Kingdom of Cambodia

Nation Religion King

 

39th ANNUAL MEETING

BOARD OF GOVERNORS

 

CAMBODIA
KEAT CHHON, GOVERNOR

It is indeed great pleasure and honor for me to represent the Royal Government of Cambodia at the 39th Annual Meeting of the Board of Governors of the Asian Development Bank (ADB) and to address this distinguished gathering. May I, on behalf of Cambodia's delegation, thank our host, the Government of India, and especially the people of Hyderabad for their warm hospitality extended to us during our stay in this beautiful and culturally rich city. I would like also to express our sincere gratitude to the Management and staff of ADB for the excellent arrangements made for this meeting. May I take this opportunity to warmly welcome Armenia and Brunei Darussalam as new members of ADB.

This Annual Meeting takes place when Asia continues to be emerging as one of the strong engines contributing to global economic growth and prosperity. The regional economic outlook for the foreseeable future is expected to remain robust, which provides a real opportunity for the region to meet the Millennium Development Goals (MDGs), including halving poverty by 2015. At the same time, the region is also facing a risk of rising oil prices and global payment imbalances that could lead to a sharp adjustment in exchange and interest rates, which would undermine the growth momentum crucial to poverty reduction efforts in the region. The Asian economies therefore must be vigilant and pursue sound macroeconomic policies and continued structural reforms to sustain growth and cope with any possible economic shocks. I believe that will be able to help member countries to respond to these challenges.

We agree with President Kuroda that Asia today stands at a defining moment. Asia's time has come. Asia is living in a new era of development given its current role and weight in the global economy, and there is real potential for the region to achieve a higher level of development effectiveness. This dynamism suggests that the ADB as the regional development bank must also change to cope with the regional transformation. We therefore reiterate our strong support for the President's vision and commitment to the economic and social progress of developing member countries and a region free of poverty by making ADB more relevant and responsive to the regional transformation.

Let me take this opportunity to congratulate the Bank for its achievement and progress made in 2005 and to express our support for the Bank's internal reform focusing on results, the result-based country strategies and programs, human resources strategy, private sector development strategy, second medium-term strategy (MTS II), regional cooperation and integration strategy (RCI), and the realignment of regional departments.

We firmly support the Bank's medium-term strategy II (MTS II) and its regional cooperation and integration initiative which are central to sustaining economic growth and reducing

Poverty in the Asia and Pacific region. In this context, we would like to see the Bank pay more attention to the poorer countries in the region. Realignment of regional departments is another means to further strengthen regional cooperation and integration. In this connection, we greatly appreciate the Bank for its catalytic and leadership role in the GMS and for facilitating co-operations under the ASEAN and ASEAN+3 frameworks.

We congratulate the Bank for reviewing various areas of the reform under the innovation and efficiency initiative. We also support the Bank's adoption of the carbon market initiative to manage energy security and climate change under the clean development mechanism. We welcome the Bank's doubling of its financing for the water sector which is vital to growth and poverty reduction, as well as to environmental sustainability.

The introduction of grant financing under ADF IX has improved the debt situation of the poorer and post-conflict countries. We think the ADF IX mid-term review should be broadly conducted to accommodate the views of the recipients. For performance-based allocation, we are of the view that the system should take into account the countries' historical background and specific circumstances so that it can serve as a tool of incentives for change for the better performance.

The newly approved public communications policy of ADS helps improve governance in both DMCs and ADS. Political will alone could not achieve targeted policy reform agenda, including the enhancement of governance through the implementation of ADS's policy on public communications. It has to be supported by additional financing resources that would provide better means for the reform program conducted by DMCs.

Let me now turn to the development in Cambodia. Our Royal Government's Rectangular Strategy for Growth, Employment, Equity and Efficiency provides a clear view and direction for our long-term development. In the heart of this strategy, governance has been the core. Without improved governance, growth and development cannot be sustained.

The Royal Government of Cambodia understands that reform is a vital issue and that day-to- day work is needed to improve, strengthen, and expand our capacity and capability in order to keep up with the development of society, economy, technology, and politics within the country, region and the world. We would like to re-emphasize that implementing reforms requires not only political will, but also considerable human and financial resources. The cultural and political context has to be taken into account as well.

During 1994-2004, poverty in Cambodia fell by 10% to 15%. Based on the recent Cambodia Socio-Economic Survey (CSES), the poverty headcount declined from around 47% 1994 to 35% in 2004. Per capita household consumption rose 32% in real terms. This achievement has resulted from peace and our reform programs which were included in the Triangle and Rectangular Strategies launched in 1998 and 2004 respectively.

In 2005 Cambodia's economic growth was 9.8%, driven by an expanding tourism sector, garment exports, construction and investment in irrigation schemes, resulting in a rebound in agriculture. The annual inflation rate, represented by the consumer price index, rose to 6.7% in 2005. The Cambodian riel depreciated marginally to 4,117 riels per US dollar by the end of 2005 from 4,035 riels at the end of 2004. Foreign reserves represented 3 months of imports. Prudent fiscal and monetary policies contributed to the stability of the exchange rate.

Total Cambodia exports increased by 8.9% to around US$2.7 billion compared to a 2004 performance of nearly US$2.5 billion, equivalent to a growth rate of 22.1 %. Total imports in 2005 grew by 15 percent, a slowdown from the 24.7% increase recorded in 2004. The

Number of tourists visiting Cambodia reached 1.4 million mark, increasing by 35%. In 2005, the main construction areas in Phnom Penh and Siem Reap, Angkor, increased by 35%.

The macroeconomic outlook in the medium term appears to be stable, because of the expansion of the tourism sector, continued growth in garment exports and off-shore oil and gas exploration, which ensures economic growth for 2006-2010 within a range of 6% to 6.5%. Growth in 2006 is expected to be at around 6.5%, driven by all sectors, but heavy reliance is placed on industry, led by textile exports, and the service sector, led by tourism. Inflation is expected to remain below 5%.

To improve the outlook for future economic growth, which we believe is the prerequisite to poverty reduction, my Government has taken steps to broaden and strengthen bases of growth by diversifying the economy, with a stronger focus on agriculture (including irrigation), enhancing governance and strengthening government capacity. improving the trade and investment climate, reorienting capital outlays toward development of rural areas, and promoting agro-industry and small and medium-sized enterprises. In all these efforts, we believe that economic integration and international cooperation continue to be the main pillars supporting economic growth in Cambodia.

In conclusion I would like to express once again our deep appreciation to the Board, Management and staff of the Bank for their hard work and impressive achievements in responding to the needs and challenges of the region and individual member countries, and especially for the support and assistance in the rehabilitation and development in Cambodia. We look forward to continued strong partnership with ADB.

 

Thank you !!