Political stability in the Kingdom should bring increased foreign direct investment, but global financial turmoil leaves future prospects uncertain
Garment workers in Phnom Penh sew clothing in this file photo.
ECONOMISTS and government officials say the smooth transition to Cambodia's fourth governing mandate will pave the way for sustained economic growth and stronger foreign direct investment.
Kang Chandararot, director of the Cambodian Institute for Development Study, said Wednesday's swearing-in of the Cambodian People's Party-dominated parliament as a sign the government will forge ahead with an aggressive economic development program.
"The swearing-in yesterday provided a strong sign that the country's business development plans will move forward," he said.
National elections in 2003 produced a year of political turmoil that delayed the formation of government and drove the economy down, shattering local and foreign investor confidence, he said.
Kang Chandararot said this year's transition has created a favourable climate for foreign direct investments.
"Social security and safety has been assured for current and new investors," Kang Chandararot said.
He added that he hoped the new government would push to reduce corruption amidst increased media and NGO scrutiny of the government.
"We are now under the same government, the same economy and the same political strategy," Kang Chandararot said.
"What lawmakers and government need to do is to pass an anti-corruption law, create a commercial court, keep the macro- and microeconomy stable and promote agro-industry and tourism," he added.
He also urged the government to focus on strengthening tax collection.
The country's business development plans will move forward.
Kang Chandararot said Cambodia has remained largely sheltered from the global financial crisis, but that the garment sector has seen some impact.
He added that the new government should offer tax incentives on imported agricultural raw materials and equipment.
For the booming real estate sector, he urged the government to pass a land tax to avoid land speculation.
Sok Sina, an independent economic analyst, also agreed that Cambodia's economy is healthier than in 2003 due to political stability, "The opposition party was responsible in joining the new government quickly," he said.
Chea Peng Chheang, secretary of state for Ministry of Economy and Finance, said the government will continue a long-term development strategy.
He also applauded the parties for quickly forming a new administration.
"I hope the government policy and strategy will go smoothly," he said.
"Cambodia growth will continue to increase, the country depends on tourism, agriculture and garments," Chea Peng Chheang said.
However, he worried that the global economic crisis has affected some Asia countries such as Japan and South Korea - both large investors in Cambodia.
CPP Senator and casino tycoon Phu Kok An also said the fourth government mandate will be the best for foreign and Cambodian investors.
"This situation will help assure investors more than before," Phu Kok An said.
"I think that the economy will be better day-to-day for investors from Korea, Japan and China to continue their large-scale development projects," he added.
Although political stability has boosted economic prospects, Cambodia's problem of rampant corruption appears to be worsening, according to international watchdog groups.
A report this week on perception in corruption by the Berlin-based Transparency International ranked Cambodia 166 out of 180 countries, a drop of five spots from the previous year.
The Asian Development Bank has also cut growth prospects in one of the region's most vibrant economies, predicting that GDP growth will slow to 6.5 percent this year and drop again to 6.0 percent in 2009 as world markets struggle to recover from the effects of the US credit crisis.
ADDITIONAL REPORTING BY CHUN SOPHAL