Ladies and Gentlemen,
I am honored and pleased to address this very important conference on investment in Cambodia. On behalf of the Royal Government of Cambodia, I warmly welcome all the distinguished guests and investment and fund managers from various countries to the Kingdom of Cambodia, home of Angkor! I thank the Naga Corporation, particularly Dr. Chen Lip Keong, for organizing this conference. I also thank Naga Corp for working with Cambodia’s Ministry of Tourism to organize events in Singapore to attract visitors and investors to Cambodia.
Moreover, I congratulate NagaCorp on becoming the first Cambodian business to be listed at the Singapore Stock Exchange. This is an important achievement, since NagaCorp is the first Cambodian business to be listed in the stock exchange of a more developed country and a well-known financial center in the region!
Today, please allow me to share with you the Royal government’s efforts to foster investments in Cambodia. I will also provide an update on developments in Cambodia.
Cambodia’s Decade of Outstanding Achievements
Cambodia has undergone dramatic changes in the last ten years. The country has completed the transition from a centrally planned to a market economy, from a one-party state to a democratic system of governance, and from war and conflict to sustainable peace. To reconstruct the war-ravaged economy, a partnership has been forged between government, the private sector and civil society, with assistance from the international community. Relationships between the government, donors and civil society have significantly strengthened through regular meetings and dialogues of reform working groups. Furthermore, labor costs remain competitive, while productivity is on the increase.
Three national elections (May 1993, July 1997 and July 2003) and the first-ever Commune CouncilElection (February 2002) have been successfully conducted in Cambodia. These elections herald a new era of peace, democracy, respect of human rights and local development. After years of war and isolation, Cambodia has now become a full-pledge member of regional and world community, thus enabling us to mobilize and make an effective and sustainable use of the full potential of our resources for rehabilitation, reconstruction of the nation, and regional and international integration.
Cambodia is now a member of most international organizations. In 1999, Cambodia became a full member of the ASEAN. Cambodia expects to become a member of the WTO very soon. The Royal Government also achieved historical success in the organization of the Greater Mekong Sub-region (GMS) Summit, the ASEAN Summit, the ASEAN plus China Summit, the ASEAN plus Japan Summit, the ASEAN plus Republic of Korea Summit, the ASEAN plus India Summit, and the Special Meeting Between ASEAN and the African Union. More recently Cambodia hosted the ASEAN Tourism Forum, the ASEAN Ministerial Meeting, the ASEAN Regional Forum, and the ASEAN Economic Ministers’ Meeting and its related meetings from 2 to 4 September 2003.
The country’s economy has rapidly recovered, boosted by rapid growth in garments and tourism. In 2002 garments exports reached US$1.3 billion. Cambodia has also entered into strategic partnerships with bilateral and multilateral donor agencies, enabling the mobilization of significant resources for reconstruction of physical infrastructure and institutions destroyed during the decades of war and upheaval.
Despite the severe slowdown in the global economy, since 1999 the Cambodian economy has remained dynamic relative to most Asian economies. Cambodia’s GDP grew by approximately 6.7 percent per year for the last five years. Production of crops and livestock remained robust in 2002 despite widespread flooding. Garments exports increased by 13 percent in 2002, against 78 percent in 2001. Construction also increased due to the acceleration of the government’s infrastructure program in 2001-2002.
Tourism continues to be at the forefront of Cambodia’s economy. Investment in the hotel industry alone totalled US$200 million in 2002. International tourist arrivals increased by about 14 percent in 2002, as against 31 percent in 2001. This growth was boosted by Cambodia’s “open skies” policy in air transport which enabled direct flights to Cambodia.
To encourage tourists to spend more time and money in Cambodia, the Royal Government has implemented actions to ease travel and entry: streamlined issuance of visas, especially for ASEAN citizens, strengthened security for tourists, and new services and recreation areas. Cambodia has also prioritized eco-tourism programs.
The service sector has contributed 46 percent to GDP and provided 15 percent employments of the total Cambodian workers. This sector rapidly grows at 10 percent per year between 1993 and 2002.
Cambodia: Open for Business
Just as Cambodia’s skies are open, so is the country open for business. The Investment Law of the Royal Government of Cambodia was originally passed in 1994 and improved by amendments in 2002 in systematically consistent with the Tax Law, with the active participation of the private sector. Based on this law, foreign investment in Cambodia is a simple, open process, one much easier than experienced in some countries in the region. Cambodia does not differentiate between investment projects undertaken by Cambodian nationals and those undertaken by foreign investors. Most sectors of the economy, including services and international trade, are open to foreign investment.
The Cambodia Investment Board (CIB), operating within the Council for the Development of Cambodia (CDC), is the government agency responsible as one-stop for controlling and approving investment projects, and granting investment incentives in accordance with the Investment Law.
Investors are encouraged to obtain a CIB license if the investor wants more favorable treatment than is otherwise available. Otherwise, an investment company can be established simply by registration with the Ministry of Commerce. The law provides that from application all projects considered by the CDC must be processed within 7 days. Other projects subject to “one-stop” processing will be vetted in a maximum of fourteen days. The service offered by CDC/CIB is “one stop” in that the CIB handles all relations with and approvals issued by other Ministries. Presently, we are working in more detail in order to issue sub-decree and technical regulations, aimed at facilitating the implementation of the Investment Law and other related laws, especially the Tax Law.
The Royal Government has also facilitated access by investors to international financing. Cambodia is already a member of the International Finance Corporation, Multilateral Investment Guarantee Association, and International Center for Settlement of Investment Disputes. The Royal Government has also agreed with the Asian Development Bank on arrangements that may provide private sector investors with access to funding from the ADB’s private sector lending facilities.
The Royal Government made poverty-reducing economic development its first priority and launched a comprehensive reform program, with emphasis placed on strengthening fiscal revenue collection, enhancing financial institutions and banks, civil service reform, demobilization of soldiers, land reform, and improved forestry and natural resource management.
In rural areas, the Government is exerting efforts to resolve the root causes for land disputes and poverty. The agricultural sector contributes about 30 percent of the country’s GDP and employs 77 percent of the labor force. Real agricultural sector growth was 2.6 percent per year between 1993 and 2002. Cambodia’s agriculture is very sensitive to weather patterns since irrigation and flood control mechanisms are inadequate. The Royal Government is focusing its attention on these urgent needs. Nevertheless, the country attained rice production self-sufficiency since 1995 with production at 3.5 million tons compared to only 2.0 million tons as of the mid-1980s. Yields rose from only 1.2 tons per hectare in the early 1990s to two tons per hectare in 2002. Output of other crops and livestock grew at about 2 percent per year.
We admit that labor conflicts, mostly concentrated in the garment industry, are also being attended to. However, this problem has been receiving much attention from the Royal Government. Industrial relations disputes have become more visible due to the operation and better understanding of the Cambodian Labor Law by both factory owners and unions.
We should emphasize once again that the important outputs in all reform sectors, especially the success of the maintenance macro-economic stability and the notable high growth rate have been achieved in the very difficult circumstance due to unfavorable conditions exposed from both internal and external factors such as natural disasters, international terrorism, uncertainties in the global geopolitics and the world economy, and the recent eruption of SARS.
Continuing Challenges and Actions for Private Sector Development
Although there are positive changes, the Royal Government acknowledges that everything is not totally good and smooth. However, the importance is that the Royal Government and people of Cambodia have strong and firm commitment to continuing all necessary reforms to create a better environment conducive to investments in Cambodia.
The Government considers the private sector as the engine of economic growth, while the government serves as the strategist to create the better business environment for private sector and manager of development. A healthy private sector is the key to robust economic development and thus the government should ensure a legal framework for fair competition, transparency and accountability. The overall environment for enterprise will be strengthened through broadened good governance and human resources development.
The Royal Government very well understands that the success of private sector development in Cambodia heavily relies upon SMEs. To achieve the set goal, the RGC laid out the vision, strategy and concrete actions for the medium term.
In general, to ensure a private sector led economic growth in Cambodia, the incoming third terms of the Royal Government will address the following challenges: (i) strengthening the business environment and improving good governance; (ii) deepening infrastructure, production and supply chain; and (iii) creating jobs and enhancing level productivity. All these will lead to both market and corporate competitiveness, thus requiring a stronger and more transparent public and private partnership to systematically tackle selected market and administrative distortions strategic to stimulating growth and competitiveness in the economy.
Once again, I confirm our commitment and determination to cooperate with the private sector in order to strengthen our partnership and establish a climate favorable conducive to investments in the Kingdom of Cambodia. We welcome recommendations on ways and means to improve the investment climate, promote export diversification, facilitate supply chain linkages and maximize the impact of Special Economic Zones. I believe we need more analysis and dialogue on the dynamics of Special Economic Zones.
As a part of private sector development strategy, the Royal Government has approved several Special Economic Zones and the Export Processing Zones. We expect that these zones will attract foreign direct investments and create jobs and generate income for Cambodians. The establishment of these zones arises from the logic of regional integration and efforts to capture market niches and make Cambodia competitive in labor-intensive manufacturing.
Let me end at this point with a simple and direct assurance: Cambodia is open for business, and the Royal Government of Cambodia will exert its utmost efforts to ensure successful enterprise and investment in Cambodia. We are now entering into our third mandate, after having received the collective will of the people through the free, fair and democratic national elections of 27 July 2003. We are now making our utmost efforts to solve differences among political parties who have been selected by the people through the National Election to serve in the National Assembly, based on the principles of democracy, the respect for human rights, the will of people and the existing laws, especially the Constitution of the Kingdom of Cambodia. I am optimistic that the new Royal Government will take over its third mandate in accordance with the will and aspiration of the people, and with firm commitment to the cause of peace, development and prosperity for every Cambodian.
Thus, we are confident that we are on the right track and stand ready to welcome and facilitate international investments for the mutual benefit of Cambodia and foreign investors. Through this short intervention, I hope that you could appropriately assess Cambodia- The Diamond of the Mekong. “Work together and prosper together”. Again, welcome to Cambodia.