Excellencies, ladies and gentlemen,
Today I am delighted to attend the opening of the International Investment Conference 2014 held under the theme of Cambodia: New Era of Opportunity “Growth, Change and ASEAN Integration” which is organized by the International Business Chamber of Cambodia. This event is indeed Cambodia’s first biggest international investment conference held in 2014 after the formation of the Royal Government of the Fifth Legislature which is born from a free, fair and transparent general election on July 28, 2013.
Taking this opportunity, I would like to deeply thank and commend the International Business Chamber of Cambodia, Prudential Cambodia, Jardines Matheson Limited, Sciaroni and Association, ACLEDA Bank and ANZ Royal for initiating this important conference. I strongly believe that this two-day conference will provide a new opportunity for strengthening and expanding business and investment sector in Cambodia. At the same time, I would also like to warmly welcome Excellencies, ladies and gentlemen all the participants to this event. Your presence show that you value Cambodia highly in terms of both economic and political aspects, especially your confidence in the Royal Government of Cambodia as well as the growing interest of national and international business community in Cambodia.
In fact, Cambodia has great potential for economic growth and diversification in many areas, meaning Cambodia can offer a big room for investment now and in the future. Currently, garment, tourism, construction and agriculture sectors are the pillars of economic growth in Cambodia, therefore, we need more investment in other sectors to help drive our economic growth. This is not only what Cambodia wants, but also a good opportunity for investors since Cambodia needs to modernize its industrial base which will play an important role in the growth strategy, help promote economic growth in the short and long run, create jobs for youth and underpin the new phase of economic growth by help attract investment in sectors other than agriculture and tourism.
Cambodia has a lot of potentials in the context of the changing architecture in the region, the establishment of the ASEAN economic community and the regional comprehensive economic partnership which will provide a great opportunity for the development of industrial sector in Cambodia through the enhanced regional linkage and economies of scale as well as business and manufacturing growth. At the same time, regional developments such as wage increase in China, Thailand and Vietnam, industrial growth in Bangkok and Ho Chi Minh cities, and the initiative to establish an industrial corridor linking both poles (Bangkok and Ho Chi Minh) will provide great opportunity for Cambodia’s integration into the regional and global production networks, indeed a favorable condition for industrial development in Cambodia. Moreover, investors can also gain from some of Cambodia’s potentials such as young and skilled labor force, constant investment in transport infrastructure, growing middle income class, growing income, preferential market access provided by the EU’s Everything But Arms initiative and the advantage of being a latecomer and so on. In addition, investors will receive further incentives once Cambodia has launched its Industrial Development Policy that aims to promote Cambodia’s economic growth and diversification, profound transformation and competitiveness.
Over the recent years, Cambodia has gone through numerous changes, not only on political and security but also on economic, trade and social fronts.
Indeed, Cambodia achieved average economic growth of 6.7% per annum from 2009 to 2013, in spite of the slowdown in 2009 caused by the global financial crisis and economic recession. Cambodia’s economic growth stood at 0.1% in 2009 while the majority of countries suffered from negative economic growth then rebound quickly to achieve average growth rate of 7% per annum from 2010 to 2013, thanks to the robust garment, tourism and construction growth despite the slow global economic recovery, severe flooding and other issues after the general election. Robust regional economic growth along with the recovery in US and Europe and the Royal Government’s ability to maintain security, political stability and social order enable Cambodia to achieve economic growth of 7.6% in 2013. For 2014 and in the medium term, Cambodia’s economic growth is expected to exceed 7% per annum, thanks to the development of energy sector and other physical infrastructure and enhanced competitiveness, trade facilitation and investment environment. Besides, Cambodia’s inflation is expected to be contained within 3 to 4% in 2014 in spite of high inflation in the region and increase in food and oil prices. The Riel exchange rate against US dollar has been generally stable with very slight fluctuation. The banking system remains robust with enough capital and liquidity. The bank deposits and loans continued to increase in 2013, a reflection of the public confidence in Cambodia’s banking system. Our international reserves increased by 5.2% in 2013 and were expected to reach USD4.5 billion in 2014, equivalent to 4.5 months of import.
The reception of foreign direction investment remains strong, driven by the relocation of factories in neighboring countries and the growing investment by investors from China, Japan, South Korea and so on. Investment growth in 2013 revealed the stronger interest of foreign investors on the potential and opportunities in Cambodia, particularly strong confidence in the leadership and management of the country. The FDI inflow has been concentrated on the garment, rice milling, construction and tourism industries. Given this, there is great investment potential, especially in the area of machineries, electronics and agro-processing as well as investment in the value-added activities of the existing manufacturing, textile and tourism sectors to help attract more foreign direct investment in 2014 and 2015.
Sustainable economic growth and good progress in improving social indicators would allow Cambodia to definitely move from a low income country to a lower-middle income country status in the near future. However, although Cambodia is able to maintain high economic growth for now and in the medium term, a number of risks continue to threaten Cambodia’s economic growth.
Therefore, in a bid to maintain a pro-growth condition that allows Cambodia to manage and sustain its economic growth, the Royal Government of the Fifth Legislature of the National Assembly is committed to the in-depth and effective reform programs, that include: (1) improvement of investment environment and trade facilitation, (2) public financial management reform, (3) legal and judicial reform as well as fighting corruption, (4) coordination and alignment between the education and vocational training in response to the demand of the job market, and (5) further diversification of the growth base through the implementation of “Industrial Development Policy”.
For its integration into the ASEAN economic community in 2015, Cambodia must be well prepared, that is the development of human capital. Cambodia needs quality and competent human resources to respond to tougher competition in the long term. The Royal Government of Cambodia through the Ministry of Education, Youth and Sport has recently imposed strict measures to manage and control the Grade 12 exit exam in the academic year of 2013-2014 and reform the education work to ensure that Cambodia has quality human resource to respond to the development needs, especially the private sector. To this end, the Royal Government will further strengthen the quality of education and development of technical skills for Cambodian youth, workers and employees to respond to the demand of the job market and ensure the continuity of the country’s leadership and sustainable development for the future.
More importantly, we need to enhance Cambodia’s capability and capacity in the context of growing demand for cooperation at regional and international level and further promote the implementation of in-depth reform to create a modern and proactive economic management structure in the context of the new regional architecture. For that, Royal Government pays constant attention to the reform aimed to improve investment and business climate in Cambodia. Recently, the Ministry of Commerce, General Department of Customs and Excise and General Department of Taxation of the Ministry of Economy and Finance have achieved notable progress in their respective reform. The three organizations have mainstreamed the use of IT, launched the automation system for customs form application, request for customs certificate, issuance of export license and certificate of origin and commercial registration. These measures not only reduce processing time, but also ensure information accuracy as well as high responsibility of the Royal Government. By doing this, I believe that the active participation of the three organizations in trade facilitation will set a good example for other ministries-institutions to speed up their reform to catch up with countries in the region
In spite of the relatively high electricity price compared to neighboring countries and the unreliable electricity supply for strengthening Cambodia’s competitiveness and economic development, there has been a notable progress in the electricity sector. Indeed, thanks to the concerted effort of the Royal Government, electricity supply reached a turning point in 2014 since some major electricity development projects such as hydro and coal-fueled power plants have been put into operation, resulting in the unused electricity surplus of about 246 MW during raining season due to shortage of electricity transmission and distribution network. From now to 2018, electricity tariffs will not increase, but will gradually decrease.
In this regard, to meet electricity demand for the expansion of the industry sector and to ensure Cambodia’s investment attractiveness, I would like to take this opportunity to instruct the Ministry of Mine and Energy, Cambodia Electricity Authority and Electricity of Cambodia Company, Ministry of Economy and Finance to work together to assess the possibility of revising electricity tariffs for industrial consumption during night time, large commercial customers, prioritized zones and so on.
With regard to setting minimum wage, we must rely on the tripartite mechanism to find solutions and review minimum wage level every year. In this regard, I would like to remind our people that setting minimum wage can also pose risks to Cambodia. For instance, increasing minimum wages in China and Thailand adversely affects manufacturers and reduce their competitiveness due to high production cost and as a result, investors consider relocating their factories to other countries. This is simply a rational decision-making. Therefore, Cambodia has to grab the opportunity by carefully setting the minimum wage to welcome investors who are relocating their factories.
Along with its effort to manage and sustain economic growth, Cambodia will also consider other initiatives and responses to the latest developments. Overall, regional economic integration, national socio-economic development, population growth, urbanization, as well as the development of transport, energy and other sectors has brought about changes in numerous aspects, that include the economy, legal aspects, environment, fiscal space and so on. To this end, Cambodia has launched the “National Policy for Green Growth” and the “National Strategic Plan for Green Growth 2013-2030” and other necessary measures to respond to climate change.
With regard to public budgeting, Cambodia continues to implement the Public Financial Management Reform Program (PFMRP) and other necessary structural reform measures, including the promotion of fiscal policy through stepping up revenue mobilization by focusing mainly on improving revenue administration and governance, tightening expenditure in order to reduce budget deficit to an appropriate level, and increase fiscal space by adopting and strictly implementing the “Medium-Term Revenue Mobilization Strategy 2014-2018” to address the needs of development and to prepare for the unexpected events such as another crisis and so on. The public financial management reform has enabled the government to address a number of expenditure priorities, such as salary increase in the public sector, increase in public investment to support and promote growth as well as response to natural disasters to ensure economic efficiency and competitiveness in attracting investment and promoting exports for Cambodia.
At the same time, in order to increase economic competitiveness Cambodia will increase its public investment and mobilize private sector participation in infrastructure development while working hard to promote the development of human resources and equip our labor force with competence and skills. That also includes the formulation and implementation the Master Plan on Transportation Infrastructure Development to connect all parts of the country and with the neighboring countries through developing multi-modal and cross border transport systems along with an efficient and competitive logistics system aimed at promoting investment, trade, tourism and rural development.
Truly, the aforementioned are aimed to further diversify the growth base and ensure effective implementation of the Industrial Development Policy. The vision of the Royal Government in formulating this industrial development policy is to expand and strengthen our economic base through enhancing the productivity and competitiveness of the manufacturing sector in order to create jobs and increase income for our citizens.
Along with the formulation of the industrial development policy, the Royal Governent will need to amend Law on Investment and Law on Taxation to ensure consistency and Cambodia’s attractiveness as an investment destination. Besides, Cambodia will strive to implement the Policy Document on the Development of Small and Medium Enterprises aimed to ensure business climate, industrial standards, compliance with accounting standard and financial reporting requirement to enhance SME’s access to credit, tax incentive for production inputs and institutional capacity building, especially the establishment of establishing National Productivity Centre, Centre of Industrial Experiment and Centre for Business Development Advisor and so on. Last week, I approved the establishment of Cambodia Productivity Committee consisting of members from relevant ministries, including representatives of economic actors and academia. This Committee, led by Permanent Deputy Prime Minister Keat Chhon, has the core mandate to study and analyze labor economics, labor productivity and competitiveness.
No doubt, the implementation of all these measures will fruitfully contribute to the expansion of the industry base, that include the emergence of assembly industry, electronics industry, spare-parts industry, agro-processing industry and other manufacturing industries. At the same time, it is necessary to revise “The Development of Small and Medium Enterprises’ Framework” to ensure its consistency with “The Industrial Development Policy” in order to enable small and medium enterprises to connect with large enterprises through industrial clusters and enhance their entrepreneurship, productivity, creativity and specialization through the implementation of a package of comprehensive measures, including the dynamics of actor system in the production chain, promotion of technological transfers, improvement in access to financing and strengthening of technical standards… etc.
In addition, Cambodia is also implementing judicial reform and the strict observance of the principles of rule of law in order to strengthen governance and institutional capacity is necessary to support the implementation of our far-reaching reform agenda in a bid to enhance the efficiency of the public service delivery and strengthen investment climate. All these tasks are intended to boost the attractiveness of business and investment sectors, support private sector development and build investor confidence in doing business in Cambodia. We will indeed do our best. Furthermore, the Royal Government has set standards and fees for public services delivered to citizens, businesspeople and investors, improved legal frameworks, strengthened institutional mechanisms, including dispute resolution mechanism aimed to better serve people with transparency and effectiveness. Also, Cambodia will continue to strengthen and enhance the effectiveness of the three core measures for our fight against corruption, i.e. (1) educating people not to commit corruption, (2) preventing corrupt practices and (3) brining corruption cases to court.
Cambodia has been actively participating in the ASEAN’s economic and financial initiatives, especially the initiatives to realize the ASEAN Economic Community in 2015 and integrating itself into the regional cooperation framework by actively engaging in dialogues with important partners of ASEAN such as China, Japan, Republic of Korea, India, Australia, and New Zealand. As a result, national and international investors in Cambodia can enjoy more and better opportunities. Meanwhile, Cambodia has officially launched the “Cambodia’s Diagnostic Trade Integration Strategy 2014–2018”, which would contribute to facilitating Cambodia’s integration into the ASEAN economic community in 2015.
In this spirit, the Royal Government always welcomes dialogue with the private sector, places great emphasis on investment climate and supports the promotion of capacity building of the private sector to compete on regional and international arenas. Indeed, the Royal Government has regarded the private sector as locomotive of growth and itself as the strategist and development manager whose role is to ensure favorable, stable, transparent and predictable investment climate for the private sector.
Further, the Royal Government will continue to promote the effectiveness of the so-called “Government-Private Sector Forum” mechanism to provide policy options and recommendations intended to enhance the role of private sector in development while continuing to address business and investment issues and concerns in Cambodia. Besides, I would like to call on ministries-institutions in charge of issues related to business and investment, especially the Committee for Private Sector Development Policy, the Ministry of Economy and Finance and the Council for the Development of Cambodia to step up the implementation of proactive macroeconomic policy to support economic growth and social development by means of promoting the development of private sector and job market and boosting investment in key sectors.
Before concluding, on behalf of the Royal Government and myself, I would like to request all businessmen and entrepreneurs present in this international conference to explore investment opportunities in Cambodia in the above mentioned context, that is the Royal Government of Cambodia is committed to expanding its growth base through strengthening governance, increasing value-added by joining regional value chain, and creating of favorable conditions for the private sector as well as ensuring the competitiveness of private sector in Cambodia.
I also would like to take this opportunity to reiterate that Cambodia continues to welcome and encourage investment projects to Cambodia, and the government will continue its effort to strengthen economic cooperation and its openness as well as to create better investment climate and ensure its attractiveness and trustworthy for all investors and businessmen. I also would like to remind the leadership and officials of relevant ministries-institutions that, now more than ever before, we have to work together for the development and prosperity of Cambodia as well as the region.
Finally, with the official announcement of the opening of the international investment conference 2014 under the theme: “Cambodian New Era of Opportunity, Growth, Change and ASEAN Integration”, I would like to wish Excellencies, ladies and gentlemen a fruitful outcome of this conference and success in all your endeavors./.