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.
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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.
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 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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