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IMF offers how-to for ASEAN growth

The fragile state of Europe’s economies and the slowdown in the United States remain concerns for Cambodia and the ASEAN bloc, as both are key export markets for countries in the region. Post reporter May Kunmakara spoke with International Monetary Fund deputy managing director Naoyuki Shinohara in Washington, DC last week about the Kingdom’s prospects for weathering the storm.

What are the IMF’s prospects for the Cambodian economy?
I think this year and next, Cambodia’s economy should expect solid growth. We’re expecting some negative impacts, especially from Europe, to slow exports. So GDP growth should be [more than] six per cent.

What’s your take on Cambodia’s current state of development?
I think there is still a lot of room for improvement in Cambodia. You know, needless to say that Cambodia had very difficult period for a long time in the past, and it is still in a start-up period. So when we compare the situation in Cambodia with neighbouring countries, the business environment is still poor. But I think the situation is improving quite a bit.  There have been some changes, but a lot more needs to be done.

How does the IMF view the risks coming from Europe and elsewhere in the global economy for Cambodia and the ASEAN region?
The economy in Europe was hit quite hard last year. And while there are signs of improvement, the recovery is still fragile. Our forecast right now for Europe is 0.3 per cent GDP growth this year. In that case, ASEAN countries, especially Cambodia, that have strong trade links with European economies will see their exports hit. How do you deal with that? I guess diversification is one option. If you rely on only one industry, you will be hit very hard. So diversification is very important, and at the same time you need to have a buffer by using monetary policy, fiscal policy etc., to protect your economy.

What should the ASEAN countries do to promote sustainable growth and stability in the region?
One suggestion that I can give you is to focus on regional integration, to promote regional integration. ASEAN countries still depend very much on demand from countries outside the region. By promoting regional economic integration, the market bases will be larger and they can start to become more interdependent on ASEAN partners, which would allow them to deal with potential shocks from outside Southeast Asia. So the regional economic integration in the area of trade, as well as the financial markets, are both important.

What kind of technical assistance is there for small member countries right now, as the IMF seems to mainly focus on Europe?
The IMF is a global institution with 188 members. We try to work with all member countries. Of course, the largest risks right now are in Europe, so we have to dedicate more energy to the European countries.

But dealing with these issues is not only for Europe but also for the rest of the world, because what is happening in Europe also has a negative impact on the rest of the world. At the same time, we work very hard with member countries such as Cambodia by providing technical assistance in the areas of national mortgage supervision, revenue mobilisation and data collection, and we have a representative in Phnom Penh with the understanding that we have to work together.

Some say Myanmar’s political and economic reforms will have an impact on Cambodia. What is your view of this?
It’s difficult to say at this moment because we don’t know to what extent Myanmar is capable of developing. But Myanmar has a large labour force that is very cheap, and their education is relatively good.

So Myanmar could provide a very good base for the garment industry, potentially making it competitive against Cambodia. But having another growing economy in the same region is usually a good thing.

To contact the reporter on this story: May Kunmakara at



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