PM says private sector not yet capable of sustaining pre-crisis growth levels
PRIME Minister Hun Sen on Sunday urged regional leaders attending the World Economic Forum East Asia summit in Ho Chi Minh City to be cautious in withdrawing fiscal stimulus efforts, according to a translation of his remarks provided by the forum.
Though stimulus was not a solution in itself, Hun Sen told the forum, he does not feel the private sector is strong enough yet to “be the engine of growth”.
He said that although East Asia has emerged stronger than other regions from the global crisis, and rapid economic growth is possible in the coming years – even with the weakened global economy – a return to pre-crisis, private sector-driven growth rates was essential and would require countries in the region to “return to the medium-term reform agenda and implement it with vigor”.
“Fiscal space is limited, and stimulus alone cannot sustain domestic demand for an extended period of time. Therefore, the most important issue is transitioning to private sector base growth,” he told the 400 delegates at the forum.
Cambodian People's Party parliamentarian Cheam Yeap supported Hun Sen’s statement, saying Cambodia’s government has a policy to “shake hands with the private sector”.
“The private sector is important to push and strengthen the economic growth of Cambodia and especially the livelihood of the people,” Cheam Yeap said Sunday.
He said the private sector is an important part of efforts to see Cambodia’s gross domestic product grow by up to 5 percent in 2010.
ANZ Royal Bank CEO Stephen Higgins said Hun Sen’s question about fiscal stimulus was not limited to Asia but extended to the world, including America and Europe.
“For Cambodia, it’s a challenging [issue]. The fiscal stimulus is still needed. The challenge is ensuring it's efficient,” he said.
Under the forum’s theme of “Rethinking Asia’s Leadership”, Hun Sen outlined his approach for Cambodia, saying each country in the region would have different priorities.
“For Cambodia, diversifying the Cambodian economy and extending its competitiveness as emphasised in the updated national strategic development plan will be crucial. This diversification has several dimensions, including more investment in physical and human capital to move up the value chain in production and exports,” he said.
Cambodia will make a stronger commitment to strengthening fiscal rules and frameworks in order to translate the “volatile” revenues from industries such as garments and tourism into long-term sustainable growth, he said.
Hun Sen told the forum that for Asia to lead, priority must be given to two common regional agenda items: integration driven by ASEAN’s commitment to a single economic zone, and addressing climate change.
“Deeper regional economic integration is now even more important given prospects for slower growth in advanced economies,” he said.
“Behind-border trade barriers must be lowered even in the face of recipient protectionist pressures around the world, including in the region.”
On climate change, Hun Sen said more must be done to improve land and water use, bolster energy efficiency and conservation, and foster a much larger role for renewable energy resources.
“Increased energy efficiency is not only good for energy security but is also environmentally more sustainable and helps make rapidly growing cities more liveable,” he said.
Hun Sen encouraged his regional counterparts not to see the ascendancy of China or India as the biggest competitive hurdle, but rather identify the challenges in their own nation.
“Countries that remain alert to the changing dynamics of comparative advantage and are able to position themselves to respond effectively to them will benefit,” he said.
“Countries bogged down with domestic political, social problems and structural issues could find a varying landscape difficult to adjust to in the short and medium term.”