Kingdom of Cambodia

Nation Religion King

Remarks
by

Senior Minister KEAT CHHON
Minister of Economy and Finance

At the

Asia 2015 Conference: Promoting Growth, Ending Poverty
 

Lancaster House, London, 6th March 2006

Your Excellency Mr. Chairman,
Excellencies,
Ladies and Gentlemen:


Today, it is my honor to join all of you at this magnificent conference, "Asia 2015: Promoting Growth, Ending Poverty". Allow me first to express my sincere gratitude to the British Government and the organizers, especially the Department for International Development (DFID), the Asian Development Bank (ADB) and the World Bank, for the opportunity to learn from other Asian countries and share our experiences on economic growth and poverty eradication efforts.

During the last decade, economic performance in Cambodia was broadly good. During 1994-2004, GDP growth has averaged almost 7 percent per annum. There has been a sharp reduction in poverty levels. Poverty in Cambodia has fallen by 12 percent, declining from around 47 percent in 1994 to 35 percent in 2004.

Development experience in Cambodia has yielded the following lessons:

• Peace and political stability is the anchor for development. Macroeconomic stability and long term economic growth is an essential prerequisite for achieving poverty reduction.

• At the initial stage economic growth is accompanied by rising inequality.

• Economic growth can be narrowly based supported by a few sector. But we don’t stick to this kind of situation. Presently we are working to broaden the base of growth by diversifying our economy.

So I wish to draw the following lessons for growth and poverty reduction:

Firstly, to further sustained growth, both government and development partners should create competitive advantages to promote growth by investing in both urban and rural infrastructure, tourism, creating favorable conditions to attract foreign investments and providing market access to increase exports.

Cambodia’s garment exports, which increased exponentially from a US$20 million in 1996 to US$2.1 billion in 2005, create jobs and generate welfare for many Cambodians. We are abiding by not only WTO rules, but also ILO standards. We are now working to improve trade facilitation through development of a single window for import and export clearance; single administrative document and risk management. Market access has to be accompanied by measures to increase supply base of developing countries. Tourism also plays a crucial role in growth and poverty reduction. In 2005 tourism generated about US$1 billion in foreign exchange inflows in Cambodia.

Secondly, growth per se is not enough. We should broaden the base of growth and have a proper response to the problem of poverty by redirecting our investments and development efforts towards the poor to promote equity and reduce the gap between the rich and the poor. To this end, we have embarked on economic diversification to ensure sustainability and equitable distribution. We focus on decentralization and deconcentration, strengthen good governance by combating corruption and increase budget in the priority sectors – education, health, agriculture, rural development, as well as institutional capacity building – to ensure that public services reach the grassroots level and ensure that scarce resources are allocated in the most economic, effective and efficient manner. Improved donor coordination and harmonization can make aid more effective and responsive to development needs.

We have embarked on public financial reform (PFM) reform, which increases additional revenue to finance more investment projects and ensures budget allocations to reflect development priorities. We introduced Merit-Based Pay Initiative (MBPI) to improve service delivery. But beyond this we have to ensure sustainable debt management to mitigate its impact on public finance, macroeconomic stability, poverty reduction and development in general.

During the last decade our spending on education increased more than four times in nominal terms. This has resulted in increasing net primary enrolment rates, particularly for girls and for children from poor family, lower direct costs to poor families and more schools and better trained and more motivated teachers. Spending on health has also risen more than six times. As a result, Health Sector also has witnessed significant progress.

Thirdly, to meet the CMDGs targets, the following conditions are crucial: robust and equitable macro-economic growth; fast growth in private sector investments and unhindered growth in trade; establishment of Special Economic Zones; promotion of SMEs and microfinance; rural and agricultural development and agricultural productivity by promoting smallholding farmers and large-scale agribusiness, transforming land into productive assets and securing land tenure; gender mainstreaming; protection and enhancement of environment; enhancing meritocratic practices in civil service and reforming the judiciary.

Fourthly, development of a sound financial market will allow us to mobilize additional domestic financial resources to finance long term development.

Fifthly, developing countries should move to create environment conducive to new technology and train skilled workers. Openness to foreign trade and technology has further induced skills-biased technological change. Further advance in information technology should create a new momentum for this development.

It is my conviction that this conference will become very constructive debates for every country to take back. In particular, it would make an important contribution to the debate on how best Cambodia should move forward on its reform path to meet challenges ahead that it faces.

Thank you !