With economic growth forecast at nine percent this year even with a slowdown in garment

exports, the Cambodian economy is bearing the fruits of steady economic policy reform

and slow inflation, International Monetary Fund's Cambodia director said this week.

"Nine percent is very high growth," IMF Resident Representative John Nelmes

said. He said that a recent IMF macro economic policy mission will update the forecast

when it returns to Cambodia Sept. 12-18, but that the high growth should extend into

2008. He made his comments following the release of the latest IMF report on the

state of the Cambodian economy.

The August 20 report said the economy is surging ahead in most areas. Agriculture

has improved on 2005's record breaking year, reflecting increases in yields and cultivated

land.

"Construction and services, particularly the financial sector, underpin a vibrant

urban economy," said the report.

The report added that tax revenues in the first four months of the year were up 60

percent over the same period in 2006 due to improved collections.

Nine percent growth is a dip from the Asian Tiger style growth of 10.75 last year

and 13.5 the year before, but is in line with Cambodia's average economic growth

since 2000.

The dip is due to fewer garment exports due to competition with Vietnam, which no

longer faces U.S. quota restrictions since joining the World Trade Organization this

year.

Nelmes said it was "not a massive slowdown," but the government will need

to take care that the garment industry gets sufficient attention - reasonable electricity

prices and good roads, for example, to keep costs down.

Although the report strongly praised the economic progress, it criticized Cambodia's

pace of structural reforms, particularly in legal and judicial reform and in the

reform of the civil service.

"Basic civil service salaries are so low ($30 a month) that a whole system of

absentees, ghost workers, multiple jobs, and bribery has unfortunately evolved,"

the report said.

It noted that the government's plan for civil service reform focuses on across the

board increases in salaries, but this is "at odds with the views of its development

partners, who stress the need for more fundamental change in staffing structures

and pay scales."

"Much remains to be done" in terms of legal and judicial reforms, it said.

With the prospect of new oil wealth , Cambodia urgently needs to restructure its

public sector employment and wages to reduce the risk of corruption, it said.

"Improvements in civil service pay are essential to attract and retain skilled

staff, increase efficiency and reduce corrupt practices," it said.