The Kingdom's sound financial fundamentals prior to the global market crisis will help insulate it from expected downturns in investment and tourism
Photo by: Nguon Sovan
Aun Porn Moniroth says that Cambodia may be sheltered from the crisis’s worst effects.
Aun Porn Moniroth, Cambodia's secretary of state for the Ministry of Economy and Finance, was in Washington, DC, last week where he led a delegation to the World Bank and International Monetary Fund annual meetings.
Do you think the global financial crisis will affect Cambodia's economy?
We expect that this will affect Cambodia's economy, but for the time being there is no substantial impact.
Cambodia's financial sector has little direct exposure to outside markets. We have no stock market, and banks in Cambodia have not borrowed much money from foreign banks. We do not expect a significant impact, but we may experience a secondary impact through countries such as [South] Korea.
Korea has been affected by this crisis, and it has invested in and opened bank branches in Cambodia. So, there will be an impact, but we do not know the full extent yet. In the medium and long-term, the crisis will affect export markets, as well as tourism. In an unfavorable economy, tourists from some countries may not be able to travel.
What sectors in particular could be affected in Cambodia?
We predict that the crisis will affect exports such as garments, but this is an indirect impact. The crisis will primarily affect economic growth in the countries that serve as our principal markets. Demand in those markets could drop, so our exports will do the same.
Could inflation in Cambodia, specifically with food and fuel, enhance the impact of the crisis?
All these factors affect Cambodia, but all crises can affect prices. The cost of rice has gone up in the past, but now it is dropping. We have suffered from high fuel costs, but now the price of oil has declined.
Inflation in our country is also dropping. But growth in food supply and other commodities gives us the opportunity to increase agricultural production. The new government has a strategy to invest in infrastructure, agriculture and our rural economies to increase food and commodity exports to the world. Cambodia has great potential in the agricultural sector, and we will grasp this opportunity and turn it to our advantage.
What strategies will the government pursue to further insulate Cambodia from the crisis?
We have to strengthen our management of financial systems because we are novices in this sector. We must have sound financial arrangements. We have a long-term vision for financial sector development through 2015.
Will Cambodia suffer primarily short- or long-term consequences from the crisis?
No one can predict when the crisis will end. Our country is small and we do not have feverish relations in the global financial sector as other countries do. We do not expect to suffer any serious impact on our economy, but we are concerned and keeping careful watch of the issue.
The government has projected economic growth of nearly seven percent this year. Given the crisis and inflation at home, will Cambodia achieve this?
Yes, we still expect to see about seven percent growth because up until September, our exports had not declined. Agriculture has achieved what we planned, inflation has dropped, fuel costs have declined and tourism remains strong.
So, if everything continues to run smoothly, we expect to hit the seven-percent mark.
What is your vision for Cambodia's future economy?
If we continue to carry out successfully the reforms stated in our second-phase rectangular strategy, the Cambodian economy will continue to grow at a proper level and poverty will continue to decline. Despite the global financial crisis, we expect economic growth will still reach six or six-and-a-half percent in 2009.
What topics did you raise at the World Bank and IMF annual meetings?
We are a small country, but we have not lived entirely outside of global markets. So, we are concerned about the ongoing financial crisis. This is our biggest concern. We are also worried that when all [developed] countries in the world are concerned about the crisis, they will forget developing nations.
We don't want them to forget about the Millennium Development Goals, or about supporting developing countries in poverty reduction. I [had] discussions with World Bank heads on these issues to continue cooperation to achieve the Millennium Development Goals ... I want them to remember us even as they deal with the crisis in their countries.
Have you arranged specific projects with the World Bank or IMF?
We have discussed projects to help Cambodia, but we need further discussions in light of the government's second-phase rectangular strategy, which has presented new priorities for us. So, we need to address this to make sure projects align with the government's broader strategy.
Do you expect to ask the World Bank or IMF to forgive some of Cambodia's international debt?
The IMF cancelled US$82 million of Cambodia's debt two years ago and has diverted this to development projects in the country.
Cambodia also owes the World Bank $800 million, but it has no mechanism for debt cancellation. So, we have not yet raised this issue with them.
Interview by Nguon Sovan