“Cambodia Trade Integration Strategy 2007 – Responding to Opportunities and Challenges”

Hotel Le Royal, Phnom Penh, 5-6 December 2007

Your Excellencies, Ladies and Gentlemen!

Today, I have a great honor and pleasure to join the “Dissemination Workshop on Cambodian Trade Integration Strategy 2007 - Responding to Opportunities and Challenges” organized by the Ministry of Commerce and the United Nation Development Program (UNDP). On behalf of the Royal Government of Cambodia and myself, I would like to commend and appreciate the efforts of the Ministry of Commerce and UNDP for preparing the Cambodia Trade Integration Strategy 2007.

I think the Dissemination of the Cambodian Trade Integration Strategy 2007 will be highly beneficial since it is a timely response to the urgent need of Cambodia to make a wise judgment of trade situations that will enable us to effectively identify and implement a trade regime to push the implementation of poverty reduction policies of the Royal Government.

Indeed, the Royal Government has considered trade sector as a requisite factor. An economy will not grow, if there is no trading. Thus trade sector is an important source of economic growth in Cambodia as well as in the world. In this sense, the Royal Government has exerted it utmost efforts to respond to various requirements for regional and global trade integration through introducing laws and regulations in order to make our financial, investment and trade sectors consistent with international standard. At the same time, the Royal Government is strongly committed to respect democracy, protect human rights and ensure peace and national unification. Clearly, these factors have significantly contributed to the regional and global integration.

In 2000, Cambodia, along with other three countries, was selected for a pilot country under the Integrated Framework (IF). Subsequently, Cambodia is the first country to have prepared trade integration policy that is known as Cambodian Diagnostic Trade Integration Study 2002 (DTIS) under the Integrated Framework.

The Integrated Framework is a program orchestrated by the six core agencies, including the IMF, ITC, UNCTAD, UNDP, World Bank, and WTO; and supported by a number of multilateral development partners. The main objective of the Integrated Framework is to assist LDCs to integrate effectively into the global trade and to transform trade into the engine of national economic development. The Integrated Framework represents the outcome of development partners’ efforts under WTO agreements.

Cambodian DTIS 2002 is accomplished prior to its accession into the WTO in 2004. As part of its accession, Cambodia is determined to implement legal and judicial reforms that relate to trade governance and have significant impact on the country’s competitiveness in the global economy. Furthermore, with the support of development partners, Cambodia has taken necessary measures since 2002 to implement a number of activities defined in the first DTIS, especially in trade facilitation, copyrights, sanitary and phytosanitary, measures to address technical barriers to trade as well as in a number of productive sectors.

At the same time, it should be noted that, in less than a decade, Cambodia has transformed itself from a war-stricken country into an ASEAN member in 1999 and WTO member in 2004.

The “win-win” policy does not only bring about genuine peace, national unity, and territorial integrity to Cambodia and its people, but it also creates a secure environment which is the crucial pre-condition to materialize national economic and social potentials. Regarding to the market expansion, as an ASEAN member, Cambodia is involving actively in all economic and financial initiatives of this association, particularly in the initiatives to create free trade area and investment zones. Besides, Cambodia is also acting as an important catalyst in various initiatives of economic, financial, trade, and investment cooperation in the region and sub-regions. Indeed, such cooperation provides a great opportunity for investment and international trade reforms, through the globalization and decentralization as well as the elimination of investment barriers. Furthermore, the cooperation pushes further the implementation of reform programs and the modernization of national economic structure and management system, and strengthen Cambodia’s competitiveness to meet regional and international standards.

The benefits of open trade are enormous for Cambodian economy. In the last 5 years, export-oriented garment sector has created more than 300,000 jobs. Garment and tourism sectors are the front wheels of economic growth and still show its high significance despite the end of the textile agreement. From 2000 to 2006, the manufacturing sector, largely dominated by clothing products, increased at an average rate of 16% per annum. The service sector, led by tourism industry, increased at an average rate of 9% per year during the same period. The strong exports are the main forces behind the high economic growth from 1996 to 2006, measured at an average of 9.6% per year. Annual economic growth was recorded at 11.2% in 2004; the growth reached 13.5% in 2005 before falling to 10.4% in 2006; and according to the preliminary figure, the growth is estimated at 9.5% for 2007. Taking full advantage from peace, political stability and social order as well as the outcome of its reform in various sectors, Cambodia has significantly reduced the poverty incidence during the last decade.

However, it should be noted that trade diversification remains the biggest challenge for Cambodia. Particularly, Cambodian exports heavily depend on the garment sector. The RGC has long acknowledged this fact and considers it as a serious source of vulnerability; therefore diversifying exports is at the top of the RGC’s agenda.

Clearly, entrepreneur’s contributions are crucial to achieve sustainable economic growth. Ranging from micro enterprises to big companies, either in developed or developing countries, private sector is the locomotive of economic growth. Therefore, it is vital to create a good business environment to allow private firms to grow. Presently, the immediate task of the RGC is to focus on its continued efforts to gain access to the huge world market, through the implementation of the policy to integrate Cambodian economy into the regional and global economy; this must be parallel with the rehabilitation and development of hard national infrastructure, namely the restoration and construction of roads, bridges, airports, ports, and other infrastructure such as water supply, electricity distribution, as well as telecommunication network to improve our competitive advantage; and soft infrastructure such as strengthening regulation framework and institutional capacity, facilitating investment and business activities, as well as protection of human rights and dignity.

At the same time, the RGC sees that Cambodia’s future sustainable economic growth will primarily rely on government ability to create a viable condition for private sector development. In this sense, Cambodia’s main challenge for the next 10 years is to strengthen good governance at the central and municipal/provincial authorities to attract more investments and to ensure our competing ability with other neighboring countries aiming at gaining advantages from abundant potentials in agriculture, agro-industry, labor-intensive industry, processing and manufacturing industry, as well as service and tourism sectors.

In this context, the RGC is determined to expand its growth base by strengthening good governance and creating viable condition for private sector to attract investments and to ensure its competitiveness, through the adoption of “Trade SWAp” for Cambodian trade sector. In preparing various policies concerning trade sector, especially regarding institutional strengthening and capacity building, the main objective of “Trade SWAp” is to promote trade reforms and improvements in other trade-related sectors, and to make contribution to employment generation, investment promotion, supply improvement, and economic growth.

The RGC clearly understands and regards agriculture as the key sector for economic diversification aiming at strengthening and expanding the base of economic growth and reducing vulnerability caused by external instabilities and other crisis through better utilization of the huge national economic potentials. Indeed, agricultural sector will also contribute to positive outcomes from the government’s utmost effort to banish poverty and raise Cambodian livelihood, especially for rural Cambodians.

The government’s agricultural policy is to transform agriculture into, through raising productivity and diversification, the leading sector which can provide further dynamics to economic growth and poverty reduction. In this direction, the government is determined to tap internal available resources to promote agricultural diversification and intensification in order to ensure sustainable economic growth, employment generation and raise rural incomes, enhance food security, nutrition improvement as well as promote agricultural exports. In this sense, changing development approach from broad or extensive into deep or intensive, namely through the improvements of cultivation ability on existing land, has become one of the key priorities of the government.

To raise agricultural productivity, the government has strengthened supporting services such as research and dissemination, market development, and provision of seeds, fertilizers, rural credits and etc. In this context, a particular priority is given to directing public investment and promoting private investment in agriculture aiming at increasing yields and quality of Cambodian agricultural products to meet the international standard.

At the same time, the RGC has also provided to private companies economic land concession to carry out large-scale agricultural and agro-industrial projects. The government also encourages and provides incentives to invest in agriculture and agro-industry through economic land concession with main objective is to develop socio-economy, create employment for rural people and reduce poverty incidence by linking the development process with sustainable environmental preservation.

In the context of policy and strategy formulation of trade reform, I would like to congratulate the Ministry of Commerce for preparing “Cambodia Trade Integration Strategy 2007 – Responding to Opportunities and Challenges” which is also known as Diagnostic Trade Integration Strategy. I am greatly delighted to see human development lies in the heart of this strategy. The Diagnostic Trade Integration Strategy 2007 that is presented today, will reexamine the relation between trade and human development.

Indeed, this diagnostic trade integration strategy will identify specific priorities for immediate intervention, and will become the blueprint for Cambodian trade development. Furthermore, setting priorities and phases are very important. Activities without identifying clear target and priority actions might easily lead to vagueness and inefficient allocation of financial, institutional and human resources.

Finally, Diagnostic Trade Integration Strategy 2007 is the only trade integration strategy which is jointly accepted by the government, private sector and development partners, and will be implemented by all relevant stakeholders through “trade SWAp”.

Before closing, I would like to reiterate my gratitude to ministries and institutions concerned, development partners, nongovernmental organizations, private sectors and other agencies for supporting and promoting trade in Cambodia to achieve sustainable development and poverty reduction.

Lastly, I would like to wish Your Excellencies, Ladies and Gentlemen with the five gems of Buddhist blessings. May I announce the launch of Diagnostic Trade Integration Strategy 2007 from now on.

EndItem.