Against the backdrop of the slight recovery by world economies, especially the US and Europe, two traditional markets for Cambodia, Asian Development Bank (ADB) deputy country director Peter Brimble sat down with the Post’s group business editor, May Kunmakara, to talk about Cambodia’s economic performance, new resolutions and challenges, and how ADB is involved.
Peter, could you tell me briefly about Cambodia’s economic performance in 2012?
Last year, Cambodia faced very sluggish growth in the US and the European Union, which are two of its main export markets. So we were concerned that growth would be lower than anticipated.
At the end of the year, we looked very carefully at exports of manufactured products, where the situation was very dynamic indeed, but the tourism sector has also picked up a lot.
So, towards the final quarter of last year, we revised our growth forecast for 2012 down slightly from 6.5 to 6.4 per cent.
We think the services sector picked up some of the growth momentum that garments had enjoyed in the export sector.
What were the economic challenges or difficulties last year?
I think the big factor was the external situation and a decline in economic growth in the US and the European Union.
Ongoing concerns have become more important.
We see three key areas in addition to challenges in electricity supply and basic infrastructure.
The first of these three challenges is skills development. There’s no question that the increasing demand for higher skill levels, even in the garment sector, will create a shortage of skilled workers. This is a key area.
The second challenge is transport costs and logistics. Cambodia is becoming the centre of industry along the southern economic corridor from Bangkok to Ho Chi Minh City. As that happens, the importance of reducing transport costs and improving speed and logistics becomes a serious challenge for the economy.
Third, given a sluggish international market and likely reductions in overseas development assistance, the government needs to raise more money from taxation and spend that money efficiently, so it can mobilise funding for the private sector. These are all critical elements of fiscal policy.
Do you see any response from the government to deal with these issues?
The government faces many challenges in developing Cambodia’s economy.
On balance, I would see the responsiveness of the government in beginning to address the issues. These efforts are not enough, but they are moving very much in the right direction.
An example I like to quote from 2012; I think one of the key economic developments occurred in February, when the International Monetary Fund issued its Article IV report for Cambodia. In that report, the IMF upgraded Cambodia from medium-risk to low-risk in terms of debt management.
This reflected a strong effort by the government to improve its management and put in place a strategy that was sufficient for the IMF to improve its rating in those areas.
In the area of logistics, I see the government is trying to put in place a price list for all services. So, if you go to Customs, you need to get a Customs licence or you need someone to work overtime, they will now have a formal list, so it is going to be very clear. I think that is very important.
On skills, I think the Ministry of Labour, especially, is beginning to be much more responsive to the needs of the private sector.
OK, this will take time, but I think it is moving.
How did ADB get involved in helping Cambodia’s economy last year?
Last year, ADB processed nine programs and projects for about $275 million.
We have a two-year funding cycle, so if you look back at the cycle from 2011 to 2012, a total of $345 million was approved – about $175 million a year.
In 2012, we had a lot of projects. We processed an education project, a big program on decentralisation, a program to promote economic diversification and a flood reconstruction project in which we repaired flood-damaged infrastructure in six provinces, particularly Prey Veng.
Do you have any funds to help the private sector?
That’s another thing we did a lot of work on in 2012. Our mission here focuses very much on how to strengthen our engagement with the private sector and how to build a better relationship between ADB and the private sector.
Our private sector operations department is also keen to come in and to do more activities here.