Fellow Cambodians, and Friends
My warmest greetings to you all
Today is a very important day – and I am truly happy to share it with all of you. This day we officially launch our nation’s Second Socio-Economic Development Plan for 2001 – 2005 (SEDP-II).
On behalf of the Royal Government of Cambodia, I congratulate and sincerely appreciate all the efforts made by the Ministry of Planning, the Government’s concerned ministries and institutions, provincial and municipal authorities, the national and international organizations, the civil society, the private sector and especially, the Asian Development Bank for their proactive cooperation and technical assistance that helped produce this Second Socio-Economic Development Plan.
I strongly believe that the implementation of the SEDP for 2001-2005 will produce better results than of the First SEDP. In the past 5 years, we have had good experience and lessons learned, which are very valuable for the successful implementation of the Second SEDP.
The launching the SEDP-II is, by itself, a major achievement – another added to the many successes that our Royal Government has attained so far. SEDP-II proves to us all that we have completed another major chapter in the history of Cambodia’s development.
We have come far up the road to restoring and rebuilding our economy’s fundamentals supportive of sustainable growth – and are proceeding resolutely to the next stage. We are marching, together, on the path to ensuring that our economy shall take off on a higher and faster level of sustained growth into the long term. This is what we need, since higher growth is a basic prerequisite for poverty reduction and prosperity of our nation.
In fact, I am certain that all of you can appreciate with your own senses the progress that has been achieved since the launching of our first socio-economic development plan in 1996, that many positive changes have been happened in Cambodia.
During the last four years, the Royal government of Cambodia has achieved considerable successes with our bold implementation of the “Triangle Strategy.”
Our triangle strategy aimed to achieve three main objectives:
- Ensure and maintain the peace, stability and the security for the nation and its people;
- Integrate Cambodia into international community and normalize Cambodia’s relationships with international development and finance institutions; and
- Promote sustainable socio-economic development through the intensive implementation of reforms in key areas including demobilization, public administration reform, judiciary and legal strengthening as well as economic and financial reforms.
Note that these wide-ranging reforms include strict measures aimed at improving the operations and management of our natural resources – the forests and fisheries; of our public finance and state assets, strengthening the banking and financial sector, management of land, environmental protection and ultimately the improvement of social welfare.
In implementing the triangle strategy, our long-term vision is to have a socially cohesive, educationally advanced and culturally vibrant Cambodia with peace and stability, and without poverty, illiteracy, and disease, in a society that enables each person to be the best that he or she can be.
Realizing our vision of development will require continued adherence to the principles of the market economy, the values of Democracy and social justice and the formulation and implementation of policies to reduce poverty by promoting sustainable economic growth and social development – the most important agenda of our nation.
To highlight some of the achievements, I should recall the major events that have occurred during the past four years. Due to the “win-win policy” of the government that Cambodia, for the first time, has finally turned a corner of history, putting firmly behind the darkness of its recent past and emerging into new light, vision fixed toward the future.
The entire territory of Cambodia has come under the jurisdiction of the Royal Government without undue upheaval or internal conflict. Moreover, we have contributed positively to the regional and international cooperation and integration under the frameworks of ASEAN, ASEAN + 1, ASEAN +3 and the Great Mekong Sub-region.
During the last four years, economic growth and macroeconomic stability has been restored. Progress was achieved across a very broad range of structural reforms: fiscal, banking, administration, legal, and military, further implementation of land, forestry and fisheries reforms and the assurance of environmental protection.
The recent quantitative indicators of Cambodia’s economic performance, as issued by the National Institute of Statistics are very encouraging. The updated report shows that Cambodia’s real Gross Domestic Product (GDP) grew by 7.7% in 2000 and by 6.3% in 2001 against the estimates of 5.4% and 5.3% respectively. Average inflation declined from the-already-low one-half of one percent in December 2000 to MINUS-one-half of one percent in December 2001. The Riel/US dollar exchange rate continued to be stable and international reserves increased.
These results are beyond our expectation as the world and regional economies continue to suffer vicious cycle of recession. The budget performance has improved steadily. During these years, due to strong budget discipline, we achieved a current budget surplus and limited the overall deficit to a manageable level. We also increased tax collections and spent much more on social sectors and much less on defense.
All the necessary criteria agreed upon with international, financial institutions, especially those under the Poverty Reduction and Growth Facility (PRGF) have been strictly observed and achieved good outcomes as planned. As a result, on July 22, 2002 the IMF Executive Board has approved the Fifth Review of the PRGF. I strongly believe that there are not many countries that have such a commitment as Cambodia’s to enforcing the structural reform programs.
All of you know that in June this year, for the first time, the annual meeting of the Consultative Group (CG) of Donors was held in Cambodia to assess the progress in the performance of the government’s reform programs based on which the new pledges are made.
The Royal Government of Cambodia presented its achievements for the past year since the 2001 CG meeting, and requested continuing assistance for its development efforts. The Royal Government submitted a request for only about US$430 million, yet the international community pledged more than US$600 million in assistance — excluding the US$50 million pledged by NGOs!
The increased level of assistance is clearly a vote of confidence in Cambodia. It is an important encouragement for the government efforts in bringing peace and political stability, strengthening the foundations for democracy and human right respect in the society, and especially in promoting sustained economic growth and substantially reducing the poverty.
In this sense, the success of the CG signifies the approval of the appropriateness and success of the government reform policies implemented so far. On behalf of the Royal Government of Cambodia, I would like to state again and again about the government’s strong commitment in continuing the necessary reforms in all areas and sectors for development, advancement, and prosperous and bright future for Cambodia and its people.
We, the Cambodian people, have reclaimed our destiny and become a genuine participant and partner in regional and global affairs. Our national unity has strengthened, and we are well and truly on the way toward our destiny as a free, independent nation, blessed with the fruits of sustainable socio-economic growth.
May I recall that during the official launch of the preparation of this Second SEDP in May 18, 2000, I had indicated the importance of broad-based participation in developing this Socio-Economic Development Plan. Broad participation provides incentives for active and close cooperation among government agencies, the donor community, private sector and civil society in ensuring the success of the plan.
I had also raised some key strategies for the government to step forward in promoting sustained economic growth and reducing the poverty incidence as fast as possible. These strategies include:
- Strengthen peace, security, stability and social order through the improvement in the rule of law, protection of human rights and the promotion of democratic governance that enables a favorable political environment and security favoring long term growth;
- Sustain long term growth at an annual rate of 6-7%;
- Equitably distribute the fruits of the economic growth among rich and poor, urban and rural, and all citizens whether male or female; and
- Sustainably manage and use our natural resources.
Based on the above positive philosophy, we have spent considerable time and resource to facilitate open discussion and inputs, repeatedly, to improve and fine-tune the draft of the SEDP-II before it was submitted to the Council of Ministers and later to the legislature for final review and approval.
Thus the Second Five-Year Socio-Economic Development Plan (2001-2005) is truly a product of a free and fully participatory process. It incorporates various inputs and the broad-based agreement of all stakeholders on key policies and strategies for development of Cambodia for the next five years.
The SEDP-II will guide us all in the management and implementation of changes and reforms and for measuring our performance to achieve the government’s motto: “Poverty Reduction through Long Term Higher Economic Growth with Environmental Sustainability and Social Equity”.
There is little reason for me to cover the details of the plan. However, I wish to highlight some of the essential strategies, which form the cornerstone of the Second Socio-Economic Development Plan. These are:
(1) to foster broad-based sustainable economic growth with equity, with the private sector playing the leading role;
(2) to promote social and cultural development by improving the access of the poor to education, health, water and sanitation, power, credit, markets, information and appropriate technology;
(3) to promote sustainable management and use of natural resources and the environment, and
(4) to improve the governance environment through effective implementation of the Governance Action Plan (GAP).
The Second Socio-Economic Development Plan has been formulated based on the review of the performance and the progress of the First Five Year Plan and the assessments of the implications of the plan on the economy so on and so forth. The experiences and key lessons from the implementation of the first plan have been incorporated into this SEDP-II.
The main challenge we now face in implementing SEDP-II is the very difficult government budget constraint. Indeed, our SEDP II sets out clearly the visions, policies and strategies for successful development up to year 2005. But, with those things alone we cannot expect to achieve our overarching and ambitious goals, without considering the mobilization of resources to implement and monitor the activities.
In the current situation of Cambodia, everything tends to be priority, but clearly we lack the resources to meet all priorities. That why we should prioritize our priorities by setting out specific reform programs and projects with clear schedules of actions within the reach of resources available, and step forward to implement those programs and reforms measures successfully.
This requires strengthening even more our efforts to reform the budgeting system and process and link development priorities with spending decisions. By this, I mean the efficient and consistent coordination through the rolling three-year Public Investment Program, or in other words, Public Investment Programming and Public Investment Budgeting.
As you are all aware, we have generated very little fiscal surplus to finance public investment projects. Most of these surpluses are reserved for the counterpart financing the projects that are supported by international development partners. The budgets remaining after allocation to counterpart financing is very small. This is the reason why I myself as Prime Minister, have directly contributed my own meager resources in order to respond to the very priorities of the government.
It is a reality that Cambodia continues to rely heavily on external resources to finance most of its public investments. Therefore, I think we should discuss ways to find a model where key foreign-financed projects are incorporated into the government’s budget process. In this way, the efficiency, coordination and management of public investments can be improved further.
Another important task that needs to be implemented is the system to monitor the implementation of SEDP-II (2001-2005). The main inadequacy we found from our experience with the First SEDP (1996-2000) was the lack of a mechanism to monitor and assess the implementation of the plan.
Therefore, I call on all ministries, concerned institutions and agencies to work together on the setting up of an SEDP monitoring and evaluation system. This task will be led by the Ministry of Planning. The system will be linked with the PIP management system and thereby also allow us to assess the outcomes and the performance of specific projects. Together, the system will enable us to make corrections to the policies, strategies and programs as the economic and social environment and situation also changes.
The Second SEDP-II covers a period beyond the term of this government. Until the end of 2003, I will make any efforts to enforce the monitoring and control of the implementation of this plan constantly and efficiently. Nevertheless, as this five-year plan is the vision of the nation representing the broad views of all stakeholders, I strongly believe that its contents and provisions will be accepted by the next government for further implementation.
I wish to appeal to all the Cambodian international development partners, NGOs to provide all the support and cooperation necessary to ensure the successful implementation and monitoring of SEDP-II. I also ask all development partners to pay more attention on improving the capacity of our Cambodia civil servants, especially that of the Ministry of Planning in formulating, monitoring and implementing the national plan.
[Selected Ad-lib Comments — Unofficial Translation]
… We used to say that “direction with monitoring” and “no monitoring, no direction.” These two points are very important in the course of getting a plan implemented. Without monitoring, everything would be sitting only on paper and we have no other means to save a situation because we are not well aware of the whole truth. Let me give an example as food for thought. Let’s us focus on organization for implementing and monitoring. Look at all the road construction sites everyday. All road construction sites with loans from Asian Development Bank and World Bank have their log books. But there are not many contractors that implemented the projects in accordance with what is said in the log books. One real example that is so impressive to us all should be the project to renovate a part of the national road 7, which has been prolonged one day to the other, while our monitoring capability is quite limited. HE Keat Chhon has been named as Governor General attached to the Asian Development Bank (ADB) and World Bank (WB) so as to conduct a meeting to monitor the situation. This what we do to a project level and if we were to not do so, we would not be informed of the implementing process and what factors have brought about problems that frustrated the implementing process. This point should be learned by all institutions and related authorities in their directions. They should not leave monitoring to be conducted after five years of works.
… The Royal Government has brought about a specific program aiming at putting its control on the day-to-day operation, while conducting a meeting once every six months with the donor countries. We have also held a meeting in every six months with the private sectors, in which shortages, progress and improvements have been sought after. We have to take into consideration also the risk factor in the course of implementing our plan. We have for instance taken a great deal of time before we come to adopting this plan. We first organized a forum for the collation of information for the preparation of the plan in May 2000 and up to the present it has been two years already. In this span of time we have looked not only into the Cambodian aspect but also areas that related to Cambodia – like regional and world economy. Anyway we should take for granted that making a good plan gives us only 30% of the result that we have expected. But this part is as important as a guiding device or map leading us to where we wish to get.
… In this sense I wish also to draw your attention on priority as the way we do things in Cambodia, everything has to be prioritized. Take for instance, we have all roads waiting to be reconstructed. They are our priority. But how do we go about solving the need with our limited budget. This could be considered a message to the Governor of provinces and cities that they should not pile up their requests all at once and expected them all to be resolved at the same time. As in the case of Phnom Penh, all roads that were made bitumen under the State of Cambodia, when HE Tea Banh was Deputy Prime Minister and Minister for Public Works, in 1985-86, we have over used their use value already. We have left them till 2001 and 2002 before we do another bitumen. We also have to broaden the city from the Cambodian-Japanese Friendship Bridge to the Monivong Bridge. The Royal Government has to set aside its budget for this task as well. We have to make investment in the project because Phnom Penh is the capital and reception center to investors. Some people said why should US$ 10 million be spent just for the preparation of the ASEAN meeting. Well it is not just for the ASEAN meeting but also for Cambodian people to use. We have set as a priority another road between Stoeung Mean Chey and Chamkar Daung (Agricultural Institute.) And we will leave the part from Chamkar Daung to Choeung Ek at a later stage because we have to raise more money for that. We have loans from the ADB for the renovation of the road between Poi Pet and Siemreap town. We have also anticipated loan from the People’s Republic of China for the road construction from Kratie to Stoeung Treng and to the border between Cambodia and Laos.
… Let me warn you all that “will cannot exceed ability.” We have to match what we want and how much we can. We have to put together a part of budget collated internally and a part of budget that are foreign assistance. Talking about foreign assistance, we have to know that we have to have sharing from the Government’s part. I had instructed HE Keat Chhon in 1990s that budget gathered from privatization could be used only for covering as the Government’s share and public investment, and cannot be used for other reason at all. Talking about Government’s obligatory share, take for example, in constructing a road, the Government could be obliged to cover 20% of the total project cost.
… Putting out a plan is very important. As far as implementing the plan is nothing completely new because we already have had continued with the first five-year socio-economic plan up to now. Take for instance the policy on forest management is not a new subject but we have had a series of plan on this issue on the basis of which we are continuing. We are in the process of consolidating and fortifying the continuing reform policy of the forest sector. We could not afford to run for development leaving our environment depleted. That is why we have to pay attention in sustaining the management and protection of environment for the benefit of sustainable use of nature. Land reform, fishery reform and various others have to continue. If we could not successfully implement it in the first stage, we could as well think of doing it better in the second stage. So implementing is also very important because without implementation, the plan will be of no use. If realizing a plan gain 30% of the result, implementing it would add another 30%. In both stages we could see that we have only 60% of the anticipated result.
… What lies in another 40%? It is the most important part. It would depend totally on the capability of our officials. I mean the risk management skill. Risks could happen anytime in the implementation stage of the plan. This theory applies not only in the Cambodian situation but also throughout the world. Take for instance, everything had gone well as planned until the 2000 flood that emerged as a risk factor. If we were to resolve it inappropriately and if our officials were incapable, our people would have faced a severe disaster, from which its consequence could have brought even in 2002 still. But we were able to assuage the problem with very good experiences. At that time our authority did not leave a single person to die but had done a great deal of help within a limited resource… We have stabilized the macro-economy, prices in the market, while pushing growth to 7.7% in 2000. That is what I said we were able to assist those flooded while stabilize the living of those who are not affected by flood. So both of them, those flooded and those not flooded were saved. Why? If we were to take action in tackling the risk factor in an inappropriate manner, and it brought about the jacking up of prices of goods in the markets, we would surely face with inflation, a risk for all. The most important element of all was the price of rice – the staple food of Cambodians. Also plans to renovate roads in a number of places were cancelled because of flooding. Flood caused us to alternate the plan.
… Resolving risk factor is very important and we have to collaborate between our national forces and those of the international financial institutions and other aid coordination mechanism for the benefit of keeping things stable. So the ability of officials in dealing with risk factors made another 40% of the result. When a situation arises, what position the officials should deem appropriate to take and if it is getting worse, whether they should have their neck tie still or jump to resolve it in a practical manner. Let me warn you of two types of officials. Once they have to confront risk factor, weak officials either report it to the senior officials or blame their junior ones. They should not be grouped for future promotion as prioritized officials. HE Sok An is the one who is delegated with this work of preparing this prioritized list of officials and this kind of officials should not be in this list.
… I may give some examples. Take for instance the assistance given by foreign donors. Some do not want to make use of foreign assistance just because they have requested for more papers. Neglecting the sources, they have alternated to the national budget that is shrinking everyday. So I hope after going back, our Governors would not file proposals for building of offices because decisions will be made in favor of roads, bridges, hospitals, schools and other infrastructure and not your offices. This is in the strategy to ensure an equitable distribution of growth among the people. It is in fact not a lecture but I think it is useful for our meeting here today, because I used lecture on the direction methodology in the past … [Back to the prepared text]
In closing, once again I thank the ADB for providing Technical Assistance in developing this SEDP II. I also wish to thank all government ministries and institutions, civil society and the private sector, key international organizations, the UN agencies and all friendly countries for the active participation and support of the formulation of the plan. I also appeal to all management and civil servants in all ministries, the Armed Forces and local authorities at all levels to actively support and participate in implementing the Second Socio-Economic Development Plan 2001-2005.
Let me end by extending to you all, Excellencies, Ladies and Gentlemen, the five gems of Buddhist wishes and my personal wish for your prosperity and happiness.