With investment and foreign aid prospects looking bright, Cambodia should be given

enough freedom to chart its own future, says Din Merican, an economist of

30 years' experience.

THE First Cambodia Roundtable organized by The Economist Group is now behind us.

Coming soon after The World Economic Forum, it reflects continued interest among

investors in Cambodia. It also coincided with the arrival of a high-powered business

delegation from South Korea. The Roundtable was yet another opportunity for entrepreneurs,

business executives and others to network with Ministers and technocrats of the Royal

Government of Cambodia to discuss its development blueprint, CAMBODIA VISION 2000,

and exchange views on foreign investment and poverty eradication through economic

growth.

According to this blueprint, Cambodia plans to almost double its per capita Gross

Domestic Product (GDP) from US$287 in 1995 to US$470 in 2000. The economy is projected

to register a real growth rate of 7-7.5 percent while the government will maintain

macro-economic stability (inflation at five percent and a stable riel-$US rate of

2,500) and enhance the quality of life and the environment. Both the private sector

and the donor community are expected to play an important role in partnership with

the Royal Government of Cambodia under a "Cambodia Inc." approach to secure

sustainable development. The policy framework will also be conducive to domestic

savings mobilization and investment. Tax reforms will also be undertaken to broaden

and diversify the sources of Government revenue and effectively control expenditure.

The Council for the Development of Cambodia (CDC) informed the Roundtable that CAMBODIA

VISION 2000 had the support of both the CPP and the Funcinpec. This can only be a

source of comfort since political will and cooperation are essential if the targets

in this document are to become reality. The Donor Group at the Tokyo meeting in July

would have to be convinced that the coalition government will remain united in purpose,

if they are to be persuaded to provide much-needed budget support.

Recent political tensions have abated somewhat, but more tangible and clearer evidence

is required to show that goodwill, understanding and mutual respect are sustainable.

Serious long term foreign investors remain sensitive to factious politics.

Translating Cambodia's development potential to create jobs and upgrade educational

and health standards requires leadership. In particular, a dedicated, professional

and development-oriented civil service will make efficient use of resources. Donors

at the Tokyo meeting may insist on greater transparency and accountability as a pre-condition

for more budget support. Over time, Cambodia should find this stipulation less onerous.

Pledges of $2 billion ($500 million a year to 2000) will be difficult without some

agreement on this matter, given growing donor fatigue and other priorities. However,

pledges should not be constrained on the grounds of "lack of absorptive capacity."

That argument is no longer valid since the Royal Government, in cooperation with

the ADB, IMF/World Bank and other multilateral and bilateral agencies, is currently

engaged in institutional capacity building through civil service and other reforms

and human resource development. This process takes time to bear fruit.

Furthermore, linking donor support with Cambodia's human rights record and progress

towards democracy will be tantamount to discounting the quantitative and qualitative

improvements which have taken place since the formation of the Royal Government.

The success of Cambodia's macro-economic policies is, after all, the result of cooperation

between the Royal Government, the donor community, the ADB, IMF/World Bank and the

UNDP. A lot of time will be needed to see significant progress on human rights and

democracy.

The international community invested some $ 1.7 billion in peacekeeping, and the

establishment of the present government in 1993 after the United Nations supervised

nation-wide free and fair elections. Today, restoring order and stability is a real

possibility.

CAMBODIA VISION 2000 seeks to consolidate the gains made over the last three years.

It is committed to pursuing with added vigour the pace of policy and administrative

reforms. Agriculture, especially rural development, will be revived.

With political stability and the gradual restoration of the Rule of Law, the investment

climate should improve dramatically. As a result, meaningful private capital inflows

from abroad, especially from the Asia-Pacific Region, will boost economic growth.

The private sector will no doubt be taking advantage of Cambodia's strategic position

as the hub of the Mekong Sub-Region. Growth, other things being equal, brings prosperity

in a "virtuous circle." Consequently, Cambodia's dependence on foreign

assistance will decline over the medium term.

The Tokyo meeting in July should, therefore, regard CAMBODIA VISION 2000 as Phase

2 of their investment in peace building and the creation of a free and democratic

society and a modern market economy in Cambodia. Continued international support

for Cambodia's socio-economic and political transformation is at a critical stage.

It was clear from the Roundtable that the Royal Government is committed to the Rule

of Law, democracy and market economics.

The process is irreversible. It has been proven from the experiences of East Asian

democratic governments that market-friendly and pragmatic economic policies which

promote government-private sector cooperation will contribute to high and sustained

economic growth and prosperity.

Donor support remains essential to move Cambodia forward on its path outlined in

CAMBODIA VISION 2000. While continuing to monitor its progress on human rights and

democracy, and by ensuring transparency and accountability in the use of funds, donors

should allow Cambodia to chart its own course, preserving its sovereignty and national

pride.

Hopefully at the Tokyo meeting, Cambodia will be allowed to present its case directly

to the donors with the IMF/World Bank and others in the role of supporting cast.

The recent Roundtable proves that Cambodians can eloquently make a strong bipartisan

case for support of CAMBODIA VISION 2000.