Your Excellency Tun Dr. Mahathir Bin Mohamed,
Your Excellency Fumiaki Takahashi, Ambassador of Japan to the Kingdom of Cambodia,
Your Excellencies, Ladies and Gentlemen,
I am very pleased to be here with you all this afternoon to participate in the seminar on “Look East Policy and Cambodia”.First of all, may I begin by thanking the Embassy of Japan and the Cambodian-Japan Cooperation Center (CJCC) for organizing this important seminar.
I would like to take this opportunity to warmly welcome H.E Dr. Tun Mahathir bin Mohamed in Cambodia. I am pleased to meet with him again. H.E. Dr. Mahathir bin Mohamed is our most honored and respected friend.
The timing of the Seminar is indeed appropriate for Cambodia. We have presently engaged in consolidating our economic gains in the last decade and are poised to move away from a traditional to a more modern economic structure. Even as we have engaged in this momentous task we have to contend with an increasing competition in the region and the world at large. This compels us to explore suitable domestic and external strategies for achieving broad based and sustainable development. The “Look East Policy” is a key aspect of our strategic approach for guiding our economy in the coming decades.
By “Look East” is referred to East Asia in the context of regional development. The “Look East Policy”, has assumed great importance to Cambodia following our membership of WTO. We have no choice but to upgrade our competitive edge to cope with the new commitments that we have entered into while joining the WTO. There can be no delay in this. I would like to share with you some of my views on the Policy and how Cambodia can benefit from it.
Many countries in East Asia have drawn inspiration from Japan’s experience in industrial modernization. The success of Japan in achieving G7 status within a few decades after its devastation in WWII has earned the world’s admiration. The Japanese model of development has become a model many countries around the world are trying to emulate including Asian countries. Japan’s success in the modernization of its economy and society has given them hope that underdevelopment is not a “disease” without cure. Many countries in Asia strongly believe that they can also raise their economic performance as Japan and achieve economic success.
We are looking East at Japan in order to learn from the values that had contributed to this success such as, patriotism, discipline, good work ethics, competent management system, close partnership between public and private sector.
The “Look East Policy” reflects in the patterns of East Asian economic development, which is often characterized as the“Flying Geese” model. In this pattern of development, Japan first establishes the bridgeheads in industrial development and paves the way for other countries to follow eventually. Japan initially took the leadership in exploring and developing new areas of comparative advantage in manufacturing. This benefited the other countries in the “Flying Geese” pattern since they were not obliged to incur the huge costs on research and development and could simply learn from the Japanese experience. As their technology level and skills developed and their economic strength increased these countries could move to areas suitable to their comparative advantage independently and not necessarily be limited to emulating Japan. This has resulted in a special kind of division of labor among countries in which the leader in the manufacture of a new product or the invention of a process has a limited time to earn monopoly profits and has to cope with the rapidly increasing manufacturing and industrial capability in the region and competition from the erstwhile followers of the leader. This has been the key to the high efficiency of East Asia’s enterprises and their stellar performance in global markets. The sequence of “Flying Geese” pattern of industrial development that we have seen in East Asia in the last four decades started from non-durable consumer goods, moved on to durable consumer goods, and has recently involved the capital goods sector.
In recent times, the “Look East Policy” has evolved beyond the industrial dimension. It is realized by regional leaders that it is not sufficient for our economies to just learn and transfer industrial technologies from Japan and other advanced Asian countries such as Korea but to engage with them in a broad range of economic activities. Cooperation in regional trade has been the first initiative to take off in this widening of economic cooperation. A network of bilateral Free Trade Areas between ASEAN members and the +3 countries is evolving into concrete form. ASEAN is also moving closer toward a Comprehensive Economic Partnership (CEP) with Japan. The ASEAN+3 Foreign Ministers have been meeting at least annually to consult on unfolding political and security issues. The other ministers of the ASEAN+3 nations are also forging cooperation agreements in other areas.
After the Asian Economic Crisis, the “Look East Policy” has become even more significant as the regional countries, both severely and less affected, realized that Japan and the more advanced Asian countries could play a greater role in mitigating its negative impacts if not all together ward off such crises through coordinated action. As a result, the vision of the “Look East Policy” has gained a financial dimension.
The “Look East Policy” is gathering momentum and is rapidly evolving as a “comprehensive umbrella of regional cooperation” for promoting development in the region. It is not limited to the “Flying Geese” model any more but covers regional cooperation over a wide range of subjects including trade, finance and culture. East Asia is arguably the world’s fastest developing region with substantial achievements in growth performance, reducing poverty and improving key social indicators. Over the last decade, the region grew at the rate of over 5 percent per annum. This rapid growth has been accompanied by a broad based improvement in education and social order with a resurgence of optimism in the future across the region’s countries. These noteworthy achievements are mainly the result of sound socioeconomic development policies being pursued through out the region.
The critical ingredients for sustained economic growth have included sound macroeconomic policies; development of institutions to promote industrial efficiency and removal of biases against exports; high domestic saving rates; substantial investment in human and physical infrastructure; openness to trade and technology; and assurance of service delivery in key utilities and social sectors. While much has been achieved in these areas new challenges have emerged which place even greater demands on the resources and resourcefulness of the regional countries. Indeed, all of these problems have happened due to globalization trend, which creates a closer link among economies in the region, strong global growth and information revolution, which is the factor to cause a rapid development in transportation and telecommunication. Moreover, the above factors have prompted some countries to deregulate trade, investment as well as liberalizing the financial sector. Within this framework, the international trade and capital flow have increased both in speed and scale to the level where it is hard to calculate or measure in the past years. Presently, we have seen clearly about the ability to reap benefits from portfolio market in the emerging countries economies. Indeed, all of these factors have promoted the international capital flow to the emerging economies countries.
In this trend, it is clear that both developed countries and emerging economies countries have stepped forward in reaping the benefits from this development. On the other hand, the key point in developing the developing countries and a number of countries in the East Asia is to move away from “Challenges” to “Opportunities”.
First, in my view, the regional development agenda is to strengthen financial cooperation. The Asian Economic Crisis revealed the vulnerability of the East Asian economies to shocks originating from international financial markets and massive capital outflows. East Asia can not afford a repetition of that experience. It is clear that East Asia needs to establish resilient and diversified financial systems and reform its public and corporate governance systems.
Malaysia under Dr. Mahathir’s leadership demonstrated during the Asian Economic Crisis that traditional solutions for correcting current account imbalances can not help in mitigating a problem centered on capital account management. We have learned that capital account liberalization should proceed cautiously, in an orderly and well sequenced manner, and commensurate with the national capacity to manage capital inflows and outflows. Many of our economies are yet to develop adequate institutional capacity in monetary policy and foreign exchange management to be in a position to fully liberalize the capital account. We have learned that the rapid liberalization of capital account could render an under prepared economy vulnerable to speculative attacks on its currency which may necessitate imposition of tax on capital controls. Before we can move to capital account liberalization we have to first accomplish strengthening and thorough restructuring of the banking system, reform of the corporate sector and most importantly deeper financial and monetary cooperation within the region. In order to avoid seeking solutions to regional problems outside the region we have to look first for new economic recipes in regional cooperation.
Second, massive transfer of resources will be needed till the poor countries in the region reach the economic take off stage. This is comparable to a plane needing sufficient speed and acceleration before leaving the ground and taking flight. These financial resources will have to be mobilized from both public and private sectors. We need the support of developed countries in mobilizing ODA. However we will have to ensure that ODA is utilized productively and in a corruption free manner. Improvement of public financial management and firm implementation of the fiduciary responsibilities of the government will give comfort to our development partners that their assistance is not being wasted. The private sector has an equally onerous role. First it will have to ensure that adequate funding is mobilized for supporting the high levels of investment needed for the take off. Alongside it will have to ensure that the choice of investment projects is prudent and the selected projects do not jeopardize the country’s debt or foreign exchange management. Therefore, encouraging prudent and quality inflows of FDI and ODA inflows into Southeast Asia, in particular to the less developed countries in the region, will be of great importance for promoting regional development and prosperity. In this regard, Japanese FDI and ODA and the outreach of Korean, Japanese and Chinese enterprises to regional countries should continue to play a significant role in East Asian development and prosperity.
Third, development requires economies of scale. Therefore, it is important to promote regional economic cooperation in key areas such as: (1) joint industrial and production zones (2) linked tourist destinations (3) joint distribution networks and markets for agricultural products (4) service sector linkages and (5) joint development of basic infrastructure. This would require systematic follow up through ministerial level meetings using existing forums such as ASEAN, ASEAN+3 and the GMS development initiative. In particular, priority should be given to the construction of physical, economic and social infrastructure, which constitutes the lifeblood of our economies. A sophisticated infrastructure network will open up opportunities and link up the regional countries to the international markets. Market access is crucial for development for many regional countries.
There are of course national responsibilities. To create a strong, resilient, educationally advanced, and culturally vibrant society, the Government should vigorously implement its strategy to increase social spending to promote economic growth with sustainability and equity. At the same time, human resource development is also crucial. The recent research reveals that intellectual capital in conceptualization and idea initiation play an increasing important role in creating wealth, promoting economic growth and enhancing the competitive advantage of each country. On the other hand, the ratio of raw material and labor plays even minor role in this process. Through this, the new development paradigm has been created in order to enhance human capacity, which plays the key role in ensuring the sustainability in the country development.
Development should not be at the cost of sustainability and the interests of future generations. Environmental sustainability is a worldwide challenge intimately linked with globalization and responsible multilateral trade. Indeed, the protection of natural and environmental resources is a difficult and complicated task, which has a huge scale. In reality, no development, which exploits and uses raw material from natural resources in the production will not have the impacts on environment. Moreover, the natural resource and environment in this world have been constantly threatened, which can lead to imbalance in the environment and ecological system, affecting the socio-economy and the wellbeing of all creatures in both national and global framework. Therefore, we should not ignore about the downgrade of national environment as well as the region and the world.
Moreover, the sustainable development requires the new development paradigm, which can provide benefits to a lot of people and promote the wellbeing to an acceptable level. The new development paradigm has to stand on the base of “human value”. We should not focus on narrow value, which is led by the stock value and money market.
At the same time, another good concept for our future is to enhance the spirit of “sharing”, which has existed in human society since the early age. In this sense, the development process is the sharing through transferring financial resource and technology from “rich countries” and providing opportunities to “poor countries” to be able to fully and equally participate in free trade through opening up the favorable conditions to have access to the markets in developed countries without any trade barriers or subsidies to the domestic production.
At the end, a country cannot abandon the development experiences of other countries in the region and the world, but the country should not confuse that “problem happens in a country is exactly the same as the problems happening in their own country and some problems happen in their own country do not mean that those problems exist in other countries”. It is now the time that we must not be careless by not considering about the special and specific conditions in the economic development of each country.
We in Cambodia are strongly committed to the “Look East Policy”. As Cambodia is a still a developing country, we have turned to the experiences of regional economic powers and tried to find what the lessons are for us. What we have learned is that the critical ingredients for robust growth include sound policies and efficient institutions to promote sustainable development, removal of biases against exports, high saving rates, substantial investment in human and physical infrastructure, openness to trade and technology, and an efficient system that can ensure service delivery.
The Royal Government of Cambodia has incorporated these ingredients in its core strategy, the “Rectangular Strategy” , which clearly determines for Growth, Employment, Equity and Efficiency to Cambodia citizens to promote equity and social justice as well as effectiveness in the public sector through the implementation of deep and comprehensive reform programs. Moreover, to reduce poverty, the government is implementing a pro-poor trade and industrial development strategy. The heart of this strategy is to link the business development with corporate social responsibility. At the same time, in order to increase employment and to expand economic links between sectors, the Royal Government directs the policy in the industrial sector by focusing mainly on (first) continue to develop labor intensive production, (second) diversify export products, (third)promote agro-business development, (fourth) develop domestic industry through promoting small and medium enterprises,(fifth) create industrial zones and export processing zones and (sixth) increase the production to replace a number of importing products.
In closing, I wish this seminar success and hope that the participants will bring out many good ideas on how to develop Cambodia by looking into the experiences of Japan and other countries in the region that have pursued the “Look East Policy”. Finally, let me wish you all, Excellencies, Ladies and Gentlemen, the five gems of the Buddhist wishing.