with Prime Minister Samdech Hun Sen
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?
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
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
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
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
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
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
Lifestyle will change rapidly,
reflecting across-the-board improvements in human indicators and the
speed of regional and world integration.