… Please allow me to take your attention further on this conference. First of all I would like to speak a little more about the macro and micro economic relations aimed at attracting consideration from all related institutions with regard to income and expense. Microfinance would not survive anyway if microfinance collapses. Therefore we have to strive to maintain the macro-economic stability. I have mentioned many times that a bomb itself would damage a size of one or two villages, but the bomb of financial issue would affect all sectors. It is in this remark that the Royal Government carefully initiates reform of public finance. Authorities at all levels concerned and related with expense request should grant understanding on the Ministry of Economy and Finance for its seriousness in being the Royal Government’s general staff.
… In the past years we have been operating a mechanism of one commander in chief and one chief of general staff. Take for example, once the budget is adopted, why there is not yet money to be disbursed? Cambodia never has money in reserve, but always makes money while having to cover expenses. We used to compare a process to 12 cut-pieces of a cucumber or a 12 parts of an adopted budget to be disbursed a part at a time throughout the period of twelve months or one year. We provided a bigger share to two sectors – irrigation and communication. Implementation of the two sectors is seasonal as all constructions could be implemented only in the drought reason.
… We have to keep income and expense on balance. In order to finance the part of expense because its size is bigger than the income part, the Royal Government, for once, could seek financing from the Bank, and, for other, to print more money – but the Royal Government never takes up these measures. I have reaffirmed this to the International Monetary Fund (IMF). We have in the past years tried to restrict expenses or else financing from Bank is necessary. As far as I could remember, in the first term of the Royal Government, we used to readjust the financial law, but from the second term of the Royal Government, we never do that. This matter implies the restriction on oneself from the part of the Prime Minister otherwise further instruction would lead to breaking further the financial package. Take for instance, prior to the adoption of the financial bill at the end of the year the Prime Minister has decided already in the chapter 50.1 in relation to public finance that how much is to be placed in irrigation, in road and in various other sectors.
… The Prime Minister also decided on which projects to be implemented in 2006, and how many more to be pushed for implementation in 2007, and to 2008, and on. Each project will have to be implemented in a span of two to three years, or else we might explode the budget package. We indeed make both ends meet every month. Thanks to stringent measures, despite a major financial disbursement in 2000 and 2001 to rescue our people from flood and drought, we never fail to generate economic growth. Take for instance in 2000, we achieved 6.9% growth, while suffering only 1% inflation. This situation is achieved thanks to the implementation the reform of public finance, which I think should go on enjoying great consideration. Take for instance, the Riel currency is taking on an increase as yesterday it has gained the strength of 4098 US dollars to a US dollar.
… The Royal Government in this concern would place an appeal to microfinance institutions to continue to reduce their interest rates so that those who take the loans would be able to generate profits from them rather than to just pay back the loans and interests. All development partners should provide low-interest credits to the microfinance institutions so that they could provide loans at a lower interest rate to other loan takers. On behalf of the Cambodian farmers and our people in general, knowing that some institutions of microfinance have brought down their interest rates from 5% or 6% to well above 2.5%, I would suggest that a rate that is lower than that would be best for our farmers and for the progress of our economy.
… Some of the institutions used to complaint that going to rural area is a difficult mission because losses are incurred from traveling there. Now that we have better roads and bridges, I think this argument is no longer a developmental backlash. Time needed for traveling is shorter leading to less expense. Seeing this development, the Royal Government would seek in return loans at low rates to be provided by those institutions to the people. Microfinance started actions since early 1990, with two forms of funding. In 1980s, one of the forms was to help people expand their cultivating areas through re-claiming arable lands. Another form was to provide through the Bank loans for small-scale business such as fishing, industry, handicraft, etc. Now that we are re-strategize the microfinance activities, we see that the rural economy is indeed making progress.
… In order to maintain the macro-economy I make an appeal (to the microfinance institutions) on four following points aimed at achieving a long lasting stability – first, maintain economic stability, security and social order. I wish to stress that there would not be any human rights or democracy when the country is plagued with war. Second, we should continue to make our economy grow at the pace of around 6% or 7% and perhaps higher. I told officials in the Ministry of Economy and Finance that we should be happy that we perform better than we have been judged. Third, an equitable distribution of the economic wealth must continue, where people of Cambodia must be able to benefit from the economic achievements. For example we have to invest more money in infrastructural development in the form of water canals, roads and bridges, schools, hospitals, etc. Microfinance should also concentrate actions in the rural development.
… Fourth, a sustainable management of natural environment should be on our agenda as it is becoming a hot issue in the present day. Advancements in science, population growth and urbanization all put pressure on our environment. Natural resources are hard to recycle. Take for instance an old age tree, when cutting, what would be the consequences? In order to relieve pressure on environment, we are taking actions to change from making extensive-approach development to intensive one – that is to say we will have to make one hectare of land productive enough to support four or five people’s consumption needs. This matter requires consideration in and provision of seeds, irrigation, etc. or to say in short to increase feeding capacity in the field. We should also implement what they call social concession land – and with the support of microfinance sector, the pace of development would be expedited.
The Royal Government would give its efforts to improve the local infrastructure in the area, and those families relocating to social concession land would be supported by microfinance projects and I am sure those families will make a positive change for sure in their lives. I am pleased to see a TV show which comprises of pro and con ideas on environment. As a start of New Year, my first speech is about microfinance and its inter-relations with macroeconomics because the two are complementing one another in its development./.