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Free market alternatives

The Editor,

I read Mr Matthew Grainger's balanced and interesting report on the recent CDRI

International Roundtable on Structural Adjustment Programme in Cambodia (January

26, 1996). I also read Dr Walden Bello's paper titled "Economic Liberalization

in Southeast Asia: Lessons for Cambodia", and Dr K.P. Kannan's paper, "Economic

Reform, Structural Adjustment and Development: Issues and Implications".

Dr Bello of Chulalongkorn University's Social Research Institute in Thailand and

Dr Kannan, CDRI's research director, are reminding policy makers in Cambodia that

there is an alternative paradigm for Cambodian economic development to the standard

IMF/IBRD prescription of market economics.

The trickle-down theory is attractive in concept, but it has limited relevance in

the real world due to market imperfections. Government intervention, as a result,

is necessary to ensure equity and development without degradation of the environment.

Growth and equity are two sides of the same coin.

For that reason, real GDP growth, in my view, is alone not a good indicator, if we

ignore the distributional or equity and environmental aspects of development. One

has to look at Thailand and Malaysia to realize that this obsession with GDP growth

rates among policy makers results in serious socio-economic imbalances with long

term political consequences.

Malaysia's realization of this problem is now incorporated in its Second Outline

Perspective Plan 1991-2000. Even as of yesterday (Feb 13), Malaysia's Deputy Prime

Minister Dato Seri Anwar Ibrahim was reported to have said that in the next Malaysia

Plan, our seventh, the social and related aspects of development will receive greater

attention. After nearly 40 years of economic management, Malaysia's decision to evaluate

its strategies and adopt new approaches to achieve more balanced development supports

Dr Bello's call "to articulate an alternative future" and "to ponder

carefully the consequences of fast track capitalism..."

We must remind ourselves what development is all about. Here I would quote Dr Kannan:

"In terms of development, the ultimate objective is that of human development

and reducing inequities as between people and regions." I am, of course, reminded

of great development economists of the sixties like Sir Arthur Lewis, Gunnar Myrdal,

Jan Tinbergen and Ragnar Nurkse and my mentors in economics, Clifton Wharton Jr.,

and Ungku Abdul Aziz (Malaysia), who studied the processes of development and underdevelopment

with a socio-cultural perspective.

Development is about bringing about systematic change, and providing meaning to the

lives of people so that they have opportunities to progress as far as their abilities

can take them. It is about ensuring that scarce resources are used responsibly so

that succeeding generations can build on the efforts and achievements of their forebears.

It is about institutions, culture and people. It does not exist in a vacuum, certainly

not in econometric models, computer simulations, scenario planning systems or in

the air-conditioned offices of the World Bank, IMF and the ADB. Most of all, development

is about responsibility and accountability for all stakeholders, not a power game.

Because it is a grassroots process and culture bound, development must be driven

by nationals, in the case of Cambodia by Cambodians, with a shared vision, not by

experts who have no stake and who do not have to live with the consequences of their

prescriptions. This is not to discount the contributions made by the international

community, donor countries and multilateral agencies. But it does emphasize that

the granting of technical and financial assistance does not confer on the provider

the right to impose their own values, preferences and way of life, or to dictate

what is best for the beneficiary.

Cambodian leaders know what they want for their country. They have a clear vision

of their country's future as reflected in their National Programme (NPRD) and this

is more than what can be said about some countries in the Third World. They have

a strategic purpose which is to create a fair, just and peaceful society and, through

strong sustainable economic growth, to raise the living standards for all Cambodians.

Cambodia is committed to a democratic system of government with a Constitutional

Monarchy, and free market economic system with the private sector as the engine of

growth and government in the role of strategist and manager-mentor.

Cambodia is adopting a state-directed economic growth strategy. This approach accepts

the price mechanism, and the market in general, as an efficient allocator of resources.

It also taps the dynamism of the private sector, but recognizes that government activism

is essential in the area of national strategy in a competitive and interdependent

world and to tame the excesses of the profit motive and ensure that economic growth

is sustainable, balanced and equitable in the long term.

Their development will be on the back of agriculture which is today the step child

of most economies in East Asia. It may not be the "sexy thing" to do, but

Cambodia is making its first wise move. Modern agriculture backed by advances in

bio-technology, efficient water resource management systems, and strong marketing

and distribution networks is a profitable undertaking.

Since the private sector is going to be given a prominent role in the development

of the Kingdom, the World Bank and other multilateral agencies should finance a masterplan

study on small and medium scale industries and businesses and recommend policies

and strategies for developing this sector. In many countries in East Asia, this sector

is the driver of economic activity with the greatest potential for growth.

It is more refreshing to talk about development than other issues, usually negative

ones, about Cambodia. The country has done well since the formation of the Royal

Government. The tasks and challenges ahead are daunting. Cambodia needs the understanding

and the patient support and cooperation of friends. Credit when it is due should

be given. Criticisms, on the other hand, should be constructive.

For democracy to survive in Cambodia, economic development is essential. I have not

known of any situation in the world where democracy exists side by side with abject

poverty, unemployment, illiteracy and social inequities.

I stand, therefore, to be educated by anyone who has had the privilege of seeing

democracy in a symbiotic relationship with the aforementioned phenomena.

I hope your readers - especially those in the IMF, World Bank, ADB and UNDP here

in Phnom Penh - will respond with their comments on my letter. If that happens, my

purpose in writing this letter as a sort of rejoinder to the Cambodian development

debate is well served.

- Din Merican, Phnom Penh. (Din Merican is an economist with an MBA degree

from the United States, who worked for more than 30 years in the Central Bank in

Malaysia and in the private banking industry. This letter represents his personal

views.)

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