Excellencies, ladies and gentlemen,
I am honored and delighted to deliver the keynote address in this important Cambodia Outlook Conference 2015 held under the theme of “ASEAN Economic Community 2015 and beyond: Reform Agenda”. This is the ninth occasion on which I have attended and delivered keynote address in this outlook conference. I once again congratulate the CDRI and ANZ Royal Bank on their initiative to organize this annual conference which brings together government officials, representatives of the private sector, the research community, NGOs and development partners to review achievements and challenges to find the best way forward for the cause of the national interest.
This is indeed a great gathering opportunity in the new political context of constructive dialogue to push for the in-depth and comprehensive implementation of main reform agendas. The culture of constructive dialogue has helped strengthen the nation’s capacity and ensure peace, political stability, economic growth and progress in all sectors while we are graduating to a lower middle-income country and doing our best to grab all good opportunities and address challenges at both regional and global levels.
More importantly, the conference will enable us to assess the government’s policy framework and its commitment to four priority areas, viz. (1) the development of human resources to ensure competitiveness in an increasingly open regional labor market, trade and investment climate once the AEC 2015 has been established, (2) continued investment in transport infrastructure and improvement to trade facilitation, (3) further development of the agriculture sector to increase the value added, and (4) strengthening of governance and public institutional capacity.
Since day one of the current government, we have given priority to the development of human resources by undertaking significant reform and increasing budget for the sector aimed to develop an education system that responds to youth’s wish and aspiration and market demand while creativity is also promoted so that they can compete in the regional and global market. Along with the development of human resources, we are also committed to reforming and improving public administration in the management of land and environment, provision of health service especially in areas in need of maternal and child health service, support to the livelihood and food security of the poor, support to the empowerment of women and children and improvement in SME’s access to credit.
I would like to highlight related aspects of the conference theme that include: the impact of the establishment of AEC 2015 on Cambodia, the important role of our Industrial Development Policy and the way the government, the private sector, development partners, research community and stakeholders can work together to reflect the new aspect of Cambodia based on past achievements and future potentials and the best way to maximize gain from AEC 2015 and beyond.
Through this, let me remind ourselves of how much has been achieved in our collective effort to ensure peace, stability, sound macroeconomic management, high economic growth, socio-economic development, poverty reduction and promotion of an open economy with environment conducive to investment and business. Overall, Cambodia has been classified as “high growth country” by the World Bank by averaging 7.7% per annum during the last two decades and is ranked sixth in the world in terms of economic growth. Over recent years, Cambodia has been viewed going through transformation in the politic, economic, trade and social aspects. Cambodia achieved 7.4% economic growth in 2013, along with the growth projection of around 7% per annum in 2014 and in the medium term, thanks to the development of energy and other physical infrastructure, enhanced competitiveness, improvement to trade facilitation and investment climate and so on. Inflation has been contained within 5% and the Riel/USD exchange rate has been generally stable. The banking system remains robust with adequate capital and liquidity. Deposits and loans continue to growth, a reflection of stronger public confidence in Cambodia’s banking system.
Growth is estimated to be around 7% in 2015, spearheaded by 9.7% growth in the industry sector and followed by 6.6% growth in the service sector and 4.3% growth in the agriculture sector which is projected to remain so in the medium term. Growth in the industry sector is due to two main aspects that include the slight rebound of the clothing and footwear sector and the continued growth in the energy and construction sectors. Inflation is projected to remain low at 3.5%, due to dropping prices of oil and agricultural products.
Cambodia has transformed its economic structure. The labor-intensive agriculture sector will continue to grow along with enhanced diversification and productivity while the garment, tourism, construction and service sectors continue to be the main driving force of economic growth. Moreover, we have seen some signs of hope, that is the economic diversification into the light industry e.g. electronics and food processing.
We are committed to pushing for more in-depth and effective reform to realize the national development goal and enhance our competitiveness in the region, especially the AEC 2015 and the world. Going forward, Cambodia will strengthen its economic partnership with other ASEAN and East Asia countries by ensuring an open economy in the global market, a key to achieving economies of scale and competitiveness, expansion of regional investment and trade and poverty reduction.
The establishment of the AEC 2015 aims to create a regional market with free flow of goods, capital and skilled workers to make ASEAN a production center in the world and a significant and competitive market in the region. On this basis, through the strengthening of its core role, ASEAN will be able to capitalize on the rise of China, emergence and gradual opening of India, new developments in the Korean and Japanese economies and stability of US and EU that in turn will provide enormous opportunities for trade and investment. In this context, it is expected that enhanced cooperation with external partners through ASEAN plus One and ASEAN plus Three free trade agreements, the Regional Economic Comprehensive Partnership struck by the ASEAN plus Six that include ten ASEAN countries, China, South Korea, Japan, India, Australia and New Zealand, and the Trans-Pacific Partnership will enable ASEAN to fully capitalize on new opportunities lying ahead.
Along with the opportunities, ASEAN must further strive to address the challenges it faces such as the management of impact caused by structural change, maintenance of macroeconomic stability, internal inequity within each nation and development gap within the region, enhancement of competitiveness and productivity to avoid the middle income trap and the maintenance of peace, stability and security in the region. All these are the prerequisites for ensuring our ability to grab the benefits arising from this broad regional integration.
In the context of such evolving regional architecture, Cambodia has become a candidate with great potential for industrial development through the linkage with the so-called “global factory” in Asia by striving to enhance physical, digital and institutional connectivity and create a dynamic regional market. In this sense, investors can benefit from investment in the industry and other sectors with great potential in Cambodia which has an open economy, young labor force hungry for knowledge and technologies, improved infrastructure, growing middle class, increase in purchasing power due to the high frequency of income earned, favorable geographical location and good cooperation with the international community.
Overall, Cambodia has been well prepared for the AEC 2015 and succeeded in undertaking the required reform. This performance is partly due to the openness of Cambodia’s economy, early ASEAN membership and firm determination of the Royal Government and the private sector to fulfill AEC’s requirements. Based on the ASEAN’s scorecard that benchmarks implementation progress and the AEC’s requirements, Cambodia is ranked 3rd behind Singapore and Malaysia in terms of preparation for AEC.
In addition, Cambodia has to maintain macroeconomic stability and improve investment climate, continue improving logistics network, build and enhance physical infrastructure as well as strengthen the quality of public service…etc. In this connection, Cambodia has to make its own effort to mobilize the short and medium-term revenues to help achieve the above goals, to meet expenditure needs and to ensure the sustainability of government operation. The priority sectors that respond to Cambodia’s present condition and medium-term prospect include administration reform, improvement of tax and non-tax revenue policy as well as strengthening of monitoring and evaluation.
Overall, Cambodia has even more hope to achieve further development through the implementation of Medium-Term Revenue Mobilization Strategy 2014-2018 which focuses on the effective collection of domestic revenue in order to fulfill the need for sustainable socio-economic development. Consequently, through the implementation of Public Financial Management Reform Program, domestic revenue grew significantly from 10.27% of total GDP in 2004 to 15.05% of GDP in 2013. However, since the revenues collected are low compared to other ASEAN countries and those with similar development level, we have to make further effort to improve revenue collection. In this sense, in terms of customs revenue, Cambodia has to strengthen the supporting mechanisms such as strengthening and expansion of ASYCUDA System, the implementation of the single window, Customs-Private Sector Partnership Mechanism (CPPM), institutional development plan, monitoring and evaluation of customs reform program, human resource management and internal audit.
For tax administration, we will focus on improving core business functions and support functions of the General Department of Taxation, especially on modernization through the use of technology to make it simple and convenient for taxpayers to pay taxes through banking system. Additionally, Cambodia will continue strengthening the administration of non-tax revenue by focusing on common issues and the sectors with high revenue potential to expand the scope and effectiveness of revenue collection from this sector.
Overall, ASEAN Economic Community 2015 is realized along with some new opportunities for Cambodia. Those include the establishment of New Development Bank of BRICS Countries (the 5 emerging countries including Brazil, Russia, India, China and South Africa) in Shang Hai and Asian Infrastructure Investment Bank in Beijing to which Cambodia is a signatory with an expectation to get new partnership in our development cooperation. In the Great Mekong Sub Region Submit in 2014, H.E. Mr. Xi Jinping, President of the People’s Republic of China announced the investment and infrastructure development assistance financed by China for the infrastructure and communication network in the Great Mekong Sub-Region for supporting the enhancement of production capacity and poverty reduction as well as a new funding for the Asian Infrastructure Investment Bank that supports China’s Silk Road initiative. In this regard, we will surely explore the opportunity to capitalize on these latest developments to support our reform and development agenda in the priority areas.
Indeed, Cambodia has great potential for growth and opportunities for diversification in many other sectors, implying that there is still a big room for investment. At present, Cambodia’s economic growth depends on traditional sectors such as garment, tourism, construction and agriculture sectors. This indicates it is necessary and urgent to diversify into new sectors especially industry, agro-industry and handicraft, which require massive investments.
To achieve such diversification, the Royal Government of Cambodia (RGC) will launch the “Industrial Development Policy 2015 – 2025” in the near future. This Policy not only provides us with the “New Growth Strategy” that is the vision and roadmap for industrial development, but also promotes foreign direct investment that is deemed to be an integral part and a key to achieving goals of the “New Growth Strategy”.
I would like to point out that this policy framework consists of four pillars: (1) attracting foreign direct investment and mobilizing domestic private sector investment for industrial development, development and expansion of the export market, and promotion of technology development and transfer; (2) developing and modernizing small and medium enterprises to expand and strengthen the manufacturing base, modernizing and formalizing small and medium enterprises, promoting technology development and transfer and strengthening the linkage between domestic and foreign enterprises specifically in the agro-industry sector; (3)improving the regulation framework to enhance competitiveness by improving investment climate and trade facilitation, providing market information and reducing business transaction costs; and (4) coordinating supporting policies such as human resource development, skill training and industrial relation improvement, implementation of urban planning and land use plan in line with “Land Policy” and “National Policy On Land Management” together with infrastructure development, including transport/logistics connectivity, digital connectivity, electricity and water supply and other supporting services such as public services, social affairs and finance etc.
Additionally, the RGC continues to allocate budget for the enhancement of productivity, competitiveness and inclusiveness by focusing on increasing expenditure for youth’s skill development, enhancement of agricultural productivity and strengthening of the education and health sectors. In order to strengthen the overall governance system, the RGC has improved the pension system, provided social safety net based on available resource, and reformed the salary of civil servants. The government has been striving to increase revenue through the implementation of the Medium-Term Revenue Mobilization Strategy 2014-2018 and debt management discipline to ensure budget sustainability. The government also continues to strengthen monetary policy, particularly, the preparation of a clear framework in order to promote gradual de-dollarization, develop the securities market, establish credit mechanism for newly established enterprises and small and medium enterprises, and strengthen financial governance to ensure the financial sustainability.
The implementation of the Industrial Development Policy requires firm leadership, effective coordination and active participation from stakeholders to achieve vision and common goals of industrial development. In this sense, the government remain committed to playing its role as an honest and responsible strategist, coordinator, supporter and initiator in the campaign for this historic transformation of economic structure and industrial development by coming up with coordination mechanism and implementing institutions with full authority, high professional capacity and adequate resources in order to ensure the effective and efficient implementation of projects, programs and various initiatives under the framework of this policy. In this respect, the government will lay out measures to implement in-depth institutional reform by providing the full authority and necessary roles to the “Council for Development of Cambodia” in terms of policy decision, preparation and implementation of action plan and implementation of measures to address challenges faced by the industrial sector so that this institution become an effective mechanism to lead, coordinate implement the Industrial Development Policy.
Our ambitious reform agenda will not be achieved without the improvement of collaboration and cooperation between concerned ministries and institutions, strengthening of institutions in the long term and capacity building for the civil servants in order to promote and implement the reform and administration system effectively.
Before concluding my keynote address, I would like to congratulate all the participants on the creative ideas, especially from young entrepreneurs, researchers and representative of mass media. Through this, we are able to find out the better way to describe the story of Cambodia’s development to broader audiences in a well-balanced and attractive manner and show that we are able to play more active and important role in the ASEAN community, Asia and the world. Moreover, I would like to reiterate that, more than ever, we need to work together in the culture of constructive dialogue and deepened cooperation to ensure peace, stability, development and prosperity in the future.
I would like to congratulate everyone on the success of this annual conference in pushing for the active exchange of views and constructive dialogue on the future of Cambodia from all stakeholders and the strengthening of cooperation and friendship for our common benefit.
To conclude, I wish Excellencies, ladies and gentlemen and distinguished national and international guests the four gems of Buddhist blessings: Longevity, Nobility, Healthiness and Strength! May this conference be conducted smoothly and achieve fruitful outcome for the common interest of regional development./.