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Government upbeat on economy

Government upbeat on economy

Senior government officials led by Prime Minister Hun Sen addressed the

largest-ever gathering of current and potential foreign investors this week and

presented a generally optimistic view of the Kingdom's economic, trade and

investment prospects, including its reform agenda, for the near and medium


The "Cambodia Investment, Trade and Infrastructure conference",

organized by Bangkok-based Dataconsult Ltd was the fourth of its kind to be held

in Phnom Penh in the last decade.

Around 330 participants from throughout

ASEAN and North America registered to attend the conference held at Le Royal,

according to Dataconsult's Chris Bruton, compared with a high of 200 for any of

the previous events.

The two-day conference was kicked off on November 30

with a keynote address by the Prime Minister. Hun Sen said Cambodia had "closed

a bitter chapter of [its] history characterized by turmoil, turbulence and


In summarizing the country's macroeconomic situation, Hun Sen

said that as a result of "systemic reform programs, in 2004, real GDP amounts to

7.7 percent. The inflation rate was kept at 3.9 percent. The exchange rate was

fairly stable ranging around 4,000 riels per US dollar and international

reserves cover three months of imports."

The Prime Minister added that he

expected GDP growth in 2005 to be 6.7 percent and around 6 percent for the rest

of the decade.

"Having achieved stable growth for a number of years

successively and successfully, Cambodia has gained confidence and is now poised

on an important threshold in its journey into the future. Cambodians have

reached a crucial platform and look to their future with optimism and hope," Hun

Sen said.

Minister of Finance and Economy Keat Chhon presented a more

detailed overview of various economic indicators, noting that recent growth had

been propelled by the garment, tourism, telecommunications and construction


Chhon said visitor arrivals in 2004 were 41 percent higher than

in 2003, and that for the first nine months of 2005 the country had received

1,005,000 visitors. He also displayed figures that predicted the visitor arrival

number would be 3,120,000 in the year 2010.

With regard to Foreign Direct

Investment (FDI), an important indicator of international investors' confidence

in an economy, Chhon said that in the first half of 2005 FDI had reached US$445

million, recovering from the previous disastrous five years where total annual

FDI had never topped more than US$160 million per year.

"Sixty-six new

projects have been signed so far this year," said Chhon, "the highest since


"The construction sector contributed 10.4 percent to economic

growth in 2004," Chhon said. "Growth in the construction sector is projected to

remain strong in 2005 at about 11 percent."

Chhon said that in the

short-term there were several factors that could pose problems for the Cambodian

economy. He said that the growth base remained weak in the agricultural sector,

that there was uncertainty in the manufacturing sector due to the rise in petrol

prices as well as threats from terrorists, and that high business transaction

costs were also problematic. He also noted that expected decreases in overseas

development assistance could impact the economy.

Minister of Commerce

Cham Prasidh told the participants that Cambodia's garment exports had continued

to increase and totaled US$1.8 billion for the first 11 months of 2005, a 6

percent increase over 2004.

"It means that we are surviving," said

Prasidh. "The prospects are good for us."

Prasidh said that quotas placed

on Chinese garment exports to the US had helped but that the kingdom's

reputation as a "non-sweatshop" country was also important.

"It would

take China and Vietnam five years to build a reputation as a non-sweatshop

country, so we still have some time," said Prasidh.

"There are new

factories coming, and the newcomers are more numerous than those that are

closing their doors," he added.

Minister of Public Works and

Transportation Sun Chanthol said the rehabilitation of the country's national

road system would continue with the help of bilateral and international


He said the rehabilitation of Route 1 from Phnom Penh to Neak

Leoung would start on Dec 6, that ground had been broken on the repair of the

Siem Reap-Poipet road on November 19, that work was under way with Chinese aid

on Route 7 from Kratie to the Lao border. The Thais had also agreed to fix

Routes 67 and 68, with work expected to get under way in 2006.


also said the ministry was looking for a private investor to fund a light rail

system from Phnom Penh to the airport using the existing rail line, as road

traffic had become so congested. As well, he indicated that the government would

consider privatizing other national roads-as has been done with Route 4-as

government funds were insufficient to manage highways once they were


Minister of Justice Ang Vong Vathana touched on the issue of

corruption that has been an on-going bone of contention with investors. He said

"the fight against corruption is of great necessity, especially in the judicial

field." Vathana said the Anti-Corruption Draft Law had "a purpose to combat all

forms, all natures and all levels of corrupt practices through measures to

educate, prevent, and combat corruption together with public participation and

international cooperation." He did not speculate on when the law would be


In addition to the Anti-Corruption Law, Vathana said needed

measures included "streamlining bureaucratic procedures, simplifying and

modernizing the tax system, eliminating excessive regulations and motivating

public servants by giving them a decent level of salaries can help reduce ...


While specific steps taken to achieve these ends were not

presented, Vathana said progress in passing new laws, such as the Law on

Commercial Enterprise, and the Law on Secured Transactions, were critical to an

improved investment climate.

While the Cambodian government is no

different from all governments in their efforts to put on a rosy face when

dealing with foreign investors, this year's conference, in comparison to years

past, had several long-time observers of the Cambodian economy nodding their

heads in approval rather than shaking them in fits of cynicism and disbelief, as

has been witnessed in years gone by.

"There's been a huge improvement

since the last investment conference," said one participant. "It's driven by

WTO. There's a commitment and they're doing it," he added, referring to legal

and governance reforms.

"They [RGC] have a wish list which is realistic,"

said ACLEDA Bank's John Brinsden when asked if the government could meet its

stated reform agenda. "It may take longer [than expected] and a lot of hard

work, but I think it is going to happen."


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