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Logo of Phnom Penh Post newspaper Phnom Penh Post - Govt to widen the focus of economic reforms

Govt to widen the focus of economic reforms

CAMBODIA has signaled it needs to move beyond the "free-market" ideology

of the World Bank and the International Monetary Fund (IMF).

Helping drive the move is the need for Cambodia to do more for its poor and vulnerable

- especially women and children. Cambodia's private markets also have to be strengthened

before they can be expected to drive the economy, as the World Bank and the IMF insist

must happen.

The Cambodian Development Resource Institute (CDRI) hosted a conference on the World

Bank-IMF "Structural Adjustment Program" on Jan 24-26.

Simply, the program is a set of conditions that the World Bank and the IMF set on

their loans to a developing country. They insist on economic reforms that encourage

market forces to rule, rather than the state.

CDRI research coordinator K.P. Kannan said that the conference - the first of its

kind - was held to create awareness of what was happening to the Cambodian people

under the reforms.

Ngy Chanphal, under-secretary for the Ministry of Rural Development, told the conference

that macroeconomic reforms - which were short-term - had to be linked with long-term

development goals.

Not everything was left to the market in the booming "Asian Tiger" economies

where, in fact, the state was very active in directing growth, he said.

State intervention in developing countries was critical to establish law and order

and to build infrastructure, he said. The Cambodian market was still in its infancy

and could not carry out development activities alone.

A partnership between the public and private sectors in Cambodia was "crucial",

he said.

Chanphal pointed out that Cambodia had already begun market reforms as "a necessity,

regardless of... advocacy from institutions such as the World Bank and the IMF".

That "necessity" had arisen because of Cambodia's 12-year international

isolation till 1991, and the collapse of the Soviet Union, which had poured money

into Cambodia.

Chanphal said "critical issues" arising from the present World Bank-IMF-driven

reforms "deserve more attention."

Young men migrating to urban areas for jobs, leaving families often to be headed

by women, was increasing because of "marketization", he said. This also

disturbed the traditional family support system.

There was also a negative impact of cash. "Once money enters their life, the

whole thing changes - attitude, behavior, morality, ethics, personal relationships,

family ties," he said.

Economic reforms must help the poor and vulnerable groups - women, children, and

the disabled and displaced, he said.

Chanphal said that the Government's priority was toward rural development, including

rural credit and markets. That appeared contrary to a Western definition of "structural

adjustment" that Chanphal had previously quoted, as: "... from country

to town, from agriculture to industry...".

Second Prime Minister Hun Sen, in an unscripted speech to the conference, called

on economic policies to focus on rural development, and on strengthening the economic

and human capacity of women.

Conference participants emphasized the need to look beyond the World Bank-IMF program.

A "Cambodian Adjustment Program" - looking at wider human development and

in partnership with the state - was suggested instead by UNDP deputy resident representative

Andre Klap.

The roundtable considered that the reforms had been successful in stabilizing inflation

and the exchange rate. The Government's need not to borrow from the central bank,

and the liberalization of trade and investment were also "real achievements".

Kannan indicated that success in at least some of those areas was only because huge

amounts of aid had been spent.

However, there were worries that economic reforms were not working in some areas,

such as:

  • Food prices were increasing;
  • There were prospects of "unsustainable" levels of external debt;
  • The government lacked the ability to increase its revenues;
  • Government spending in agriculture, health and education was proportionally low;
  • Foreign investment was slow and investors were little concerned about what Cambodia's

    development priorities were, and;

  • There was a big gap between what donors had pledged, and what they had actually

    spent.

Klap said that criticism of the World Bank-IMF reforms were "not so much

questioning... the approach itself", more toward the pace of implementation,

which should be more moderate.

Kannan said that the ideology of the market - which the reforms represented "in

a concentrated... form" - could overshadow Cambodia's own reconstruction and

development program.

"There could be a mistaken identity between political democracy and market liberalization,"

he said.

The World Bank-IMF reforms relied on the "trickle-down" of employment and

income. In Cambodia, Kannan said, the issue was "... far more complex than a

simplified version of market liberalization and its tailor-made prescriptions for

institutional development."

Participants agreed that a move away from the World Bank-IMF "free market"

regime was needed.

Public investment in such areas as energy, irrigation, transport and in health and

education was "imperative," they said.

There was also a call for donors to develop longer term plans if they wished to help

Cambodia.

Delegates agreed that local initiatives were important to "mobilize resources"

and start "locally appropriate" development programs.

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