The Kingdom of Cambodia
is opening itself to the world economy with agreements
such as your incorporation to ASEAN, the Great Mekong
Sub region (GMS) or the WTO. What is the strategy
of the kingdom within this context?
The royal Government of Cambodia (RGC) has adopted
a "win-win" policy and strategy that
has led to genuine national reconciliation in
the entire kingdom. The political and military
organisation of the Khmer Rouge has been fully
dismantled, and for the first time in the last
four centuries, the entire Kingdom territory has
been unified and peace restored. Cambodia, therefore
has marched into the 21st century with a vibrant
peace, ample national reconciliation and strengthened
Democracy.
Cambodia's quest for integration into the regional
and world economy constitutes one of the three
pillars of the strategy of the RGC to maintain
peace and security in the country, and in the
region to embrace regional and world affairs and
embark on multi-faceted reforms which will have
far reaching effects on the country's social and
economic development.
Soon after the 1998 elections we worked out a
new political platform and formulated a "triangular
strategy", which has underpinned our domestic
and foreign policy. The first side of this strategic
triangle is building peace, restoring stability
and maintaining security for the nation.
The second side is Cambodia's rapid integration
into the international community, especially into
the community of regional nations, and normalization
of our relationships with the international financial
institutions.
The third side of the RGC's strategic triangle
is to promote national development within the
favourable context created by the implementation
of key reform programs: military demobilization,
public sector, judiciary and economic reforms
including fiscal and banking reforms, land reform,
fisheries reform and stringent measures taken
to crack down on illegal logging and to promote
environmental protection.
It is my conviction that to catch up with the
rest of the world, Cambodia must open up and strengthen
its own institutional capacity to benefit from
globalisation, information and communication technology
and thereby build our status as a real partner
in regional and global affairs on par with the
more advanced countries in the region.
For Cambodia to play a meaningful role in the
community of nations, we have to rigorously implement
the reform programs in all areas to rebuild a
socially connected, educationally advanced, and
culturally vibrant society in Cambodia.
Regional economic integration will generate positive
externalities in stimulating economic development
in Cambodia. Active membership in the ASEAN, the
Great Mekong Sub-region program and accession
to the WTO are expected to bring about many challenges
as well as opportunities for the country which,
if well managed, will promote economic take-off.
Cambodia can play a positive role in transforming
the entire sub continental Southeast Asia from
a region stricken by backwardness and poverty
into an epicentre of peace, security, stability
and cooperation. It is my conviction that this
sub-regional cooperation, within a framework of
an open economy, will pave the way for a more
rapid transformation of this part of the world
into a region of prosperity. This will contribute
substantially to narrowing the gaps in development
across our region and enable all our people to
truly enjoy the benefits of prosperity and peace.
As underlined, within this context of opening
of the country, since 1993, the Royal Government
of Cambodia (RGC) has undertaken an ambitious
program of economic reforms with the assistance
of the IMF, World Bank, ADB, UNDP and other bilateral
and multilateral donors. Could you give us a brief
outline of the evolution of the Cambodian economy
for the past 10 years and the several reforms
undertaken to strengthen your national economy?
Since the establishment of the Royal Government
of Cambodia in 1993, annual GDP growth has averaged
a healthy 5.6 percent. From 1999 to 2001, overall
growth averaged 7 percent annually. In per capita
terms, such growths was 4 ½ percent per
annum. Inflation was kept below 4 percent. However,
growth in 2002 is estimated to be lower, at 4
½ - 5 percent due to adverse weather conditions.
Agriculture is the most important sector of the
economy, accounting for 40 percent of the GDP
and employing more than 70 percent of the labour
force. The industrial sector has been the main
engine of growth, increasing annually by average
of 16 percent. This industrial growth has been
due mainly to spurts in garments and tourism.
The textile and garment sub-sectors have displayed
remarkable dynamism, with exports growing rapidly
during the last four years following the grant
by the US to Cambodia of Most Favoured Nation
(MFN) status in 1996 and access under the Generalised
System of Preferences in 1997. In 1996-98 garment
exports increase by 70 to 190 percent, but slowed
down to 13 to 75 percent in 1999-2001 after the
US imposed quotas on 12 categories of garment
products. Employment in garment and textile has
been a major stabilizing force for the population
and the economy in recent years, as the sector
has absorbed about two hundred thousand workers,
a large number of skilled and semi-skilled labour,
especially poor female workers.
Overall, the assistance of the international
community to Cambodia these past 10 years has
been very valuable and well spent. Official development
assistance has reinforced ongoing national efforts.
It has strengthened Cambodia's unceasing efforts
to lift the country to a higher destiny, to a
new plateau of sustainable development. For example,
ten years ago, Cambodia was plagued by accidents
due to land mines; today, such incidents have
been reduced by half. Ten years ago, significant
proportions of Cambodian children were crippled
by polio; now Cambodia is free from the poliovirus.
The HIV/AIDS epidemic has been put under control.
Ten years ago, Cambodia was not self sufficient
in rice; now Cambodia has attained a rice surplus.
Ten years ago, Cambodia was crippled by malaria;
Cambodia is now being cited as a success story
in combating malaria. The list of achievements
can go on and on.
However, the most important development that
has taken place in the Kingdom and its people
has been the transformation of attitudes, virtues
and values, and above all else toward democratic
values. The Cambodian people have taken firm hold
of democratic ideals, and steadily adopted democratic
norms of behaviour, inclusive in the political
process. Indeed, in democratic governance we have
moved far forward; that it is clear, as the ancient
Greek philosophers say: "once cannot cross
a river twice!"
Yet so much more remains to be done in Cambodia.
Foreign direct investment and continuing donor
support will be crucial to the achievement of
GDP growth target of 6 to 7 percent per year in
the medium term. Attraction of FDI will require
relaxing several constraints that weaken Cambodia's
competitiveness. In the short term, the civil
service and legal and judicial systems must be
improved in order to facilitate the implementation
of governance reforms and to enhance the environment
for private investment. Reduce trade facilitation
costs and generally foster private sector development
and trade-driven growth is also a must. It will
also be important to improve road infrastructure
to facilitate market access and reduce transportation
costs, as well as enhance port management and
power and utility services to reduce production
costs.
A Key objective of the RGC's reform program,
that you just underlined, is to improve Cambodia's
attractiveness as a destination for foreign direct
investment in order to enhance economic growth.
Could you tell us more about Cambodia's foreign
investment regulations?
Cambodia's foreign investment regime is set out
in the Law on Investment (1994), the Sub-decree
on the Law on Investment (1997) and the Amendments
to the Law on Investment (2003). These regulations
provide the regulatory framework aimed at attracting
foreign investment, highlighted by land tenure
of 99 year, 100 percent enterprise ownership by
foreigners, favourable labour relations and investment
protection. Note that Cambodia does not have law
on Foreign Investment; it has a law on Investment,
indicating that all investments whether by foreigners
or nationals are treated alike, apart from the
Constitutional prohibition on land ownership.
The Law on Investment is supported by recent
revisions to the Law on Taxation under which investors
can choose to be subject to a special depreciation
schedule rather than the automatic three years
tax holiday provisions under the Law on Investment.
The law provides tax and duty exemptions, including
those for projects located in Export Promotion
Zones (EPZ). Other incentives available to investors
include; (i) a corporate tax rate of 20 percent,
the lowest in the region; (ii) five year carry
forward of looses; (iii) exemption from import
duties of all imports used as inputs in certain
projects, particularly export oriented projects;
and (iv) exemption from export taxes.
Cambodia's investment and tax framework facilitates
investment by streamlining procedures and paperwork
in applying for investment approval, imports and
exports of goods and equipment within the framework
of the investment project. The main objective
is to simplify paperwork and promote transparency,
predictability of approval, monitoring and implementation
of investment projects.
Moreover, the RGC has set out a comprehensive
policy to improve Cambodia's international competitiveness
by focusing on the development and improvement
of its physical infrastructure, thereby effectively
responding to the increasing need for basic services,
such as low-cost water and power supply, finance,
information and telecommunications services. Furthermore,
we have streamlined the functioning of the Cambodian
Investment Board (CIB) so that it serves as a
"one stop shop" in the facilitation
of investment procedures.
If one has single out one of the many achievements
of the Royal Government in the promotion of the
private sector, it is that; for the first time,
we have established a sound mechanism for consultation
with the private sector. This has been accomplished
through the organisation of the Government-Private
Sector Forum and its seven working groups divided
by sector. This consultative structure has been
effective in allaying the concerns and difficulties
faced by investors and entrepreneurs. Moreover,
this mechanism has also enabled the adoption of
many measures that have facilitated trade and
nurtured an environment conductive to investment.
The nurturing of active partnership between the
RGC and the private sector has enabled us to candidly
and productively exchange views and experience,
ensured the transfer of knowledge by promoting
communication and the search for mutually beneficial
solutions to various issues. Through this partnership,
stakeholders can identify realistic goals, take
significant steps to carry out their respective
commitments and become genuine owners of the resulting
policies and strategies.
Within the objectives of all reform programs,
the Social aspect of poverty reduction is the
first priority of the RGC. With this in regards,
your government is implementing an important National
Poverty Reduction Strategy. Could you give us
further details on the strategy's main lines and
achievements?
To facilitate the attainment of our ultimate
objective of poverty reduction, in December 2002
the RGC adopted the National Poverty Reduction
Strategy (NPRS) to address the challenges of development
in a more holistic, integrated way. The NPRS complements
several other important initiatives, in particular
the First Social and Economic Development Plan,
1995-2000 and the Second Social and Economic Development
Plan, 2001-2005.
The main thrust of these strategies include:
(i) strengthen peace, stability and social order
thought concrete measures aims at enhancing the
state of law, human rights protection, and democracy
in order to create a favourable political environment
and security for the long-term sustainable development;
(ii) ensure long term sustainable economic growth
of 6-7 percent per annum; (iii) facilitate the
equitable distribution of economic growth between
the rich and the poor, city and rural, female
and male; and (iv) guarantee sustainable management
and use of environment and natural resources.
As a result of the implementation of the above
strategies, we have managed to maintain macroeconomic
stability and promote sustainable economic growth
with law inflation and stable exchange rate. We
have in particular enabled the private sector
to play a leading role in economic growth as already
mentioned.
Rural livelihoods have been improved through
the multiplication of opportunities for the use
of local services, principally by focusing in
policy implementation and concrete measures to
ensure the increase of income of the people. Program
and policy focus include: land reform, water,
agriculture, forestry and fisheries policies,
and infrastructure projects especially the construction
and maintenance of rural transportation infrastructure.
These advances have enabled the expansion of
job opportunities, increases the exports, the
promotion of light and medium manufacturing industry
and the expansion of tourism.
Furthermore we have implemented a New Social
Policy Agenda and are pouring a massive proportion
of our budget into the priority sectors; education,
health, agriculture and rural development.
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These sectors served
as the foundation for future growth, improved equity
and accelerated progress. We are ceaselessly pursuing
reforms in the educational system and promote other
avenues of human capital formation to make Cambodians
more productive and competitive in the global economy.
We are restructuring our health programs to better
finance referral hospitals and health centres
at the district level. We are waging a war against
deadly diseases, such as HIV/AIDS, tuberculosis
and malaria. We adopted a new Land Law to prevent
the eviction of the poor by the powerful. We are
reducing the size of official fishing lots to
improve the access by the poor to fisheries resources.
We are cracking down on illegal logging to improve
official collection of timber royalties. And last
but not least we are implementing military demobilization
to shift spending from defence and security to
the social and economic sectors.
The results of these policies are conspicuous;
poverty fell from 39 percent in 1993 to 35.9 percent
in 1999 and school enrolment rate, especially
among girls, has drastically increased during
the last few years. Other indicators show similarly
dramatic gains.
Of course there are still many challenges ahead
and many milestones to attain. But, what we have
so far achieved, gives us confidence that we shall
overcome the obstacles and difficulties that lie
ahead. Indeed, the road ahead is long and difficult,
but you must agree that the considerable distance
Cambodia has traversed so far in such a short
time, by a society resurrecting itself from destruction,
is a clear indicator of our future potential.
The subject of "good governance"
is a major theme of the reform process; civil
service reform, improvement of the public services,
judicial and legal reform and fight against corruption
are the relevant main points within this context.
How is the RGC reaching its targets so far?
The subject of good governance has gained popularity
not only in Cambodia but also in the international
arena. Governance is the subject of concern in
various venues, and in particular with international
frameworks such as the UN, WB, IMF and OECD. Indeed,
the RGC and its development partners have come
to consider "good governance" as the
key to economic reforms and poverty alleviation.
In development thinking, there is growing recognition
of the crucial role played by institutions in
the promotion of development. A nation's level
of administrative skills helps determine the ability
of public sector to alter the structure of production
and set the character and pace of its economic
and social development. The critical role of civil
service reform in successful fiscal reforms is
also recognised. Institutions, coupled with technology,
determine the overall structure and level of transaction
and production cost in the economy.
Therefore, in 2001 the RGC adopted its wide-ranging,
long-term Governance Action Plan (GAP). The GAP
identifies two categories of governance reform
where action will be critical for Cambodia's development
over the near to the medium-term. This includes
legal and judicial reforms, fiscal reforms, civil
administration reform and measures to fight corruption.
In addition, the RGC has identified two specific
policy issues on which governance reforms must
be implemented. One is natural resource management,
including land and forestry management. A final
major policy and implementation challenge is the
demobilisation of the armed forces.
Consistent with the GAP, the RGC's National Program
of Administrative Reform (NPAR), consists of three
stages: (i) consolidation of public services;
(ii) restructuring and redeployment; and (iii)
rationalisation and capacity building.
A comprehensive program has been put in place
to improve the civil service, covering; (a) the
rationalisation of civil service wages to attract
and retain skilled staff necessary for high level
management and priority sectors; and (b) strengthened
civil administration to ensure that human resources
are wisely deployed in high priority sectors and
that human resource expenditures are subject to
controls that enable managerial and fiduciary
accountability.
The initial stages of the NPAR have been successfully
implemented, including: (i) completion of an employee
database; (ii) automation of the payroll; (iii)
introduction of a new employee classification
system and salary grid; (iv) design of Priority
Mission Groups (PMG) and adoption of an implemented
legal framework; (v) development and introduction
of a Human Resource Management Information System;
and (vi) initiatives to improve service delivery
(e.g. de-concentration, reviews of "back
office" processes, etc.).
Moreover, the NPAR has achieved laudable progress
in the following key areas: (a) civil service
remuneration, in which average pay has been increased
by 44% in nominal terms via introduction of a
new classification system in 2002, as per the
Strategy to Rationalise the Civil Service 2002-2006;
and (b) census and documentation of the work force
completed in 2000 and which identify some 9.000
"ghost" workers; (c) issuance of a civil
service identification card; (d) installation
of an automatic pay roll system as part of the
Human Resource Management Information System,
and (e) by solidifying the legal framework, with
the approval of statutes, to cover all civil servants
under the Common Statute.
Starting in 2003, the implementation of the Priority
Mission Groups program will address major service
delivery bottlenecks. The PMGs are groups of civil
servants who will be tasked to focus on identified
"priority missions". To motivate these
groups, they will be provided with special monthly
allowances, a structure depending on staff category.
In 2003 the government expects to create PMGs
comprising a total of a thousand civil servers.
In our efforts to combat corruption, the RGC
has drafted an Anti-Corruption Law, soon to be
reviewed by an Inter-Ministerial Committee. The
Anti-Corruption Law will encode the strategy and
action plan to combat corruption, already formulated
by the RGC. We are also considering how to ensure
an efficient mechanism to effectively implement
the law. Rigorous controls on revenue collection
and expenditure management are essential for fighting
corruption. The transparent application of the
Sub-decree on Public Procurement, notably the
decision to expand the scope of implementation
of the law to all ministries except three, reflects
our resolution to combat corruption. Finally the
RGC has established and provided support for the
efficient functioning of the National Audit Authority
(NAA). The NAA has already completed its review
of the accounts under the 2001 Financial Act and
has submitted its audit report for review by the
National Assembly.
The RGC has made considerable progress in the
preparation and adoption of many laws and regulations.
At the same time, we all know that the shift from
one legal system to another requires much effort,
particularly by a large corps of legal experts
for research, review, formulation and all other
legislatives processes. Within this context, Cambodia
lacks experts in Anglo-Saxon law, as most of the
few legal experts in the country were trained
in Continental law. Nevertheless, we have prepared
a Strategy for Legal and Judicial Reform that
will be adopted in the near future. The amendments
to the Law on the Supreme Council of the Magistracy
have been drafted. The review of the Law on the
Status of Magistrates is underway and the RGC
is pushing for its adoption in 2003. This latter
sets the duties, rights, obligations and independence
of Judges.
As part of the judicial reforms, I have proposed
measures to strengthen the Department of Court
Inspection inside the Supreme Council of the Magistracy
(SCM). The RGC has investigated and sanctioned
48 judges and prosecutors involved in misconducts.
As soon as feasible, the SCM will consider the
nomination of 12 chief judges, deputy chief judges,
prosecutors and deputy prosecutors, and the transfer
of 28 judges and prosecutors. In performing these
actions, the SCM will adopt a set of principles
and consistent procedures for the removal of judges
and prosecutors in the Kingdom of Cambodia.
In addition, to improve the performance of the
courts, we are preparing a report on the review
of the status of Cambodian Court to identify needs
and measures for improvement. The development
of human resources for the judiciary is key to
our success. In this regard, the RGC has conducted
a competitive recruitment of the first batch of
trainees for the Royal School of Magistracy.
Indeed, much more remains to be done to move
to a performance-based civil service system, and
the institutional reforms described above are
crucial for Cambodia to move forward to a new
plateau of development.
We are also interested in knowing more about
the men behind the Royal Government. Can you tell
us about your career path and your personal ambition
as being part of the Royal Government?
I was born in a peasant family. While I was a
student Cambodia, that was once known as an oasis
of peace, became engulfed in the war that followed
the coup d'Etat led by the Lon Nol clique against
the then Prince Norodom Sihanouk. Our peaceful
life was shattered and I followed Prince Sihanouk
and joined the maquis. After the war against Lon
Nol, I stood against the Khmer Rouge and their
genocide policies, leading a group of brave soldiers
who helped liberate Cambodia and our people.
After the liberation from the Pol Pot genocide
regime, I was appointed Cambodian's Foreign Affairs
Minister at the age of 27; I was the youngest
Minister in the cabinet. Since then, I have devoted
my time and efforts to learning the arts of politics
and diplomacy. In 1985 I was elected Prime Minister.
In those early years, we had to start from scratch.
There were no schools, hospitals, water and electricity.
There were less than 100 people left in the capital
city, Phnom Penh. We lived just like in the Dark
Ages. The ravages of wars and genocide left tremendous
burdens on Cambodia. In its painful efforts at
recovery, the top priorities were to train people
to deliver public services at all echelons of
the bureaucracy.
You cannot imagine how hard our people's lives
were at that time. Yet we managed to rebuild our
country from the ashes of war. Furthermore we
have accomplished this in such a short period,
even though we were subject to an unjust political
and economic embargo. Today's visitors will find
very difficult to believe that just two decades
ago Cambodia's status was comparable to the Middle
Age. Those advances have been made with the tremendous
efforts of our people, the Royal Government and
friends from around the world.
I have always clearly understood that if Cambodia
remains at war the country will be denied its
rightful place in the community of nations. Many
times, since 1987, I met with Prince Sihanouk
until we reached a peaceful settlement of the
Cambodian problems with the signing of the Paris
Peace Agreement in 1991. This agreement restored
the Monarchy, established a reviewed Constitution
and proclaimed the second Kingdom of Cambodia.
Peace, however, remained elusive as the Khmer
Rouge boycotted the 1993 elections and continued
to wage war against legitimate government.
In 1987, when Asia was hit by the financial crisis,
our coalition government collapsed. Since then,
by implementing the "win-win" policy,
I managed to restore full peace in Cambodia. The
political and military organization of the Khmer
Rouge was dismantled. Then after the 1998 elections,
I implemented the triangle strategy to push Cambodia
into the path of long-term peace, reforms and
integration with the regional and world community
of nations.
In all these efforts, my ambition has always
been to turn the first decade of the new millennium
into a decade of economic growth, rapid reduction
of poverty, social progress and prosperity for
Cambodia and Cambodians. My ultimate goal is to
create a socially connected, educationally advanced,
and culturally vibrant Cambodian society. My agenda
is to boost our once strong and proud nation to
become a truly free and independent nation that
can reclaim its own destiny, and be a real partner
in regional and global affairs.
My vision for Cambodia is to have Democracy deeply
rooted in the Cambodian society by strengthening
the rule of law, implementing good governance,
and promoting respect for the rights and dignity
of Cambodians from all walks of life, religion
and social strata.
As a final question, which is the final message
you would like to address to foreign investors?
Cambodia needs financial resources to expand
production and create employment. We are also
in dire need for technology, knowledge and know-how
to improve our capacity and productivity. When
developed and enabled, these factors constitute
the private sector's strengths. To attract investments,
we have adopted a policy that regards the private
sector as the national economy's engine of growth
and the key partner of the RGC. We clearly understand
that in the world of globalisation, capital and
technology will flow into investment-friendly
countries. As government, we guarantee all investors
a favourable investment environment, especially
peace, security, political and macroeconomic stability,
an increasingly efficient legal and institutional
framework, transparency, accountability and predictability.
Cambodia's ongoing structural reform programs
shall lay the foundations for sustainable economic
development. Moreover, the Royal Government has
the good will and strong commitment for genuine
cooperation with the private sector, both domestic
and foreign. All these are bound by our common
aspiration of improving the living standards of
the Cambodian people so that they are assured
of improved welfare and peace, and become the
masters of their own destiny and development.
It is in this spirit that I invite all investors
to join us to face all challenges proactively.
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