Opening Address by Samdech Akka Moha Sena Padei Techo HUN SEN at the 2013 Cambodia Outlook Conference: A Partnership of CDRI and ANZ Royal Bank “Securing Cambodia’s Future – Food, Energy and Natural Resources”

It is my great pleasure today to preside over the opening of the 2013 Cambodia Outlook Conference on important theme of ”Securing Cambodia’s Future – Food, Energy and Natural Resources”.  This is the seventh occasion on which I have had delivering the opening keynote address, and I would like to congratulate CDRI and ANZ Royal Bank on their initiative in hosting this important annual conference, which brings together officials from the Royal Government, and senior representatives of the private sector, the research communities, non-government organisations and international development partners to reflect Cambodia’s achievements and highlight facing challenges that requires a joint address for the benefit of our nation. I would particularly like to express my gratitude to Mr. Grant Knuckey, the CEO of ANZ Royal, and Onkha Kit Meng, ANZ Royal board member and Chairman of the Royal Group, for their continued strong support for this event.

 

We are now at a critical point in Cambodia’s socio-economic development as we build on our past successes and move steadily towards graduation from least developed country status to lower middle income status by 2015-16. The policies we adopt and the strategies we implement under a refreshed and updated Rectangular Strategy and a new five year National Strategic Development Plan for 2014-18, which are both now in development, and the achievement of an ASEAN Economic Community by the end of 2015, will determine our success in achieving our national aspirations.

 

The success of Cambodia’s next stage of development will be determined by continuing high levels of inclusive growth based on economic diversification, increased competitiveness and productivity; the strengthening of key export-oriented sectors such as light manufacturing, tourism and agriculture; success as a major rice and agricultural exporter; the strategic integration of our economy in the Greater Mekong Sub-region, ASEAN and broader East Asia; significant further progress in poverty reduction; the strengthening of our health and education systems in response to changing needs; the strengthening of democratic development, public institutions and national and sub-national governance; continued improvement in national infrastructure and access to affordable energy; and the responsible management of our precious natural resources – land, water, forests and fisheries.

 

This morning I would like to deliberate the three specific and related aspects of the conference theme that will be important to Cambodia achieving its aspirations – our recent strong performance and strategies for continued strong economic management and growth; the central role of energy and infrastructure in underpinning strong economic performance, for the enabling environment for the private sector, and for the achievement of socio-economic development goals; and food security and agricultural development, particularly as it impacts on poverty reduction and the livelihoods and wellbeing of rural Cambodians and the poor.

 

In spite of external constraints and the threat posed to the national integrity, the Royal Government of the fourth legislature of the National Assembly has realized some milestone achievements, including:

 

-      Sound macroeconomic management,

-      The establishment of a securities exchange along with the strengthening of the financial sector,

-      Improved public financial management,

-      FDI growth,

-      Better public administration and enhanced capacity of the private sector,

-      Strengthening of non-garment sectors and better supply of skilled labour force, thanks to increase of FDI,

-      Remarkable development of transport network,

-      Good progress of the agriculture sector due to the Royal Government’s policy reforms,

-      Robust tourism sector which has become a concrete growth pillar, and

-      Realization of many CMDG targets such as education, health and sanitary targets, including the public health and clean water supply.

 

In spite of the uncertainty of the global economy and sluggish growth in both Europe and the US, Cambodia has successfully managed to recover from the crisis and re-achieve a robust growth, while its macroeconomic management has effectively responded to external uncertainty by maintaining market confidence and pursuing clear targeted socio-economic policies.

 

Between 2008 and 2012, Cambodia achieved a growth rate of 5.6 % per annum. If excluding the 2009 growth, which was the worst year of the crisis, the growth during the same period would stand at 6.8% per annum. Growth for 2012 has recently been revised upward from 7% to around 7.5% of GDP. Rising public and private investment; rebound in industry – especially garment exports; continued robust growth in the service sector – mainly in tourism and real estate activities combined with strong growth in financial sector; and good performance of industry and agriculture sectors – particularly rice production and exports have underpinned this year performance. The future outlook for Cambodia is positive, with the projected annual growth of more than 7% over the medium term.

 

In addition, GDP per capita increased from USD 760 in 2008 to nearly USD 1,000 in 2012, with the projection of USD 1,080 in 2013. As a result, poverty rate dropped to 20% in 2012, and to an estimated 19% in 2013. These achievements have made Cambodia the 15th fastest growing economy in the world during the last ten years, the 5th developing countries that can achieve the MDGs, and ranked 1st in the Asia Pacific in terms of improving social indicators.

 

Inflation has been contained. In particular, the 19.7% inflation in 2008 caused by soaring oil and food prices crisis dropped to 1% in 2009, followed by a slight increase to 2.5% in 2012. The inflation has been kept under control to ensure favorable condition for economic activities and the stability of people’s livelihoods. Inflation is projected to be suppressed within 4% in 2013. The “Revolution in the Fisheries Sector” I personally led across the country has contributed to containing inflation since 2011.

 

Exchange rate, especially against US dollar, has been generally stable during the last few years, with a slight appreciation of the Riel. In particular, USD/Riel exchange rate was 4,065 in 2008 and largely remained stable at 4,050 in 2012. Within the Cambodia’s context, apart from helping strengthening the macro-economic stability, such stable exchange rate also helps maintain the balance the interests of both USD and Riel holders and increase public confidence in Riel. Cambodia’s international reserve has been gradually increased, reaching USD 3.2 billion which is equivalent to 5 months of imports.

 

Trade deficit has been significantly shredded, declining from -15.3% of GDP in 2008 to -9.1% in 2012, enabling Cambodia to maintain a reasonable balance of trade. Increased production capacity for domestic supply and exports, along with enhanced export capacity and competitiveness has contributed to the decline of trade deficit.

 

Despite the impact of the global financial crisis and some natural disasters, state revenue on average rose by 13.6% per annum between 2008-2012, of which tax, custom and excise and non-tax revenues increased by 15.3%, 11.8% and 11.6% respectively.

 

Public expenditure policy and administration have also been improved and strengthened, resulting in better planning of expenditure requirement and better linkage to policy priorities as well as more effective and efficient use of state budget. The public expenditure policy gives priority to education, health, agriculture, rural development sectors as well as the improvement and expansion of physical infrastructure such as roads, bridges, ports, electricity, clean water, schools, hospitals and irrigation systems. In particular, public expenditure increased by 17% per annum, of which current expenditure and capital expenditure increased by 17.6% and 16.8% respectively.

 

Public investment financed by state revenue increased from 711 billion Riel in 2008 to 1,327 billion Riel in 2012, with much focus directed to physical infrastructure for underpinning growth and social development and protection of national sovereignty and integrity, while the financings by external sources increased from 1,926 billion Riel in 2008 to 2,860 billion Riel in 2012.

 

Public investment on physical infrastructure totaled 9,852 billion Riel between 2008 and 2012, of which transport, irrigation and electricity absorbed 6,821 billion Riel, 2,251 billion Riel and 780 billion Riel respectively. Between 2008 and 2012, public investment on transport increased from 850 to 1,851 billion Riel; irrigation investment increased from 201 to 650 billion Riel; and electricity investment increased from 128 to 327 billion Riel.

 

From 1993 to 2012, the condition of Government debt has been significantly improved. In particular, debt to GDP ratio was 73%, debt to exports ratio was 643% while debt to state revenue was 1,766%. However, in 2012, these ratios dropped to 31%, 72% and 227% respectively.

 

In the last few years, Cambodia strong economic growth has somewhat cushioned our economy from most of these impacts. Throughout the crisis, Cambodian governments have kept macroeconomic policy prudent and flexible while strengthening financial safety nets.

 

Looking into future, as the debt crisis in Europe and uncertainties in some advanced economies will take some considerable time to address, the outlook for the global growth remains weak, the business confidence may start waning and downside risks are still major challenges for economic growth and stability. Thus, the threat of spillover from the advanced economies can create a very challenging environment, which would impact our growth projection. Cambodia is a developing economy and is not immune to these adverse external affects. The possibility of sudden capital flow reversals and weaker external demand are continuing concern. Therefore, in the face of this global slowdown, we need to use our available policy space wisely in stimulating domestic economy as well as addressing domestic vulnerabilities. We need to implement all necessary policy options to keep the confidence level. We need to do more to gain lasting stability and reduce risks to growth outlook. Macroeconomic and financial prudential policy should be implemented all time to keep the financial sector strong. Finally, we need to deepen our integration further to guard our region from any potential spillover risk.

 

The development of Cambodia’s energy sector is progressing well as a result of the efforts of the government in partnership with the private sector but much remains to be done. Over the past 5 years per capita growth in power consumption has been around 7 percent per year. However this growth rate is not high enough for such a rapidly growing economy, with some geographic regions yet to be connected to the power grid. Our challenge and commitment is to expand generation at a higher rate, to improve the efficiency of our distribution system through more efficient, transmission and distribution lines and transformers, and tariff collection systems.

 

The development of rural electrification remains a priority for the government. In 2009, only 11.5 percent of rural households had access to public electricity where the overwhelming majority utilized generator, batteries and kerosene for main sources of lighting. In 2011, the coverage improved to 23.5 percent and almost all households in Phnom Penh (98.9 percent) had access to publicly provided electricity.

 

Good progress has been made in extending publicly provided electricity with reasonable cost per kilowatt hour. Cambodian households’ access to public electricity increased from 26.8 percent in 2009 to about 37.6 percent in 2011 according to the 2011 CSES. This is a result of the government’s efforts to diversify electricity sources, mainly through hydropower dams, to increase supply capacity, and to expand transmission lines. However, electricity prices are still too high compared to our neighbors in Southeast Asia, power outages still too frequent and connection times too long. To address these issues, the government, through the Ministry of Mines and Energy, is implementing a five year plan to increase power transmission lines nationwide to achieve “Sustainable Electricity for All” by 2030. The plan will also see a decrease electricity prices and bring benefits for private sector businesses and their competitiveness, and for both urban and rural households.

 

Under the plan, we are already seeing progress in increased generation of electricity from both thermal sources (coal, oil and gas) and hydroelectric sources, while still relying on some importing of electricity from neighboring countries. By 2020, every village in the country will have electricity, provided by 9 hydropower plants and 8 coal plants, with at least 70% of households having access to electricity by 2030.

 

Along with our commitment to increase electricity generation and transmission is our commitment to ensure that hydropower construction projects undergo appropriate Environmental Impact Assessment (EIA) prior to approval, with the participation of local communities to ensure that social, environmental and economic risks are minimized. We will also actively explore other renewable environmentally friendly energy sources like mini/micro-hydropower, wind and solar energy generation, particularly learning from the promising low cost solar and wind technologies being developed in other countries like China.

 

In the current phase of Cambodia’s development, along with energy generation we must address other related infrastructure and logistics priorities to facilitate exchange of goods and services domestically and across borders. Although great progress has been made in the construction of roads and bridges over the past decade, with financial and technical support from both bilateral and multilateral development partners, Cambodia’s transport network has not been satisfactory improved. In 2011, the length of paved roads was 33.2 percent of the total 11,914 km which included single and double digit and provincial roads. Under our current plan, Cambodia is on track to reach its 2013 target, but we must redouble our efforts to keep pace with the rapid development and the needs of the private sector and communities.

 

Cambodia is working hard to implement our policy and strategy to upgrade all existing road networks, inland waterways, railways, ports and the other means of transport facilities to provide safe transportation for trade and tourism for the country as well as for our region. The rehabilitation and construction of National Roads Network is now nearing completion. The main National Roads, which are asphalted, now connect Phnom Penh with almost all provincial capitals, and link to major cross-border checkpoints with neighboring countries. Significant progress has been made to put in place regional and sub-regional roads to facilitate connectivity in East Asia, ASEAN, and the Greater Mekong Sub-Region, which will be serving as economic corridor routes and international transit routes facilitating transportation.

 

Transport infrastructure development will continue to focus on the rehabilitation of high-priority trunk and feeder roads and bridges as this will help realize the potentials of agriculture, tourism and trade in the rural areas. Major investments will be directed toward improving physical transport infrastructure that links Cambodia with countries in the region, especially Thailand, Lao and Vietnam, as well as toward enhancing sea and air access to international destinations, especially China. This is a major asset for Cambodia given its strategic central location in our economically dynamic region and will be a key factor in Cambodia’s regional and sub-regional economic integration.

 

The rehabilitation of the national railway systems also remains a high priority. As highlighted in the mid-term review of the National Strategic Development Plan 2009-20013, construction and rehabilitation of railway is a driving force to transport a large mass of goods and people with low overhead costs. Thus, expediting railway investment is crucial to facilitate ASEAN connectivity and the expected flow of goods and people when AEC comes into effect.

 

The development of information and communication technology, the coverage of the national media, both private and public, has also expanded, and the quality and effectiveness of the media has improved. About 85 percent of Cambodians have access to informative, educational and entertainment programs on TV, radio, newspapers, and other media. The IT and communications capacity and skills of Cambodians, particularly our younger generation will be a major factor in the future success of Cambodia’s socio-economic and cultural development, and our capacity to look outwards and to compete successfully in our regional and global future.

 

Agriculture continues to play a crucial role in boosting our gross domestic product, in employment, and contributing to rural poverty reduction. While economic diversification, including industrialisation, is a priority for the future development of the Cambodian economy, agriculture will continue to be an important foundation of our economy and society over the next decade and beyond.

 

Given the steady growth in agricultural production over the past decade as a result of government policies that have focused on the enhancement of production of major crops, especially rice, Cambodia is considered generally to be food-secure. However we must remain vigilant to ensure the agricultural sector remains strong and is resilient in the face of external shocks such as the rice price crisis of 2008 and local natural disasters such as floods and the impact of climate change.

 

Our agricultural development and food security strategies are focused on addressing some particular constraints still felt by the sector – inadequate infrastructure (particularly irrigation and rural infrastructure), insecure land ownership, inadequate access to technology and agricultural extension services, poor access to affordable credit, limited marketing information, natural hazards such as flood, drought, insect/pest infestation, and low public investment in the agricultural sector.

 

Despite these challenges we can point to growing opportunities for business investors to gain a high return on their investments in the sector, both in rice production, milling and export, where the government’s rice production and export policy is already showing promising results, but also in crops such as rubber, cassava, maize and soy beans, and associated agro-processing.

 

In achieving our commitment to the diversification of agricultural production, rubber in particular is proving to be an increasingly valuable industrial export crop for Cambodia, contributing both latex and timber. Smallholders control almost 45 percent of the area under rubber cultivation, creating jobs, helping to reduce poverty and preventing out-migration. As rubber is the tree, it also helps expand green cover and protect the environment.

 

Our success in achieving our goals in agricultural development and food security will require the expansion of effective irrigation, using improved seed varieties and soil nutrients, intensifying land reforms, promoting marketing facilities and price information systems, disseminating weather forecast information to farmers, strengthening agricultural extension systems, organizing training of agricultural agents for all communes, and more effective cross-ministry coordination and cooperation between key ministries such as MAFF and MoWRAM at both national and sub-national levels. We must also explore and support an enhanced and more effective role for local farmer organizations and agricultural cooperatives, with associated training and resources, to better manage agricultural production, extension services and marketing at the local level.

 

We are committed to maintaining a healthy balance between promoting and facilitating private sector investment in large scale agro-production and associated agri-business, and support for small holder farmers to increase their productivity and enhance market connectivity, if we are to promote both the contribution of agriculture to economic growth, diversification and development, and at the same time secure the livelihoods and overall food security for Cambodians, particularly the rural poor.

 

Cambodia is blessed with an abundance of natural resources – land, water, minerals, forests and fisheries. In the next stage of our development, improved governance and management of natural resources will be critical to ensure their productive and sustainable use, and their contribution to national economic prosperity and private sector development, but also to rural development and livelihoods, and the achievement of poverty reduction goals. This morning I would like to take the opportunity of speaking to this distinguished national and international audience to focus on land management policy.

 

There are few issues that have attracted more debate, controversy and media coverage in Cambodia in recent times than land management policy and its administration, particularly our progress on the complex challenge of national land titling, and the role of economic and social land concessions as key elements of our national strategic development policy. As I have made clear in recent months, I believe we must learn from the many lessons of recent years, acknowledging both progress that has been made, particularly in land titling, but also where mistakes have been made that need to be addressed.

 

Let me emphasize that the promotion of productive land use in both community and national interests, the certainty and security of land titling in both urban and rural areas, and the important role of economic and social land concessions, in promoting large-scale commercialization of agriculture, improving productivity and creating rural employment, and in ensuring access to productive land for the poor and ethnic minorities, all remain fundamental elements of our national strategy and policy framework.

 

With regard to the land reform, up to 2012, the Royal Government has provided 1.5 million hectares of economic land concession to private companies. Investment in rubber plantation accounts for 80% or 1.2 million hectares. At present, 300,000 hectares of land have been cultivated and 100,000 workers are being employed. In the next 5 years, 70% of rubber plantation will be cultivated and 840,000 hectares of rubber plantation will be tapped for latex while 1.3 million workers will be employed. Cambodia’s forest covers total 10.8 million hectares. Since 1.5 million hectares of forest cover are converted to economic land concessions, there will remain only 9.2 million hectares of forest cover. This shows that the Royal Government balances the needs to create jobs for poverty reduction and the needs to protect the environment. Due to the fact that rubber trees are considered part of the forest cover, 1.2 million hectares of rubber plantation which create 1.3 million jobs for the people will contribute to the improvement of people’s livelihoods, protection of forest cover and rubber exports.

 

In recent times I have felt the necessity to take strong action to improve the administration of these policies. In implementing the new actions within existing land policies, the Royal Government plans to issue land titles covering 1.8 million hectares of land in 20 provinces to the people. Up to present, 520,000 hectares of land have been distributed to 480,000 families and we expect the job will be done by the end of 2013.

 

I have fast-tracked our rural land titling program by using thousands of volunteers youth to assist us in this process, issuing more than 110,000 land titles to rural Cambodians.

 

I have temporarily postponed approvals of new economic land concessions. The Royal Government will distribute at least 10% of the economic land concession to the local people and communities.

 

The Royal Government has withdrawn 268,696 hectares of land from 34 economic land concession companies that violate the agreed procedures and conditions, for instance, timber exploitation without developing the land, illegal land encroachment, maintaining land for speculation purpose, and violation of individual or communities’ lands. The land from the cancelled concessions is reserved for social land concessions to be granted to the poor, landless people.

 

As we move forward in the development of a refreshed and updated Rectangular Strategy and a new five year National Strategic Development Plan, I will be working with relevant ministers and their ministries and agencies to ensure that better governance of natural resources in general, and land in particular will be a central pillar of our national development efforts in order to ensure a more effective and transparent land management policy and administration. I doing this, I believe we can ensure that the economic and social benefits that our land rich nation can bring are shared equitably.

 

Cambodia’s peace, stability and socio-economic development over the past decade and a half is a remarkable success story, and one in which we should feel pride. However, as I have explained this morning, we have learnt many lessons along the way and much remains to be done. I look forward to working with my colleagues in government, the private sector, non-government organizations, policy research institutions, local communities, and our development partners, in moving Cambodia forward. As today’s conference slogan says – “The Future is in Our Hands!”

 

Once again, I congratulate the organizing partners of the 2012 Cambodia Outlook Conference, ANZ Royal Bank and CDRI, and look forward to receiving sound policy recommendations and ideas for action generated by the conference.

 

To conclude, I now have great pleasure in declaring the 2013 Cambodia Outlook Conference open and I wish the conference a success in exchanging views and dialogue on the future of Cambodia. May I also express my best wishes for the success of all participants’ future endeavors working together in our national interest./.

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