Ladies and Gentlemen,
On behalf of the Government and people of the Kingdom of Cambodia, I would like to extend my warmest welcome to the distinguished Finance Ministers of the ASEAN member countries, the ADB President, the ASEAN Secretary General, their delegations and our other honored guests.
Today is another important event for the Kingdom of Cambodia to host this historical meeting in Siem Reap-Angkor – an ancient city of Cambodian civilization, where the world wonder Angkor temples are located.
The 10th ASEAN Finance Ministers’ Meeting today will provide an excellent opportunity to the ASEAN Finance Ministers to discuss how best to maintain and enhance stability of the region’s financial system. A well integrated and smoothly functioning regional financial system is a sine qua non for achieving our ultimate objective of establishing the ASEAN Economic Community (AEC), and accelerating our progress towards realizing a unified vision of prosperous and peaceful Southeast Asia.
The important aspects of regional financial cooperation include macroeconomic and monetary policies, coordinated liberalization of the financial sector, close cooperation in the regulation and development of money and capital markets, insurance, and tax and customs systems, and enhancing the ASEAN surveillance mechanism to avert future financial crises. This provides an overarching environment and constitutes the most important conditions for socio-economic stability and enhances our cooperation in other sectors, particularly in trade and investment.
Moreover, based on international practices, the level of financial and monetary integration is the most important benchmark for measuring the width and depth of regional economic integration. They are two sides of the same coin. ASEAN Economic Community will evolve as a single market and production base for the region with free movement of goods, services, investment and skill labor that are intertwined into a force driving the development, with a sound and efficient financial system.
In this regard, I commend the efforts of the ASEAN Finance Ministers and ASEAN Central Bank Governors to carry out the mandate given by the ASEAN Leaders to implement “the Roadmap for Financial and Monetary Integration of ASEAN” and coordinate other initiatives such as countering terrorism financing and money laundering, reforms of the financial system consistent with the evolving international financial architecture and development of regional self-help and supportmechanisms. Therefore, there is no doubt that “important building blocks” for the establishment of the ASEAN Economic Community (AEC) are being put in place together under the leadership of ASEAN Finance Ministers.
To me ASEAN financial and economic integration is a plan of epic proportions and needs long time. We have a proverb: “It is easier to say than to do”. In order to carry out this grand plan, all our countries should gear themselves to embrace the new paradigms of regional cooperation. These include, reforming institutions, reformulating investment financing strategies, and empowering the ASEAN Secretary General and the ASEAN secretariat. To this end, the ASEAN Leaders have tasked the “Eminent Person Group (EPG)” to come up with bold and visionary recommendations to move the ASEAN forward. Myself and other ASEAN leaders look forward to their recommendations.
Indeed, in order to ensure equitable distribution of benefits, integration should be carried out at different levels in the pyramidal structure of the society: government to government, government to business, business to business and people to people. So far our integration efforts are almost entirely focused on the government to government level. The other levels of economic and financial integration, particularly between firms are still lagging and remains weak. Therefore, ASEAN is often perceived as an “elitist grouping” concerned only with the top of the pyramid.
In order to dispel this perception, it is imperative that integration is pursued at the grassroots level so that the common people at the base of the pyramid can get the benefits of integration. While integration has been beneficial at the economy wide level, there are sections of the society which have been left out and marginalized. We must make efforts to support them in order to make integration fair and equitable. We should learn from the recent social events in Europe and draw up plans to give our young people confidence in the future.
ASEAN should be revitalized and the region made more competitive to cope with the rising challenges from globalization and from continued increasingly competition of other regional blocs. The creation of a ASEAN single market will bring down barriers to trade and investment, reduce the cost of doing business and production and make the ASEAN more competitive vis-à-vis other regions.
Economic integration will enhance the attractiveness of the ASEAN as an investment destination; accelerate the liberalization of trade in goods and services; improve trade and business facilitation and enhance the viability of ASEAN SMEs. Realizing this, we are working towards achieving a free flow of services earlier than the originally targeted 2020. We have adopted the “ASEAN Minus X” formula for services liberalization and each round of negotiations.
At the same time, we are firmly committed to strengthen the socio-economic cooperation aiming at bridging regional development gaps by mobilizing resources to implement “Initiatives for ASEAN Integration”. I am convinced that regional integration must start with the strengthening of bilateral relations through investments geared to promote regional cooperation such as physical infrastructure, supported by appropriate laws and regulations and the facilitation of economic activities including trade, investment and exchange.
Nevertheless, regional integration also depends on the efforts of each government in implementing comprehensive domestic reforms. Cambodia’s experiences show that reform, integration, economic growth and poverty reduction are closely interlinked. To promote development we are required to develop and implement comprehensive reform agenda, including agenda for regional integration. While exploring new horizons of economic opportunities, integration requires continuous reform efforts, which will effectively contribute to economic modernization and promote economic growth. This, in turn, contributes to the improvement in the living standards of the people. Robust economic growth and better living standards achieved through carefully thought out integration and rigorously implemented reform programs will further accelerate reforms and deepen integration.
Based on this philosophy, the Royal Government of Cambodia has taken serious strides to implement reforms in all sectors as stipulated in the “Rectangular Strategy”, which we introduced in order to achieve the Cambodian Millennium Development Goals. This strategy has a clear goal to promote economic growth and create employment for the Cambodian people, enhance equity and social justice as well as strengthen efficiency in the public sector through the implementation of comprehensive cross-sector reforms. In all of these efforts, our ambition is to reduce poverty in the country to 25 percent by 2010 and 19.5 percent by 2015.
The wide-ranging reform program and sustained domestic political stability have allowed us to pursue policies for accelerating economic growth and reducing poverty. With prudent macro-economic management over the last 12 years, GDP growth in Cambodia has averaged around 7 per cent per annum. Growth in 2005 is provisionally estimated at 9.8 per cent. As a result, poverty rate dropped by more than 1% per year in the last decade as the Government intended to achieve. Robust economic growth in 2005 was mainly attributable to excessive projected growth of agriculture sector, continued expansion of garment exports, construction boom, and increased tourist arrivals. You can witness all these phenomena yourself during your stay in Siem Reap.
The RGC is fully committed to some basic principles for taking the country forward: strict adherence to democracy with openness and guaranteed freedom of expression; maintenance of political stability, rule of law, equity and social order; and instituting governance reforms at all levels to make administration fully responsive to the needs of the people, responsible, effective, transparent, accountable and predictable. The Government is also committed to ensuring macro-economic stability, creating and maintaining key infrastructure, as well as a conducive climate for private sector to flourish, and provide essential social services for human capital formation and enhancement.
Our progress will not be sustained if a financial crisis comparable to the 1997-1998 episode occurs. A high priority concern of the ASEAN Finance Ministers’ Meeting should be to put in place a high quality ASEAN Surveillance Process to monitor global as well as regional and national economic and financial developments which would forewarn us of emerging systemic risks and signs of vulnerability in the ASEAN economies. I am glad that we are making good progress in this regard.
We must increase our efforts towards realizing the Roadmap for the Integration of ASEAN in Finance, which will contribute to the realization of the ASEAN Economic Community. Under the Roadmap, approaches and milestones have been identified in areas deemed crucial to finance and monetary integration, namely (1) capital market development, (2) capital account liberalization, (3) financial services liberalization and (4) ASEAN currency cooperation. Implementation of this roadmap will allow the ASEAN to diversify the sources of financing, and deepen and widen financial integration.
The ASEAN and ASEAN +3 cooperation in finance will guide us in our quest to develop a sound financial system in the spirit of sharing benefits among all parties concerned. The Roadmap for Financial and Monetary Integration of ASEAN is the master plan that we have agreed to raise the financial service system in accordance to the international standard. The Royal Government of Cambodia is committed to implement the Roadmap through financial sector development plan, entitled «The Vision and Financial Sector Development Plan for 2001-2010» adopted in August 2001. This plan envisages a vsion for developing a sound, market-based financial system to support resource mobilization and sustainable economic growth by establishing a strong foundation for banking and insurance, and developing financial markets. Now this plan is being updated to make it more relevant to the current level of economic development in Cambodia. In this context, I would like to thank the ADB for providing technical and financial support for the implementation of this financial sector development plan.
Cambodia has also learned the experiences of older ASEAN Member States in the development of insurance sector. Malaysia and Singapore have graciously shared their experiences in this sector. A special training program was put in place by the Malaysian Insurance Institute (MII) to upgrade the professional level of Cambodian insurance practitioners. Japan has also provided technical assistance to newer members of ASEAN in the development of bond markets under the framework of the ASEAN+3 cooperation. Cambodia is in the process of developing legal and regulatory framework for the creation of bond and stock markets in the near future. In this regard, ASEAN cooperation in capital market development has provided our officials with the opportunity to learn from on-hand experiences of more advanced ASEAN members.
I would like to congratulate the ASEAN Finance Ministers on the launch of FTSE-ASEAN Indices, which serves as a benchmark for the regional markets in order to highlight and promote ASEAN equities as an asset class. Enhanced cross-border collaboration, strengthening linkages and promoting harmonization between capital markets in the ASEAN would elevate ASEAN capital markets to a higher level.
We all remember from the Asian financial crisis that free movement of capital is a double-edged sword. Non-regulated foreign capital could flow out easily as like the in-flows. Therefore, capital account liberalization should be carried out in an orderly and well-sequenced manner by strengthening institutional capacity and putting in place adequate safeguards against volatility and systemic risks.
To expedite the process of financial services liberalization, ASEAN has recently agreed on a “positive list modality” and adopted milestones to facilitate negotiations. This is a welcome development.
At the same time, we need to search for other cooperation mechanism in the financial cooperation aiming at ensuring stability and firm regional monetary strength such as determining offsetting mechanism by using regional currency for intra-ASEAN trade. ASEAN economic integration is as much a matter of deliberate policy as it is also an inexorable economic and strategic trend. This process has gained momentum after the initiation of the ASEAN plus Three process.
I congratulate the ASEAN+3 group for reviewing the Chiang Mai Initiative (CMI) and reaching agreement on the expansions of “Sector Wide Approach” facilities among ASEAN member countries to include all members and also the +3 countries (China, Japan and South Korea). This is a significant step towards greater financial and monetary cooperation in East Asia. It exhibits a broad consensus among the group that East Asian countries need to cooperate more closely in order to protect themselves from volatilities and risks arising from developments in international financial and capital markets and ensure sustained economic development in the region. The new initiative is also more responsive to the requirements of regional financial integration. The “Sector Wide Approach” arrangements have enhanced market confidence in ASEAN-East Asia economic and financial cooperation.
Building on the good progress in financial cooperation our intention is to expand economic cooperation with the +3 group to a higher and more comprehensive level. It is encouraging that ASEAN and China have agreed to develop a “comprehensive economic relationship” culminating ultimately in an ASEAN-China free trade area. ASEAN, Korea and Japan have also agreed to forge a “comprehensive economic partnership”. These arrangements will open up a new dimension of economic cooperation in East Asia.
The ASEAN Finance Ministers’ Meeting provides an excellent vehicle to provide coordinated responses to the many challenges that confront us. Deepening global imbalances, threats posed by the avian flu and terrorism, possible slow down of global economic growth due to escalating oil prices and financial sector weaknesses in several of our countries could derail the smooth progress in regional economic integration that we have achieved so far. On this rare occasion, I strongly urge the meeting of ASEAN Finance Ministers to deliberate on the specific policies and programs to deal with these challenges during Economic Review and Policy Dialogue.
The comprehensive agenda before us reflects our common desire to effectively deal with the problems, threats and challenges that confront our respective economies and the region. We should also take stock of the progress in implementing the agreements we forged in the earlier ASEAN Summits. In tackling this complex agenda, our Finance Ministers bear a special responsibility. I propose three key tasks where we seek the prioritized attention and involvement of the meeting of ASEAN Finance Ministers:
· First, supporting regional economic integration: While the responsibility for economic integration is primarily assigned to our ASEAN Economic Ministers, we have learned through experience that the key to successful international economic partnerships is in forging strong cross border financial relationships. Thus, our Finance Ministers should play a central role in promoting ASEAN financial cooperation and integration.
· Second, achieving equitable development of countries within the ASEAN: Consistent with our Initiative for ASEAN Integration, we must continually strengthen the coordination of all strategies and programs aimed at accelerating the development of the newer and less developed members of the ASEAN. Therefore, we should strive towards greater complementarity in our cooperation programs and activities. Continuing policy dialogue among the ASEAN Finance Ministers in this matter should be of high priority. Otherwise, faster regional growth could result in widening gaps among the more developed and less developed members of ASEAN.
· Third, fully engaging in East Asian cooperation and the ASEAN+3 process: I appreciate that the ASEAN Finance and Central Bank Deputies met with their Northeast Asian counterparts in the ASEAN+3 AFDM prior to this meeting. I understand that the ASEAN+3 AFDM considered the many findings and recommendations presented by the ASEAN+3 Working Groups on how to promote and strengthen the ASEAN+3 financial cooperation. This close coordination between ASEAN and ASEAN+3 frameworks must continue.
Indeed, Cambodia greatly values being a member of the ASEAN. Cambodia remains a steadfast member of the ASEAN. Our commitment to the strengthening of the ASEAN is demonstrated by our hosting of key ASEAN meetings and events and active and constructive participation in a wide range of ASEAN led activities particularly in the areas of political, economic, trade, investment, financial, social, cultural and environmental cooperation.
I am confident that our ASEAN Finance Ministers will put forward their best skills and leadership qualities towards meeting our shared objectives. I wish all Your Excellencies, Distinguished Delegates Ladies and Gentlemen success in your endeavors in this meeting and pleasant stay on the land of Angkor.