Address at the 2010 AsiaLink Conversations - Cambodia

Excellencies, Ladies and Gentlemen,

It is my great pleasure and honor to address the opening of this “2010 Asialink Conversations-Cambodia”. Taking this opportunity, I would like to warmly thank Asialink at the University of Melbourne,especially Mr. Sid Myer, its Chairman, for organizing this event in Cambodia, in partnership with CDRI, Cambodia’s leading independent development policy institute.

Since its establishment in 2002, The Asialink Conversations has made a significant contribution to ‘second track’ regional policy dialogue, linking Asia with Australia, and prompting better understanding among people and countries in our region. I believe this communication connectivity helps to improve state-to-state and people-to people relations between Australia and Asia, enabling us to promote mutual understanding and information sharing and expand our political, security, economic, social and cultural cooperation.

Taking this opportunity, on behalf of Cambodian people and myself, I would like to express our deep gratitude for the role that Australia played in Cambodia’s economic development and in the Cambodian peace process which led to the successful conclusion of the Agreement on a Comprehensive Political Settlement of the Cambodian Conflict on October 23, 1991. This enabled Cambodia to organize a free and fair election in 1993, form the Royal Government of Cambodia, achieve national unity and reconciliation; paving the ways for peace and stability, democratization, economic development and institutional reform.

In the context I would like to extend a particularly heartfelt welcome back to Cambodia to The Honourable Professor Gareth Evans, Chancellor of the Australian National University & Former Australian Minister for Foreign Affairs, for his personal role and great contribution to Cambodia’s national reconciliation and reconstruction. I would also like to warmly congratulate him on his recent award of the prestigious Franklin Delano Roosevelt Freedom Medal in recognition of his tireless efforts over many years in the cause of peace, social justice and international governance, and in his acceptance speech his generous acknowledgement of the role that contact with Cambodia and young Cambodians played in his commitment to that cause.

Cambodia: Two decades of nation building

Even after the general elections of 1993 following the peace agreement, unrest continued. The prerequisites for any serious development had yet to be established. However, the rudiments of a market economy were established during this period. Cambodia was firmly put on the path of rehabilitation. The Cambodian economy was growing 6.3% per annum during 1994-1998. Only the “win-win” policy of national reconciliation that I initiated and implemented in 1997 finally ended the Khmer Rouge regime and the remaining Khmer Rouge political and military forces were integrated into the mainstream of the Cambodian society.

Since 1998, with the return of full peace, a sense of confidence and pride pervades the country, a feeling that bodes well for bright prospects for economic growth and job creation and a concrete vision of a promising future. We have successfully implemented the triangular strategy, focusing on strengthening peace and security, integrating Cambodia into the region and the world, and promoting reforms and development. Cambodia joined ASEAN in April 1999. The Royal Government of Cambodia has embarked on wide-ranging reforms focusing on macroeconomic management, public financial management and financial sector reforms, and rehabilitation and reconstruction of physical infrastructures, especially the national road network. Since then, the Cambodian economy has undergone a dramatic and rapid transformation. Economic growth during 1999-2003 averaged 8.8%. Although ODA continued to finance growth, FDI particularly investments in garment and tourism, was key to promoting growth.

The economic take-off phase started from 2004. Considerable efforts have been made by the RGC to implement the second generation reforms in all sectors as envisaged in the Rectangular Strategy, in particular the implementation of the Public Financial Management (PFM) reform program and continued investment in provincial and rural roads. Economic growth during 2004-2008 averaged 10.3%. For the first time Cambodia achieved sustained double-digit growth, financed mainly by the rapidly growing banking sector, FDI inflows and the ODA. Cambodia was the first Least Developed Country to join the World Trade Organization in October 2004.

Cambodia can be considered as a successful post-conflict country. With the support of our development partners and the private sector, Cambodia has made giant strides in development in the last decade. Since 1993 Cambodia’s Gross Domestic Product (GDP) increased fourfold from US$2.4 billion in 1993 to US$10.3 billion in 2008. During this period per capita income has more than tripled from US$229 to US$739. Poverty rate was reduced from around 50% in 1993 to 30% in 2007, then to 27.4% in 2009. The structural reforms were undertaken to allow the Cambodian people to live in a modern civilized society. These reforms are necessary so that Cambodian society can face the future confidently.

However, with each stage of development accomplished, new challenges arise. Cambodia’s economic performance has been affected in 2009 by the global financial crisis. The RGC has successfully guided the economy, like other Asian economies, through the most difficult period of the global crisis. The RGC has acted swiftly to counter the social impact of falling incomes and employment from declining garment exports, tourism and construction pursuant to the crisis. Cambodia has managed to maintain the stability of the financial sector as well as macro-economic and social stability, especially the normalcy of the people’s livelihoods.

With the implementation during the last 5 years of the Public Financial Management (PFM) Reform Program, government revenue more than doubled from 2,220 billion riels (US$ 553 million) in 2004 to 4,928 billion riels (US$1,2 billion) in 2009. The expenditure tripled from 3043 billion riels (US$758 million) to 8,539 billion riels (US$2 billion). At the same time, we have accumulated more than US$700 million in cash reserves in government deposits. During the crisis, we used this money to implement our stimulus package, without resorting to borrowing, in order to maintain macro-economic stability. The Gross Domestic Product experienced a positive growth in 2009, though very small, as agriculture and services sector maintained robust growth. Economic growth in 2010 is estimated to be 5%. Next year the economy is expected to grow 6.5%.

The Global Financial Crisis: Changing regional and global architecture

Even though Asia’s financial institutions have limited direct exposure to the US sub-prime mortgages and East Asian countries have strong external positions, Asia was hit by the Global Financial Crisis because of the collapse of international trade and capital flows. On top of this, domestic demand in the region also deteriorated. But Asian policy makers have been proactive in managing the global crisis. Australia has also engaged with a strong degree with the region on the global financial crisis.

Although the global recovery remains fragile, we expect growth in Asia excluding Japan in 2010 to be around 7 percent. Strong economic performance in Asia is predominantly led by the high positive economic growth of China and India, and the robust recovery in South Korea. Asia’s remarkable recovery reflected a decoupling from the United States and Europe. The main factors contributed to Asia’s rebound include global trade normalization, especially in the global IT recovery, monetary easing, currency flexibility, sound balance sheets of its private sector and large fiscal stimulus.

The Global Financial Crisis has had far-reaching impact on the region and the world, with the rise of economic powerhouse of China, which has become the world second largest economy, and the changing global architecture, which will have geo-political implications for our region. However, Japan continues to play an important role in the global economy, especially in the hi-tech sector. In this regard, I would like to welcome “the New Growth Strategy Blue Print for Revitalizing Japan” adopted by the Government of Japan under Prime Minister, Mr. Kan, on 18^th June 2010.

Consequently, the global financial crisis has had the effect on the traditional global economic architecture G8 with the rise of the G20 as the key global forum to tackle the global recession and rebalance global growth in the post-crisis environment. The Global Financial Crisis has spawned G20 Leaders process, also thanks to the efforts of Australia. The G20 has coordinated stimulus measures combined with commitments to reform the global financial architecture, address longer term economic challenges and the future growth and rebalancing challenge facing the global economy, including the response to climate change.

At the regional level, after the Asian Financial Crisis in 1998, ASEAN+3 countries embarked on bank restructuring and structural reforms, which contribute to strong economic growth and financial stability. We have embarked on building regional financial safety nets by establishing the bilateral SWAP arrangement to the amount of US$77 billion under the Chiang Mai Initiative (CMI). Furthermore, the regional surveillance mechanism in the form of Economic Review and Policy Dialogue (ERPD) has played an important role in maintaining the financial stability in the region. In response to the Global Financial Crisis, ASEAN+3 decided to launch the Chiang Mai Initiative Multilateralization (CMIM) and increase the size of the SWAP arrangements to US$120 billion. The Chiang Mai Initiative would be further strengthened if Australia were to also be part of these regional financial safety nets.

Security Cooperation in East Asia

At the security level, the region is wrestling with fighting terrorism and here too Australia is a major player along with the United States. Cambodia has greatly benefitted from capacity training in counter-terrorism that Australia, the United States and some regional countries that have provided us during the past years. Moreover, Cambodia has embarked on the training of peace-keeping forces, making humble contribution to regional and world peace.

The ASEAN Regional Forum has now evolved into the region's premier security forum. We looking forward to the first Defence Minister Meeting scheduled in October 2010 in Hanoi. As a founding member of the ARF, Australia can play a positive role to ensure healthy political, economic and strategic balance between China and the US in our region. The ARF mechanism also ensures that ASEAN plays a central role in maintaining peace and security in the region, and therefore will be the cornerstone of the ASEAN Security Community. The ARF is making progress on three fronts, namely confidence-building, preventive diplomacy and conflict resolution. However, in light of the Cambodia-Thailand border conflict, more needs to be done to strengthen ASEAN conflict resolution mechanism based on international law, as envisaged by the ASEAN Charter. The Cambodian-Thai crisis is the litmus test for ASEAN’s credibility and centrality, as we aspire to build the ASEAN Community in 2015.

Cambodia is committed to the regime of nuclear non-proliferation and welcomes efforts exerted to re-launch the six party talks. Peace and stability on the Korean peninsula are critical for the prosperity of East Asia. In this regard, the RCG strongly condemns the sinking of the South Korean ship Cheonan which led to the loss of 46 lives.

ASEAN-Australia in a wider East Asian Regionalism

For decades, we have seen that Australia’s foreign policy has placed a high priority on the Asia-Pacific and the forging of strong economic, strategic and political ties with Asian countries and cooperation frameworks, namely ASEAN Dialogue Partner, ARF, Asia Pacific Economic Cooperation (APEC) and the East-Asian Summit (EAS). Cambodia has also welcomed the constructive recent debate on our future regional architecture stimulated by the concepts of an Asia-Pacific Community (APC) proposed by Australia, and Japan’s initiative of establishing the Free Trade Area of the Asia-Pacific (FTAAP) by 2020 under the APEC framework, while still recognizing the need for ASEAN’s traditional central role and contribution to the many structures of cooperation existing today in East Asia.

We have witnessed that East Asia is loaded with increasing responsibility for leading the sustainable and balanced growth of the world economy. In this regard, the strengthening and deepening of integration in East Asia is indispensible. Presently, the EAS is the newest of the regional architecture but a very important framework, given that its 16 members, including Australia, present almost half of the world’s population and account for almost 30 percent of global GDP. Thus, in addition to the regional processes namely APEC, ASEAN Regional Forum, ASEAN+1 and ASEAN+3, the expansion of East Asia Summit should be a gateway for ASEAN to engage ASEAN’s dialogue partners whose have substantive relations with ASEAN.

There are many reasons why ASEAN and Australia must work closely together and advance together. During the past years, ASEAN’s trade, investment, education and tourism connections to Australiacontinue to grow substantially. Moreover, ASEAN stands to benefit from relationship with Australia under the EAS framework. Among the five priority areas under EAS namely, finance, energy, education, combating avian influenza and natural disaster mitigation, Australia has given a key priority to enhance regional financial cooperation in the EAS.

We have witnessed that ASEAN’s total merchandise trade on goods with Australia-New Zealand rose by 23.6 percent from US$47.8 billion in 2007 to US$ 59.0 billion in 2008. ASEAN exports and imports to and from Australia-New Zealand both registered significant growth. ASEAN exports grew by 22.1% from US$ 31 billion in 2007 to US$ 37 billion in 2008; while ASEAN import rose by 26.2 % increasing from US$ 16.8 billion in 2007 to US$ 21.2 billion in 2008.

Medium-term challenge for ASEAN is, however, to promote domestic sources of growth and diversify regional cooperation to maintain sustained high-growth rate in a post-crisis environment. This requires stronger push and sooner completion of cooperation and regional economic integration process in accordance with initiatives and action plans that we have adopted, such as the ASEAN-Australia-New Zealand FTA (AANZFTA), the ASEAN-China FTA, as well as the East Asian Free Trade Area (EAFTA) and the Comprehensive Economic Partnership in East Asia (CEPEA) in the long run.

Thus, we should speed up the implementation of the AANZFTA since it entered into force since 1 January 2010 as the first comprehensive FTA between ASEAN and a Dialogue Partners that was concluded in a single undertaking, covering key sectors such as trade in goods, services, investment, electronic commerce and intellectual property. I believe the AANZFTA will not just promote trade and growth but also create a building block for the establishment of the EAFTA and CEPEA, leading to East Asian integration in the long run.

Nevertheless, we should avoid overlapping efforts and resources in EAFTA and CEPEA. East Asia’s economic architecture should progress gradually and in phases, starting from trade in goods, reflecting ASEAN’s centrality. Discussion will commence on the Rules of Origin, tariff nomenclature, customs related issues and economic cooperation as building-blocks in the process of realising East Asia integration. Four working groups will be established to study the recommendations for both free trade arrangements. During the consolidation of the recommendations for EAFTA and CEPEA, the Plus One, Plus Tree and Plus Six countries will be invited to join the discussion on how to move forward together to the East Asian Free Trade Area. Cambodia appreciates Australia’s initiative to facilitate effective and full participation of LDCs in the discussion and to develop capacity and increase resources of the ASEAN Secretariat.

Therefore, ASEAN integration should be a priority and key to East Asian integration in the long run. In this regard, Cambodia is committed to have the agreement ratified within this year in order to promote trade and investment in our region to the next level. Cambodia has much to gain from CEPEA, as it will help us solve the problem of monitoring the rules of origin and narrowing development gaps. CEPEA will help less developed ASEAN countries to use imported raw materials from China to process and export to more developed countries, such as Japan, Australia, New Zealand and Korea.

Yet, narrowing development gap among the regional members is necessary to materialize regional competitiveness and resilience. This requires us to reinvigorate domestic demand, and boosting intra-regional trade through structural reforms aimed at return for investments in domestically oriented sectors and removing impediments and bottlenecks domestic spending.

Closing these gaps will require a lot of resources. The ADB estimates that Asia Pacific countries need to invest about USD 8 trillion dollars over the next decade. Such investment would not only boost productive potential but would also help in the fight against poverty, by improving access to basic services such as electricity and clean water. It is important therefore that implementation of Greater Mekong Sub-region Program and the Initiatives for ASEAN Integration (IAI) be strongly supported by development partners and members of the regional community alike.

To this end, the Greater Mekong Sub-region (GMS) program is crucial to resolving the imbalances among the regional economies. The ADB Strategic Thrust of the GMS has enabled linkages and connectivity of the GMS countries among themselves. Lao DPR is no longer ‘land locked’ but ‘land linked’, owning to GMS Transport Corridors. Tremendous progress has been achieved in connecting the GMS countries with each other. Trade and Transport Facilitation (TTF) measures have been implemented, and the GMS is poised to transform the transport corridors into Economic Corridors. As a result, the GMS countries are ready to enter a second generation reform which essentially increasing investment on soft aspect of development such as greater financing on human resource development, increasing institutional competency and training; and cross border market management.

Development partners (Australia, EU and Japan) all expressed continuing commitment in assisting the GMS Cross Border Trade Agreement (CBTA). Financial and technical supports are available for the Trade and Transport Facilitation action Plan. Australia’s AusAID made available USD 230 million dollars for hardware and software assistance. USD 170 million is made available for road and energy sector development. The EU will provide expertise and TA through the ASEAN-GMS framework; and Japan will made available USD 3 million dollars for human resource development of three projects.

In this regard, I would like to welcome the recent plan made by the GMS Ministers in Vietnam to connect regional rail lines under the GMS cooperation. This will allow the Singapore-Kunming rail link to be materialized by 2020. I also would like to welcome the US-Mekong meeting that was initiated by the Obama administration. At the same time, Japan’s support for the CLV cooperation is very much appreciated.

Australia assistance and participation in second-generation reform in the CLMV countries is also much sought to create a healthy, stable and prosperous region that in turn provides Australia with the opportunities to invest in ASEAN and working together for a dynamic business environment for trade and investment for the long term. The ASEAN-Australia Cooperation Framework has enabled Australia to benefits from ASEAN liberalized economic, political, security, cultural; and social-health policies cooperation, sharing information on intelligence, and cooperating in anti-terrorism measures, as well as combating non-traditional security threats help to stabilize regional security.

Cambodia must not only overcome impediments to growth through the reform process, but must also create the conditions for sustainable growth through equitable distribution of costs and benefits of development. For a start business costs, costs that weigh upon employment will be further reduced. We must map out a clear strategy and implement it in order to enhance its attractiveness as an investment destination.

Regional Cooperation in the Protection of Cultural Heritage

I am particularly please that The 2010 Asialink Conversations - Cambodia will include discussion of cultural heritage and its protection in our region. For Cambodia, regional cooperation in the protection of cultural heritage is not new. Given our rich history, for us cultural heritage is fundamental to our national identity, our cultural identity, and an emerging regional identity. It defines who we are and the value we bring to each other. Since the 1990s, Australia has provided valuable assistance to the National Museum in Phnom Penh in the area of cultural heritage preservation. The Museum houses a large collection of ancient Khmer archaeological and religious artifacts, including art and sculpture, from the 4th to the 13^th centuries.

The Greater Angkor Project (GAP), an international, multidisciplinary research program of the Sydney University interested in the study of urbanism history at Angkor. Specifically, the project is investigating the relationship between the vast extent of Angkor in the 12th to 16th centuries AD, land clearance for rice production and regional ecological damage both then and now. The project will identify (i) the ancestry of Angkor’s social and spatial organisation in the first millennium BCE, (ii) the way the urban complex operated to diagnose (iii) why, when and how it was abandoned and reveal the transformations from the 16th to 19th centuries that created the modern landscape out of 3000 years of cultural continuity.

At the regional level, I urge Australia to deepen its cooperation for cultural and heritage protection through the ASEAN-Committee on Culture and Information (COCI) Framework. AusHeritage has been very supportive in ASEAN Cultural and Heritage protection program; and I trust AusHeritage will continue to support the Working Plan for the ASEAN-COCI, specifically its Strategic Framework for Cultural Heritage Management: Preserving the Past for The Future.

In conclusion, much has been said and more needs to be done. I hope The Asialink Conversations Cambodia will enlighten our understanding on the future directions of the relations between Australia and Asia, and the future shape of our region, and ways we can work even more effectively together for the peace, security and prosperity of our region and the wellbeing of our peoples. I trust the discussions that are taking place here today will be fruitful, and although informal, will generate useful policy recommendations for our consideration. I wish you all successful a Forum.