Distinguished National and International Guests,
Ladies and Gentlemen,
I am deeply honored to be here with you all this morning to address in this 2nd Asia Economic Forum on “Bridging Development Gaps in East Asia: Vision, Strategic Direction and Plan for Action”.
I highly appreciate this initiative, bringing together regional policy makers and experts from the government, private sector and academia for dialogue on critical economic issues facing our region. I am convinced that this Asia Economic Forum can provide a most valuable periodic venue for assessing strategic policy directions, and generating innovative ideas and consensus on practical solutions for advancing development and bridging gaps in East Asia, thus further improving the well-being of our people.
Thus, on behalf of the Royal Government of Cambodia, may I congratulate the Asia Economic Forum, an independent think-tank, and the University of Cambodia for their efforts in organizing this conference. I would like also to thank the International Foundation for Arts and Culture for funding support that makes this forum possible and effective.
As we meet today, our region’s economy remains buoyant in the face of moderating growth in some major industrialized nations (including the U.S. and the E.U.), though easing from a peak of 8.0% in 2004 to 7.5% in 2005. The outlook for 2006 is generally favorable amid the rising and persistent downside risks such as the persistently-high oil price, avian flu pandemics, and un-sustained global imbalance, which can be a threat to the stability of global economy. These expectations, along with improvement in the global demand for IT products would significantly support economic growth in the region. The ADB forecasted that the region overall (East Asia) is expected to sustain a relatively high rate of GDP growth of 7.6% in 2006.
At the same time, several challenges, that can cause the regional and global downturn, are identified such as the persistent rising of the oil and gas prices and higher global short term interest rate. The avian flu pandemic, should it occur, could also be very costly in terms of human suffering as well as economic impact. The risk of global imbalances is still a disturbance as the US current account deficit widened in 2005. Without appropriate response, the situation could be further exacerbated, leading to a loss of confidence in financial markets.
Thus, I think that the forum needs to revisit the development path in our region, such as our vision, strategic directions and plan of actions. Because, on one hand, our region has experienced a solid growth for the past years, while on the other hand, the region is now facing such potential threats. We need to engage today in the dialogue to exchange our view on how best to address all these risks and challenges that will help shape our vision and future plan of actions.
Other than what I have identified above, the other most pressing issue for us to consider is the widening development gaps in our region that would threaten our regional stability and future growth. While we enjoy our success in improving the living standard of our people, we should not be under illusion that we are totally out of the poverty. Asia’s rapid economic growth over the past decade masks stark and growing inequities in human development. Home to the world’s fastest-growing economies, fueled by surging manufacturing and service exports that require highly productive and skilled people, Asia exhibits some of the worst levels of human deprivation on the planet. We have to accept that millions stand excluded – not just the income poor, but the chronically poor, and those excluded by their gender, caste, ethnicity, religion, minority status, or geographic location.
In this sense, there are different kinds of the development gap, which usually can be divided into social groups, nationalities and countries and gaps among development levels, countries or a number of regions in the world. My conviction is to focus my full attention in striving on bridging this development gap and fighting poverty in the societies, which I strongly believed are the most worrying and concerning to the government in East Asia.
Indeed, growth is of course a necessary condition but growth alone is not sufficient to ensure sustained poverty reduction, and that rapid growth sometimes may itself create threats to social stability and cohesion that can in turn undermine the sustainability of growth. We have to understand that growth does not guarantee that the gain will equally distributed to every person, including the poor and marginalized group.
Most countries faced a daunting task to bridge this development gap within the countries. We all know about it and we all declared war against this inequality and poverty. But to win this war is not easy. I myself have gone through many kinds of war. I have spent considerable time of my live to go to wars to liberate Cambodia from imperialism, to liberate the people from the genocidal regime and to protect people from the return of that genocidal regime. Since Cambodia got full peace 8 years ago, I started to change my focus from fighting those wars to the war on poverty. I think that I may have to spend another half of my live to bridge the development gaps and to eradicate poverty.
Poverty is not only multi-dimensional reflecting economic disadvantage but also social, cultural and other aspects of exclusion which will not be addressed through economic growth alone. Relevant to the concerns of this forum are questions of how we can bridge the development gap and eradicating the poverty.
Before we can address this inequality and poverty, I think that peace and political stability is needed in every country. Peace and Political stability is a sin qua non for economic growth and poverty reduction. Peace and political stability brings confidence to investors to invest and in return leads to stronger economic growth and employment creation. We have clearly seen the impacts of this factor in a lot of countries, especially Cambodia. Looking back into history, Malaysia, Singapore, Vietnam, China etc. have all had a long political stability, and the economic growths have been fantastic. After almost a decade of political stability, Cambodia has exhibited a strong economic growth. Since 1998, the average economic growth in Cambodia is around 7 percent, which amount to about 1% per year in poverty reduction. We will do our utmost effort to maintain this stability. Therefore, countries want to develop fast have to maintain political stability.
With the rapidly changing socio-economic global landscape, there is a greater sense of urgency and commitment among all countries to join hands to develop and liberate the remaining people from inequality and poverty. We all need partnership, which is mutually beneficial for all of us. We have to think a fresh, freeing oneself from the hang-ups of the past and think innovatively about future and what can we do together. We have to have confidence in each other and to face the economic challenges ahead such as globalization and liberalization together. We must help each other to strengthen countries’ capacity, capability and resolve in meeting the challenges ahead such as reducing poverty, preparing them to face global competition and also assisting each other to gain some competitive edge in world markets.
In this spirit of maintaining the present economic growth momentum, we should not only focus on trading with advanced nations outside the region, but we must focus on demand and opportunity to improve and to scale up the intra-Asian trade. To achieve this, the growth in trade and integration within Asia is likely to depend on country, regional and sub-regional efforts to liberalize trade and on measures that promote trade efficiency, which includes investments in infrastructure and institutional facilitation.
Improving the investment climate, such as reform of labor law, better incentives for productive investment for both domestic and foreign firms and good infrastructure and strong competition policy is the critical factor for all countries in the region.
A functioning financial sector encourages investment by mobilizing savings as well as permitting investors to manage risk is important for investment climate. The financial sector also plays a crucial role in poverty reduction: ‘Financial sector development can also reduce poverty.
Even though many countries in East Asia have moved away from agriculture to industry sector, agriculture sector is still considered as an important sector where million of people still depend on for their daily existence. The agriculture sector has been playing a key role in improving the living standard and poverty reduction. Moreover, most of the poor in our countries totally depend on this sector. In many regions, growth in basic staples is critical to ensure household food security via affordable agricultural workplaces. Moreover, the gains in agricultural productivity reduce poverty by lowering food prices, raising farmers’ incomes and creating employment opportunities.
In many countries, even the share of agricultural sector in GDP is declining to around 30 percent, its share in total employment is actually around 75–80 per cent. When we see this number, we have to ask our selves that what this figure means. Well, the answer can only be that the agriculture sector is still important for many countries and the benefits from industrial development have not been shared equally for the whole population. Agriculture’s share of total employment is declining, but more slowly. Therefore, any vision of closing the development gap cannot ignore the significance of the agriculture sector.
As this sector is the one that is often considered as the market failure, more attention from the government to invest in this sector is needed. At the same time, to have a positive investment climate on the level of agricultural productivity, the government needs to focus on the existence of adequate infrastructure and communication networks; the extent to which transaction costs are minimized. Moreover, the focus should be coherent and coordinated in term of accessing to finance, and particularly to short-term seasonal credit; and access to land and secure property rights. Additionally, efforts must be made to enable a gradual transition through diversification to high value crops and broader employment opportunities for poor people. Skills and access to information and technology such as prices of agricultural products, machines and fertilizer are also critical, particularly in lagging regions where there are few opportunities to raise productivity levels.
Good governance is another important element that we need to cherish if we want to bridge the development gap and reduce poverty. We have seen improvements in governance in some countries, but there remain a number of governance challenges facing Asia. Much remains to be done to improve transparency and accountability in the formulation of public policy, in public-private relations, and in corresponding resource allocations etc.
To a significant extent, the issue here is a better understanding of where the perceived governance ‘needs’ of the poor lie. These would appear to be in the following areas: (1) better service-delivery, particularly in the areas of health and education; (2) reduction of leakages in targeted anti-poverty programmes; (3) access to justice for everyone; (4) regulatory support to the informal and unorganized sectors of the economy where a majority of the poor pursue their livelihoods and (5) reduction of income erosion threats to the poor due to various forms of insecurity and improper application of power.
In this sense, improving governance also means to improve service delivery to the poor and marginalized groups. Even there has been a huge improvement to service delivered by the government in the areas of health care, education, clean water, sanitation etc., there are actually a lot remained to be solved. One in three people in Asia’s urban population still do not have access to basic services, water, sanitation and secure housing.
More transparency and accountability in the government expenditure and better target spending on the poor will definitely contribute to service delivery. We have to ensure that the money spent by the government will reach the poor. Another important thing is that we have to regularly monitor the results of expenditure program. In Cambodia, we have created the Priority Action Program (PAP) to provide money directly to schools where we considered as needed more assistance since 2000. The result of this program can be considered as a success as most of the basic education’s indicators have been improved dramatically.
The decentralization is also important for the effectiveness of service delivery. We have seen notable progress on decentralization and innovations in service delivery. The decentralization of both elected representation and of the public administration have recently been promoted in many Asian countries such as Cambodia, China, India, Indonesia and Pakistan. The decentralization has widened the scope for citizens to influence decision making, and increase resource allocations. To empower grass root level to choose, implement, and monitor their own services is an effective approach to directing service delivery to the poor as well as increasing the capacities and empowerment of communities involved.
Lastly, I think that we need to create social protection for the poor because most of them are quite vulnerable to weather shock, economic recession, natural disasters, or ill health. Without social protection, some families can easily fall back into poverty trap. Therefore, to protect these people, the governments need to create a sound risk pooling mechanism, social insurance, social security system and pension. I understand that this is not an easy task to fulfill. For those advanced countries with high living standard, the social protection schemes have been constantly reformed to make sure that benefits are equally shared. For those countries that have not had this schemes yet, we have no choice but to start developing because we do not want to see our people falling back into poverty.
In closing, I wish this forum a success and fruitful discussion. I hope that the participants will bring out many good ideas on how to bridge the development gaps in all aspects in society include bridging the development gap between castes, others religion in each countries, bridging the development gap between nations and all the economics in the region and around the glob to improve the living standard of billions of people.
Finally, allow me to wish you all, Excellencies, Ladies and Gentlemen, the five gems of the Buddhist blessing. I would like to declare the 2nd Asia Economic Forum open.