– Samdech Norodom Serey Vuth, Deputy Prime Minister and Co-Minister of Ministry of Interior and the Head of the Board of Directors of Cambodia Institution for Cooperation and Peace,
– Mr. Axel Schmidt, Chief of Southeast Asian Cooperation Office, Friedrich Ebert Stiftung, Singapore,
– Your Excellencies, Ladies and Gentlemen, Members of Parliament and Senate, National and International Guests.
First of all, on behalf of the Royal Government of Cambodia and myself, I would like to express my most warming welcome for the presence of Samdech, Your Excellencies, Ladies and Gentlemen in this National Conference on Cambodia and the WTO: Benefits, Challenges and Future Directions.
I would like to complement and support the cooperation and meaningful action of the Cambodia Institution for Cooperation and Peace (CICP), and the Friedrich Ebert Stiftung Fund of Germany that have initiated and channeled their fund for the preparation of this important National Conference in order to contribute to the efforts of promoting knowledge and developing human resource in Cambodia.
The Royal Government of Cambodia has always determined and cooperated as partners with civil society and Non-Government Organizations that have served the benefits of our society, namely, the Cambodia Institution for Cooperation and Peace (CICP). Besides, the contribution of your time and knowledge in the preparation and participation of today National Conference on Cambodia and the WTO: Benefits, Challenges and Future Directions, is truly valuable not only in identifying current challenges and benefits of the integration of Cambodia economy into the world economy but it also helps to establish the view of Cambodia’s future in the new era.
The WTO accession has been precisely adopted as a strategy of the Royal Government’s “Triangle Strategy” for the second term of the National Assembly. For instance, the result from the implementation of the Triangle Strategy has established a strong foundation for long-term development including (1) the achievement and strengthening of sustainable peace, security and stability in the framework of the whole country, (2) fast and full integration of Cambodia into the regional community and the world (3) …………… the battle field of economic reform in order to promote growth and to reduce poverty of the people.
The second achievement has been the fast and full integration of Cambodia into the regional community and the world which clearly reveals the Royal Government’s policy determination behind the preparation of its economic integration into the regional economy and the world. Along with the effort of improving and stabilizing the relationship between Cambodia and the international community, the Royal Government has successfully implemented the regional economic integration after we have received a membership in the ASEAN since April 1999.
Indeed, Cambodia’s agenda does not end by just becoming a member of ASEAN and to promote the implementation of other related cooperation. Cambodia has a bigger ambition. The agenda of the Royal Government is the integration of national economy into the entire world trade system. In achieving that goal, Cambodia has devoted its entire effort for many years in becoming a member of the World Trade Organization on the 12th August 2003 in the Ministerial Conference of the WTO at Cancun, Mexico.
Indeed, this new achievement has enabled Cambodia to receive incentives and to have pride in its capacity to respond to many strict conditions as the participant of WTO. Moreover, it also clearly highlighted that Cambodia has been on the right track in implementing democracy, respecting human rights and transparent goals as well as modernizing economic infrastructure, especially, trade liberalization and investment in order to provide our people with proper benefits from the strong current of globalization.
At the same time, the Royal Government clearly understood that the effective implementation of its duty as a member in the WTO is even harder than the journey to become the member itself. In this meaning, Cambodia must increase its efforts in order to address challenges, difficulties and obstacles of all sizes through deep reform of all sectors, especially, strengthening the local production, capacity building and human resource development which is a journey that requires high commitment and absolute political willingness.
In this sense, the acceptance of the membership’s risk in the WTO will provide Cambodia with a rare opportunity to resolve any infrastructure issue through the package of a broad commitment which includes the industrial goods, services, agriculture products and the implementation of trade with transparency and justice. If we stand on this view, the accession into the WTO has brought tremendous potential more than the economy and trade. This membership can serve as the basic foundation for the building and strengthening the rules of law in Cambodia and to establish habitual willing to accept and respect the international standard in many other sectors.
Even though there has not yet been any substantial impacts from being a member of the WTO, today National Conference onCambodia and the WTO: Benefits, Challenges and Future Directions is being held on time in order to summarize and evaluate disadvantages and advantages as well as to set future direction for us in order to overcome challenges and to maximize benefits from this integration.
Indeed, globalization is a big wave that cannot be avoided. All countries, companies and people must accept this fact. Historical experiences and other researches showed that the closed door policy to protect local industries has never been successful. On the contrary, the country will be isolated from modernization and development. Cambodia has enjoyed the richness of natural resources for a long time and received marginal benefit by exporting and selling these primary commodities such as ore and agricultural products. Now it’s time for Cambodia to seek for more possibilities and choices to earn by broadening the trade and seizing market share.
The membership in WTO reflects the new stage of Cambodia’s economic reform, which opens to the outside world by shifting from selective to broad liberalization and from unilateral liberalization to multi-liberalization basing on the WTO’s regulations. Cambodia’s membership in WTO will entirely integrate her economy into international trade system. The liberalization will increase the effectiveness of Cambodian economy and improve the growths in agriculture and industry sector. The competition will push local enterprises to improve quality, production quantity and services through the integration of new technology and new management to seize regional and global market share.
Obviously, another benefit, which Cambodia gains from WTO, is the political benefit. While the poor country such as Cambodia becoming a member in WTO, the country will have more friends and supports from other members by providing more aids to develop human resource as well as the economy.
Thus, membership in WTO will significantly link to the growth of the Cambodian economy, employment creation and poverty reduction.
The public has been doubtful on the economic integration in the region and the world.
Indeed, the membership in WTO will provide both opportunities and challenges. As above mention, the main opportunity for all members in this organization is the ability to trade with other members of this organization under the principle of trade as the Most Favor Nation (MFN). Thus it opens the door for enterprises in Cambodia to export, to create more jobs for the people and increase the revenue. Through this, Cambodia will earn more from the exports than the lost or lower imported tax revenue due to accession into the WTO.
We should remember that even though the WTO membership will allow Cambodia to increase exports but Cambodia has to import products to meet local demands. Trade operates in “Two Ways” and when market access to the world and the favorable condition is better, the Cambodian enterprises are able to reduce their expenses on raw material and inputs. The Cambodia people will also have better living standards.
Indeed, our challenge is to ensure that export goods from Cambodia have competitive advantage. This is the task in which we have been actively promoting with measures to reduce cost on domestic production, inputs and advertisement. The measures that include the construction of transport infrastructure, communication, energy and water supply system, have to be built immediately and effectively. There is also a need to decrease administrative expenses, bureaucracy and license issuance.
The biggest challenge is to increase our competitive ability, which means that our domestic products have to compete with foreign goods that flow freely into the country with cheaper prices and better quality. The speedy liberalization can cause our young industries; such as agricultural production, small and medium enterprises and other domestic companies; that are vulnerable and need protection, face direct competition with import goods. As a result, they may go bankrupt.
The expectation for higher import than export after Cambodia’s accession into the WTO will lead to huge trade deficit. Most Cambodian enterprises such as chemical, pharmaceutical and agro-industry processed enterprises will face difficult in their production. In addition, some service sectors such commerce, transportation, insurance, and communication which used to be protected, may lose their competitive advantage when they compete with foreign companies.
Cambodia is facing uneven growth in the region and widening income gap among its people. Phnom Penh will gain more benefits and develop more than the other regions. This is one of the social issues emerging from the development. An acceleration of liberalization and competition resulted from the implementation of all agreements of Cambodia made with WTO may face some challenges.
There are many seminars and training programs organized by Ministry of Commerce for Cambodia’s officials related to the discussion on Cambodia’s accession into WTO. However, knowledge and information of impact of WTO accession remains limited. The involvement of other stakeholders beside the government for this entry is very important. The impact of WTO membership of Cambodia is very important issue for Cambodian. In this regard, involvement of stakeholders, in particular, private sector, education and civil society are very vital. Today conference is playing the key role in disseminating these information.
All legal documents in Cambodia were almost destroyed during the civil war. Cambodia has created and amended some legal documents to adapt to political changes. Required conditions and legal instruments of Cambodia’s WTO entry was revised or made to comply with free trade and rule of the WTO. Therefore, it is a huge burden of Cambodian people to do this job while knowledge and time is limited in the environment of market-based economy and globalization. New regulations and legal instruments have been drafted in response to requirement of the WTO. In this context, those regulations, that were created may not be good enough and may need to be revised in the near future when the government found that there are loops and it is not good regulation.
The implementation of those requirements to become WTO member is a difficult issue but working with WTO is another challenge. When trade dispute emerge Cambodian officials must solve problem and many negotiations are made as well. However, Cambodian officials have shortage of knowledge in commercial issues and Cambodia will face difficulty in trade discussion.
The challenges for Cambodia are not only on the changing of business climate, but also the increasing of domestic industries. Even though, the economy steadily grows, sources of growth is actually stemming from external resources mobilization and other productions such as tourism and services. Reducing the dependency on external resources would impact the growth and the development of international trade cannot be a substitute for the next 10-15 years.
The Royal Government of Cambodia encouraged all economic agents including private sector to prepare and understand well about the impact of WTO membership in order to avoid disputes and difficulties. They should realize that WTO membership would push them to learn from competition for quality improvement of domestic products and for ensuring larger market accession. Domestic businessmen also have opportunity to expand their business activities.
The Ministry of Commerce has an active role in searching for market, providing market information to domestic producers, potential of international market and trade facilitation particularly exportation. We have to proceed the establishment of the Special Economic Zone as soon as possible in order to attract investor for enhancing production capabilities especially for exportation. Therefore, Council for the Development of Cambodia has its important role to attract and facilitate investors. Presently, we are weak in promoting and attracting investors. We need to improve working procedure by eliminating the extortion of unofficial fee from investor meaning that corruption in public sector must be reduced.
Cambodia has to work out the way to develop national economy that is consistent with the global economy through economic integration and private sector promotion. WTO membership of a weak economy as Cambodia faces a lot of challenges including fierce competition and difficult to adopt in response to the trade rules and regulations of WTO. In short-run, Cambodia would be difficult to play a role in a rule-dependency organization, but we gain trade opportunity for the long-run. While Cambodia opened its economy, it stimulated imports and exports at the same time. The more important was to attract in-flow of direct invest from foreign countries.
Cambodia should study country competition including comparative and absolute advantages using technical assistance in order to utilize the regional economic potential as much as possible in the sense of exchanging goods with other regional trading partners. Domestic production should improve the quality based on demand and market, improve production capacity and quality. By so doing, those goods can compete in global market.
The knowledge and information on the impact of WTO membership on Cambodia’s economy are still limited, the involvement of beneficiary excluding the Royal Government is greatly important. Negotiation and dialogue among involvement agencies should expand to inform public and accumulating ideas and knowledge of the benefit of Cambodia in WTO.
To take benefit from WTO membership requires an active participation from people especially private sector which directly involves in international trade. We have to work together to bring our product to the world market.
For the last several years, the Royal Government vehemently pushes forward its willingness to do reform. These efforts produce a favorable and dynamic climate which can be proved by a significant economic output. However, the Royal Government recognizes that reform cannot be finished within a day or a leap step; it is a gradual and continuous process. Before closing, I would like to wish all of you and the conference with five gems of Baddish blessing. I hope that the conference will proceed successfully and I would like the conference open from now on.