Cambodia's GDP growth rate for the current fiscal year is set to halve in the wake

of decreased exports and increased inflation.

Commerce Minister Cham Prasidh told a meeting of top business leaders October 25

that while GDP growth had been revised from 6 percent to 5.25 percent, inflation

this year could jump from zero to 2 percent.

The meeting, which was organized by the Australian, British, US and Malaysian business

councils, to examine the impact on Cambodia's economy of the September 11 terrorist

attacks in the US and to discuss remedial steps.

Prasidh also ordered rice millers and crude oil companies to create one month's stock

to ensure food and oil security in case of any drastic change in the global economy.

The controversial review of investment and taxation law was toned down to help the

private sector.

Prasidh said that one effect of the attacks was that garment exports to the US had

dropped 10 percent, jolting the industry. Clothing retailer Gap had cut orders by

20 percent.

"A 20 percent cut in orders can translate into millions of dollars of lost business,"

he said. Although the European Union had tried to help by offering to buy "everything

but arms" from Cambodia, its orders were much smaller than those from the US.

As of October 22 this year, Prasidh said overall exports had dropped to $919.6 million,

compared with $964.8 million last year. Exports to the US were worth $682.5 million,

down from $729.9 million. The government hopes that duty- and quota-free exports

to EU countries will offset some of the impact.

Airlines were also in trouble with cancellations and low occupancy reported at leader

Thai Airways. It saw month on month drop of 50 percent in passengers out of Phnom

Penh. Sales manager Bunluasak Samargasevi said cargo shipments were down 80 percent.

"We usually carry 5 tons of cargo a day, for which bookings are made by exporters

a week in advance. Current bookings are for less than 3 tons, while no cargo has

been booked for the whole of next week," he said.

Arisra Sangkrit, Siem Reap Airways' chief of overseas corporate communications, said

the company had suspended its daily flight to Ho Chi Minh City after a drop in occupancy.

The flight has run at a loss since inception, but the downturn meant the company

had no choice.

"Since the whole industry is going through a downturn, we decided to suspend

the service," she said. Planes were only flying one-quarter full by the time

services were suspended October 1. Other airlines reported declines of up to 20 percent

in passenger numbers.

Cambodia Airport Management Services (CAMS), a business grouping, said the real impact

would become apparent in November-December.

"September to October represents the lowest season when the tourist arrivals

drop significantly," said Michel Faucher, CAMS officer in charge of the Siem

Riep Airport.

Nuth Nin Doeurn, secretary of state at the Ministry of Tourism (MoT) who chaired

a meeting with travel industry executives October 25, said US arrivals to Pochentong

Airport dropped 40 percent, while French tourist numbers were down by half against

last year.

"However, our overall figures may not see a very big change [since the numbers

of] tourists from China and Korea are increasing," he said.

Prasidh promised to help the business community cope with "this difficult situation"

but warned businessmen against making public statements or criticisms of government

policies.

He detailed plans for a series of export processing zones along the Thai border to

improve the resilience of the economy. He said the EPZ would gain from existing links

with airports, seaports, power lines and highways.

He added that he was trying to persuade Asean nations to grant Cambodia most favored

nation (MFN) status, and a limited trade relationship with Japan and Korea to globally

integrate the country's economy.

"Our exports are now almost completely US-orientated. Once we manage to get

MFN status from other countries, it will become easier for business to gain access

to huge new markets," he said.

MoT's Doeurn said he had asked industry representatives to formulate proposals to

boost tourism, such as lower fees at Angkor Wat, reduced visa fees, and lower hotel

and restaurant tariffs. He asked them to present a report within two weeks.