Delegates at the 35th ASEAN Economic Ministers Meeting (AEM) in Phnom Penh on September
2 said they were optimistic about the prospects for continued economic growth in
The meeting was the first in a series of meetings held in the capital aimed at thrashing
out Asian economic integration.
The ministers predicted that the region would grow between 4 and 4.7 percent in 2003
despite the effects of Severe Acute Respiratory Syndrome and terrorist activity across
Southeast Asia. The region's economies grew at 4.2 percent in 2002, up from 3.2 percent
the previous year.
But it was not all good news.
Foreign Direct Investment (FDI) declined by 18 percent across the region to $12.4
billion. The third year in a row it has done so.
Cambodia fared worse than most with a sharp drop in foreign investments between April
and June of this year, reported the Cambodian Development Resource Institute. Investment
during that period declined 53 percent to just $48 million compared to the previous
But Commerce Minister Cham Prasidh put a brave face on the situation, choosing to
focus on investment applications instead.
Speaking at the Cambodian launch of the World Investment Report on September 4, he
said that Cambodia was affected by the regional slide in FDI.
However, he added that investment applications to the Council for the Development
of Cambodia (CDC) had increased by 200 percent in the first half of 2003. Applications
were up from about $47 million in the first six months of 2002 to $152 million for
the same period in 2003.
"I am upbeat that FDI flows to Cambodia will increase in 2003 and 2004, and
will remain robust well into the foreseeable future," he said. "The reasons
for this positive outlook are the improving global and regional economy, including
the regional integration process in which Cambodia is actively involved."
"Regional integration" also moved a step closer during five days of meetings
in the capital.
An AEM statement recommended that a task force be established to formalize the ASEAN
Economic Community and integrate ASEAN as a single market and manufacturing base
Prasidh promoted the idea at a press conference after the meeting by describing a
new line of "Made in ASEAN" products such as regionally produced cars and
"It could be favorable to all ASEAN countries to produce some products that
are both very competitive and have market access as well," he said. "We
are considering manufacturing products where all the components are made in [one
or more] countries in ASEAN and then assembled in another ASEAN country for export."
Prime Minister Hun Sen used his opening address to the meeting on September 2 to
propose lifting all tariffs on goods exported to other ASEAN countries from Cambodia,
Vietnam, Laos and Burma by next year.
ASEAN Ministers also held a consultative meeting with Chinese Minister of Commerce
Lu Fuyuan. ASEAN and China are seeking to create a free trade area in 2010 with the
richer ASEAN nations. Cambodia, Myanmar, Vietnam and Laos could join by 2015. China
indicated it would push for a faster timetable.
"We want to accelerate the tariff reduction [to move towards the] ASEAN-China
Free Trade Agreement," said Fuyuan.
ASEAN ministers stressed that China's rapid economic development would provide a
significant boost to trade and investment relations between the China and ASEAN nations.
That trade was estimated at $34 billion for the first six months of 2003. China imported
$20 billion worth of goods from ASEAN nations. That represented a 55 percent increase
and made ASEAN China's fourth largest supplier.
The volume of ASEAN-China trade has risen significantly in recent years. It grew
45 percent in the first six months of 2003 alone. The ministers predicted that by
the end of the year the trade volume could reach $70 billion.
There were still jitters about the failure of the main political parties to form
a government after the election.
Speaking at Hotel Le Royal on September 4, Hun Sen tried to reassure about 200 foreign
investors and other private sector representatives that a new government was close
to being formed.
He said that the new government would ensure a legal framework to provide a fair
competitive environment for business, as well as transparency and accountability
for future investors in Cambodia.
"We expect Cambodia to attract FDI, generate income, improve the living standards
of Cambodians and make Cambodia competitive in labor-intensive manufacturing,"
Hun Sen told the meeting that Cambodia's economy had grown dramatically by promoting
the garment and tourism industries.
Garment exports, he said, had reached $1.3 billion in 2002, and Cambodia experienced
an average economic growth rate of 6.7 percent annually over the last five years.
He reiterated his plan to create six "priority sectors" for investment
including agriculture, transportation and telecommunication, electricity, tourism,
human resources and export processing.
"The government acknowledges that everything is not always perfect or smooth,
but the most important thing is that the government has the strong political will
to make necessary reforms that will improve the investment environment," said
However, independent economist Sok Hach, director of the Economic Institute of Cambodia,
warned that the current uncertainty surrounding the formation of a new government
was affecting Cambodia's economy and ability to integrate into global trade.
Hach said he was concerned that Cambodia's producers could not hope to be competitive
in global trade while they were hampered by rampant corruption, weak public administration
and a lack of reform.
Bureaucracy has created a high barrier to entry for investors in Cambodia's market,
"I think that to make the country develop and have an economy that is not just
based on natural resources, the most important thing is a good leader," said
Hach. "When the power in the ruling party is strong and the state institutions
are weak then there can be no political stability."