Ladies and Gentlemen,
Today, it is my great pleasure to address this closing ceremony of the “Ministry of Commerce (MOC) Conference on Trade Performance in 2005 and Targets for 2006”. This conference is indeed of great importance in terms of promoting export-oriented manufacturing and market access development for Cambodian products, which is mainly based on trade facilitation and consistent with the overall reform policies of the Royal Government toward poverty reduction and development of Cambodia.
I believe that this stock-taking conference provides us with a unique opportunity for sharing experience, evaluation and reviewing all the achievements and challenges in our past joint efforts, while identifying the strengths and weaknesses as well as adopting the action plan and new measures the enhancement of trade activities. Thus, I would like us all to consider future trade development policies and strategies by conducting appropriate analysis for effective formulation and implementation of trade policy.
Clearly, trade is crucial, and without trade there would be no economic progress. Trade is a key source of growth in Cambodia, and it is also true for the world economy at large. In recent years, the Royal Government has exerted its utmost efforts in responding to the needs for regional and world integration through the formulation of laws and regulations that makes the national financial sector, investment and trade consistent with international standards and practices. At the same time, the Royal Government is strongly committed to adhering democratic principles, respecting and protecting human rights, ensuring peace and national reunification. These, indeed, have importantly and invaluably contributed to strengthening the regional and international affairs.
The annual average GDP growth has been around 5.6% due to our prudent macroeconomic management over the past 12 years. From 1999 to 2002, average growth reached 7% every year while GDP per capita reached an annual average growth of 4.5 %.
With no doubt, the overall progress can be seen in all sectors. Positive changes and gradual improvements in the previous decade reflect in: (1) strong and stable macroeconomic growth, (2) balanced and improved fiscal management, (3) poverty reduction, and (4) improved measurable social indicators such as expanding the scope of primary education, reducing infant and child under 5 mortality rate, reducing pandemic diseases, especially HIV/AIDS, improving access to clean water in urban areas and hygiene services in rural areas as well as reducing gender inequality in various sectors and other achievements.
It is clear that previous progress is possible due to better macroeconomic framework, which provides solid grounds for economic growth. Indeed, the status of Cambodian economy remains stable with great improvement despite negative effects such as increased oil price, terrorism and natural disasters. In 2005, Cambodian Economy is estimated to increase by 7%. This reflects strong progress in agriculture, industry, construction and tourism, especially garment and textile production export, which have played an important role in boosting economic growth.
Moreover, the RGC has been successful in maintaining inflation rate of 1% in the last five consecutive years. Although, between 2004 and 2005, inflation rate is higher than previous years due to oil price increase and high cost of foods, the inflation remains 6% in 2004 and at the same level in 2005. However, trade balance and Riel’s stability in many years contribute greatly to the macro-economic management and the credibility of national currency. Furthermore, international reserve increases to the level that is able to ensure 3 months of imports, reflecting more progressive exports and higher tourist arrivals.
The reforms, completed and implemented by the Royal Government, have substantially contributed to growth. Those reforms include public financial management, civil administration, and trade facilitation program with the establishment of “one stop service”, and justice and other reforms.
Normalization of relations with the US and other countries in European Union has resulted in fruitful trade agreements, which are generally considered as Cambodia success in generating jobs and investment with good labor conditions. Our factory products have marketed in the US, and in return, we accept inspection from international labor organization. The exports of clothes, textiles, shoes and other products under preferential system have increased sharply from USD 20 million in 1996 to USD 2,115 million in 2005, implying that exports under preferential system have increased 10 times over the past decade. This is indeed our pride as a poor country which is able to export more than USD2.44 thousand million a year. Now, there are 258 factories in operation with 299,500 employees and USD 20 million in wages. Job creation in garment sector and textiles is an important source of income for our people, particularly women, and the economy in the recent years.
Moreover, Cambodia has made impressive strides in integrating itself into international community. Cambodia membership in ASEAN and World Trade Organization (WTO) including the Cooperation in Greater Mekong Sub-region, Ayeyavady-Chaopraya-Mekong Economic Cooperation Strategy (ACMECS) and other sub-regional Development Triangles have provided the opportunity for reforming investment works and international trade regime. This mainly focuses on the liberalization and decentralization of decision-making through the eliminating bureaucracy, removing investment barriers, implementing modernization of structure and management system and improving our comparative advantage comparing with international and regional standards.
Indeed, our past achievements are the results of our joint efforts, those of all ministries and related institutions, particularly the Ministry of Commerce. Taking this opportunity, I would like to appreciate His Excellency Cham Prasith and the MOC Officials at all level and all the concerned agencies that have made their great efforts to negotiate with developed countries to reduce technical and tax barriers, opening their markets for Cambodian products. Specifically, the negotiation with European Union provides Cambodia and other 50 other poor countries with duty-free and quota-free to European Union as well as the Generalized System of Preference(GSP) to Cambodia with more than 6,000 items of goods. The negotiation with the US, mostly on agricultural products, will prepare for the negotiation of a plan “ TRADE ACT 2005”, which proposed to get duty-free on clothes and other products exported from least developed countries in Asia and the Pacific region including Cambodia to the US market. Japan has provided Cambodia with GSP on 226 items of goods, while China and the Republic of Korea provide 380 and 78 items of goods respectively. Moreover, the ASEAN countries also provide Cambodia with AISP on 630 items of goods which mostly are produces. Through GSP, Cambodia is able to open itself to international markets mainly for agricultural produces.
In line with these, the 6th WTO Ministerial Conference held in HONG KONG in December 2005 has provided Cambodia and other 50 least developed countries with positive results. The developed countries promised to cut down step by step and to eliminate in year 2013 their export subsidies, reduce taxes on non-agricultural goods, and provide duty-free and quota-free market access to 50 least developed countries from 2008 onwards, and also provide budget packages to poor countries in the form of technical assistance for trade development, human resource building and production expansion which aimed at supporting export capability.
At the same time, the effort in trying to open Cambodia’s market for exports is not an easy task because every country in the globe always competes with one another to export their products to the international market. In this sense, it is insufficient to depend only on tariff reduction of a single product. Therefore, the Royal Government has immediately put in place reform measures on trade facilitation since March 2005, before the 8th Government Private Sector Forum, which was an appropriate policy decision aiming at supporting and promoting a stable and fast-growing sector for exports. With regard to the trade facilitation, every ministry and agency have jointly cooperated in order to resolve and actively promote every instance measure which aim at eradicating any impediment to economic growth and institution building measures with the goal of ensuring Cambodia’s export capacity and competitiveness in relation with neighboring countries to attract more investments. The trade facilitation activities are as follows:
- The establishment of the “Federal Office” to reduce the amount of time spent on applying for goods inspection.
- The creation of a “Single Inspection Unit” for both CED and CAMCONTROL.
- The reduction of time spent on acquiring documents related to C/O and exporting and the time spent on goods inspection. There were many other major works which we have and are being accomplished.
The Emerging Markets Consulting’s report of August 2005 has shown an improvement in the implementation of trade facilitation policy:
- The average costs for import have decreased from USD 2,477 per transaction in 2003 to only USD 673 per transaction in 2005.
- The average costs for export have decreased from $942 USD per export transaction in 2003 to USD 598 per transaction in 2005.
As I have already mentioned, reforms are most important instruments for Cambodia. “If we want to build a better society, we must be brave in making a new start”. In this sense, I am indeed very proud that our people and the Royal Government have made a clear decision that “Cambodia has no other choice but to continue the reform that we have started for the better”.
For instance, since the 8th and 9th Government-Private Sector Forums, the Royal Government has made many reforms which satisfied the private sector. In this occasion, once again, I would like to reiterate our commitment for closer and continued cooperation with the private sector in ensuring our strong partnership to create a favorable environment for investment and trade in Cambodia. The Royal Government welcomes any recommendation on the method and necessary means aiming at promoting the investment environment, broadening exports, facilitating the supply network, and to expand the influence of special economic zone. I believe that we must analyze and exchange more ideas on these priority actions.
The statement above, together with other experiences regarding the economic sectors, which have been carried out, I believe that we must continue to clearly identify more opportunities for trade promotion as well as upgrading the economic status for fast-track development. Thus, I would like to share some views on these important issues as follows:
1. Cambodia has the potential for agriculture production. Therefore, we must look for new ideas on implementable strategy which can be achieved through increasing agriculture products such as the appropriate use of fertilizers, the creation of community in using the same type of crops on the production land which make the products easy to be sold overseas because most consumers abroad are willing to buy any agriculture products which are similar and of large quantity up to thousand tones.
2. Must continue to negotiate on tariff reduction and other technical barrier in order to broaden international market through GSP for Cambodia.
3. Implementing any reform strategy which improve the competitiveness of Cambodia’s economy, especially the exports in industrial sector as well as the strategy which can bring about more benefits from the fast growing regional markets, especially from China through early harvesting from ASEAN and CHINA as well as methods on further developing Cambodia’s comprehensive tourism potential to promote tourism, trade and the competition of qualified labor market generation. At the same time, how can we capitalize on our WTO’s membership?
4. For opportunity reason, how do we improve local business environment to generate jobs, especially in crowed rural areas in the context of the weak and developing institutional capacity. Within the same point, how can we attract qualified foreign direct investment to generate jobs and transfer skills and knowledge to Cambodian and to get more value-added at the world market?
5. Whilst facing threat and strong competition in the region, what is the best economic incentives that can be used to improve situation and efficient for governance strengthening?
6. To seek for formula and strong components that use less resource, guarantee appropriate cost and are able to compete in international markets, especially export-oriented manufacturing in the special economic zone I just singed on its sub-decree that just come into force.
7. Last but not least, effective implementation of regional and global obligation that I believe it is more difficult than process to be membership. In this spirit, we have to make our effort to deal with difficult issues and obstacles through deepen reform in all sectors, especially the strengthening of production base, export diversification, legal and judicial reform, good governance, institutional capacity building and human development, that need time, strong commitment and political will.
In closing, I would like to take this opportunity to express my profound thank to ministries, institutions, development partners, NGOs and private sector for their support in promoting Cambodia’s trade in contributing to poverty reduction and development in line with the RGC’s Rectangular Strategy. Finally, I would like to wish you all the recent Universal and Chinese Happy New Year 2006. I also wish you the five gems of Buddhist Blessing. May I now declare the closing of MOC Conference on Trade Performance and Targets in Cambodia.