AMRO as an international organization will further strengthen macroeconomic and financial
surveillance of the region, particularly in its mandate to support the CMIM. Furthermore,
ASEAN+3 countries have also reaffirmed their commitment to further strengthening the
CMIM as part of the regional financial safety net by enhancing the use of local currencies
for settlement in trade or capital transactions, and reducing the volatility of capital flows in
and out of the region and by establishing an effective cooperative relationship with the
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International Monetary Fund (IMF) in the areas of surveillance, liquidity support
arrangement and capacity development.
25. At the same time, I am pleased to note that the negotiation for a Regional Comprehensive
Economic Partnership (RCEP) were formally launched by Leaders from ASEAN Member
States and the ASEAN Free Trade Area Partners (Australia, China, India, Japan, Korea
and New Zealand), in Phnom Penh, Cambodia, during East Asia Summit in November
2012. I believe that this is a significant progress for ASEAN and the other six partners in the
effort to play a leading role in the emerging regional architecture. RCEP goes beyond FTA
to incorporate trade in goods, trade in services, investment, economic and technical
cooperation, intellectual property, competition, and dispute settlement. The key point in this
issue is to ensure that RCEP will be better than the existing FTAs by recognizing the
individual and diverse circumstances of all participating countries.
26. Infrastructure is vital to regional integration. Therefore, the full establishment of the
ASEAN Infrastructure Fund is an integral component of ASEAN’s efforts to strengthen
regional physical connectivity, and narrow the infrastructure development gap in ASEAN.
We are pleased that Japan, China and Korea have actively supported the AIF in order to
increase investment in infrastructure in the ASEAN region.
The Challenges to the Asian Century
27. More importantly, Asia’s rise will face with some challenges. As we all know, peace and
stability constitute prerequisites for Asia’s continued prosperity in the future. Therefore, we
should strengthen regional mechanism to maintain peace, stability and mutual understanding
by adhering to the principles of international law, as enshrined in the Charter of the United
Nations.
28. In conclusion, during the last two decades, Cambodia has been transformed from a wartorn Least-Developed Country (LDC) into a low Middle-Income Country (MIC). Sitting in
the middle of Asia’s growth dynamics, we aspire to move up to the level of high middle
income country by 2030 by further integrating into regional and global economy, investing
in infrastructure, attracting FDI and reforming economic and political institutions.
Therefore, all of us need a peaceful, prosperous and dynamic Asia. Japan, as a regional
economic powerhouse, should continue to play a leading role in Asian to promote economic
growth in the flying geese paradigm as proposed by a Japanese scholar, Akamatsu, in the
1960s.
29. Thank you for your kind attention. Myself and Dr. Hang Chuon Naron are happy to answer
you questions.
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