Today, I have a great honor and pleasure to meet once again the representatives of international community and development partners. I would like to express our warmest welcome to you all to Cambodia, and deeply thank you for your participation in this Consultative Group Meeting (CG).
I would like to thank the Council for the Development of Cambodia (CDC) for working closely with the World Bank in coordinating the CG process and making arrangements for the meeting today. We also thank all the bilateral and multilateral cooperation partners for their active engagement and support to the Royal Government in our pursuit of poverty reduction and overall national development.
As in the past, you will in this meeting not only do stocktaking of our past progress and review reform activities, but also dialogue on key aspects of our strategic approach for development in order to steer our economy in the years ahead. In this sense, I would like first to outline our key achievements and challenges that we faced since the last CG meeting. I will also touch upon the key policy areas and issues that need your attention and support after deliberations during this meeting.
Your Royal Highnesses,
This meeting has special significance as it is being held soon after the Cambodian politicians across the board have found a "Cambodian solution" to their differences. Belying dire forecasts of doomsayers and people who rush to instant judgments on every occurrence, the Cambodian leadership has demonstrated that all of them work towards one goal, however divergent their approaches may seem to uninitiated observers. That goal has always been the welfare and progress of the common Cambodian people at large. The recent events are a further testimony that we all have put our supreme national interests ahead of political parties. We have agreed to work together for our people. We have not done so merely to placate outsiders but because we believe in mutual accommodation and are committed to serve our people, not merely to cling to power. The victors in the process are not politicians or political parties but the people at large. Democracy is not merely political game for the sake of power politics or endless, critical speeches but it is an art of compromise and finding common ground. Genuine democracy, in my view, should be the means to make the hard choices and do the hard work necessary to constantly improve the lot of all Cambodians, the poorest foremost.
We are proud that we are able to work together for our national interests. Cambodians must be united to meet the new challenges the country is facing by exhibiting a new sense of Cambodian nationalism. Cambodia is moving from war to peace; from a culture of conflict to a culture of compromise; and from a culture of confrontation to a culture of dialogue and reconciliation. We have seen that the decade of peace and stability has improved our people’s living standards and opened up tremendous opportunities.
As we march further into the 21st century, we are conscious that our country’s development requires that we put aside past discord and build national consensus necessary to further strengthen the foundation of our modem society. Along this road, everyone is free to propose his or her recipe for the future. But this freedom should go hand in hand with responsibility and restraint. We should look into the past to draw lessons from the mistakes of history. We Cambodians cannot afford the luxury of engaging again in senseless confrontation and internal strives that our country had gone through since the 14th century by appealing to foreigners to help resolve our differences. Every solution in the final analysis has to be a Cambodian solution. Cambodians are interested in Cambodia more than anyone else.
We have seen that peace, which has been brought about by relentless efforts, mutual accommodation and compromise, has considerably contributed to social and economic development in Cambodia. During the last decade, we have made serious strides in promoting economic growth. In fact, with prudent macro-economic management over the last 12 years, GDP growth has averaged almost 7 percent per annum. During 1999 - 2005, overall growth averaged 7.3% annually. Based on the latest survey, over the last decade, the level of poverty has been rapidly reduced by 10-15 percentage points from 47% in 1994 to 35% in 2004. This means that poverty rate dropped by more than 1% per year as the Government intended to achieve. At the same time, robust economic growth persisted in 2005, demonstrated, among others, by increasing tourist arrivals, continued expansion of garment exports and construction boom.
Increased revenues and allocation for physical and economic infrastructure, irrigation facilities and social or human-development sectors have created favorable conditions for broader distributive growth. We have made major improvements that are measurable by social indicators such as an increase in school enrollment and improvement in primary education, which help closing the gender gap in literacy among younger age group. Health indicators are improving with the reduction in maternal and child mortality rates and under 5 mortality rates, the dramatic decrease in infectious diseases, especially HIV/AIDS, the improved supply of clean water in urban areas and sanitation in rural areas, as well as other achievements.
We have made significant progress towards achieving the Cambodian Millennium Development Goals (CMDGs). However, we have no room for complacency. A constant reminder to us is that a third of our people still live below the poverty line. We must work harder so that the poor have secure land tenure. We must curb the increasing inequality. We must create more employment for our young people by strategies that would yield largest returns in the quickest time, such as by enhancing agriculture productivity and strengthening small and medium enterprises. We must improve governance and trade facilitation to promote private sector. Good governance is also the sheet anchor for a vibrant civil society.
Taking stock of the progress so far made and recognizing the urgent need for more targeted and focused developmental efforts, the Royal Government of Cambodia considers poverty reduction of the people as core objectives of all policies and development strategies of our government, especially the "Rectangular Strategy" which clearly states the goal of economic growth, employment creation for the people, promotion of equity and social justice, and enhancement of efficiency in the public sector through implementation of in-depth and comprehensive reform programs. Moreover, in order to formulate a more detailed action plan as stipulated in the Rectangular Strategy, the Royal Government has prepared a planning document called "The National Strategic Development Plan" for 2006-2010, which synthesizes the Cambodian Millennium Development Goals (CMDGs), the National Poverty Reduction Strategy (NPRS) 2003-2005 and the Governance Action Plan including civil administrative reform at the national level.
The NSDP has been formulated by a highly and intensely inclusive process involving wide ranging consultations with all stakeholders within and outside the government and represents a true consensus on the priority strategies to be pursued.
The implementation of the strategies and policies outlined in the NSDP will be achieved through a focused and prioritized Public Investment Program (PIP). The PIP, adopted by the Royal Government of Cambodia on 27 January 2006, is a three-year rolling programme to capture priority investment proposals and needs on an on-going basis. The programs and projects that constitute the public investment program will be financed both from the National Budget and with assistance from development partners. From now on, the National Budget will be aligned to support the implementation of NSDP through financing of the PIP. The PIP is comprised of Government’s priority programs that are being implemented and/or are planned to be implemented in various sectors and constitute the basic information for the allocation of national budget resources as well as for the mobilization of resources from development partners.
I believe that all of you have before you both the NSDP and the PIP for 2006-08. I strongly urge and expect all government agencies and external development partners to strictly adhere to the priorities set out in them.
Your Royal Highness, Excellencies, Ladies and Gentlemen:
Cambodia is at a critical threshold for faster future progress. The next ten years represent a decade of opportunity to realize ambitious CMDGs and uplift the poor and vulnerable. We have a daunting and challenging task ahead but we are confident that we will be able to surmount problems and ensure robust growth in the long run and well distributed growth in an equitable manner.
The RGC is fully committed to some basic principles for taking the country forward, such as: strict adherence to democracy in governance with openness and guaranteed freedom of expression; government to ensure political stability, rule of law, equity and social order. State reforms at all levels will be carried out to make the government fully responsive, responsible, effective, transparent, accountable and predictable in their job performance to serve the needs of the people. The Government is committed to ensuring macro-economic stability, creating and maintaining key infrastructure, as well as a conducive climate for private sector to flourish, and provide essential social services for human capital formation and enhancement.
Certain overarching aspects will govern all other actions to be pursued during 2006-2010, namely:
Vigilance in safeguarding and continuously enhancing our hard-earned peace, political stability and social order is essential for our future progress on the road toward sustainable development. Indeed, we will deepen and strengthen partnership with civil society, private sector and external development partners. Our strategy is to further broaden and deepen integration of Cambodia into the region and the world and attract investment to achieve pro-poor economic progress.
On the basis of the above, various key strategies and actions will be pursued to implement different aspects and elements of the Rectangular Strategy.
Under Good Governance, priorities are to reinforce and fast track a multi-pronged attack on corruption; carry out specific legal and judicial reforms; speed up implementation of public financial management reform and pursue public administration reform; and add to and strengthen measures to make decentralisation and deconcentration (D&D) more effective.
A draft of the Anti-Corruption Law, prepared through extensive consultations is in its final stages of consideration within the government before being sent to the National Assembly. As you all know, we have taken steps to crack down on corruption of the court system by launching an investigation with regard to a number judges and prosecutors. Moreover, disciplinary actions were taken against some judges and legal clerks involved in irregular cases. A rotation system was introduced for judges across the country.
Efforts have been made in drafting the laws in 2005. A total of 45 Laws were approved by the National Assembly in 2005. In addition, other Laws have also been submitted to the National Assembly during 2005 for adoption.
As part of promoting good governance, the Royal Government has to make sure that the civil servants have the right incentives to do their jobs. Cambodia needs civil servants who report to schools, health centers, and offices for a full, productive and effective day of work, and who stay in the region where they are employed. Cambodia needs civil servants who try to serve citizens’ needs in a timely, efficient and effective manner. The Royal Government is fully aware of the need to improve the incentives civil servants receive as well as strengthen merit-based management of the entire public administration. The Royal Government and its development partners are pioneering a new approach to address these problems.
The Merit Based Pay Initiative (MBPI), which is currently operating in the Ministry of Economy and Finance, is an official government program that rewards civil servants with higher pay while also requiring a merit-based management and performance system. Civil servants are selected to participate based on their merits in a competitive process. Those selected and those who perform well in accordance with their terms of reference will stay in the program. Those who do not perform will be removed from the program. I hope other ministries beside the MEF will take advantage of this opportunity and look into their possibility to expand this initiative among ministries/agencies in the government.
Your Royal Highnesses, Excellencies, Ladies and Gentlemen:
Productivity and improvements in agriculture holds the key to quicker reduction of poverty which is concentrated in rural areas. The focus will be on urgent preparation of a comprehensive Strategy for the Agriculture Sector as a whole, including irrigation and water resources, with attention focused towards intensifying crop production to increase yields and rural incomes, diversification of crops, improving fisheries management, sustainable management of forestry through reforms, environment conservation and carrying out of land reforms, particularly to ensure land tenure to the poor, improve infrastructure, especially irrigation and enhance human capital. Strengthening good governance is vital for promoting agri-business in Cambodia. Of high importance would be to try out direct assistance strategies to help the poor through innovative grass-root based initiatives.
In this regard, I thank our development partners for helping Cambodia to receive secure legal land title, allowing our farmers to have secure land tenure and encourage them to work on their land to improve their livelihood. At present, we can register land title up to 20,000 per month by strictly adhering to procedures. This process ensures active participation from the people and a legal redress for each land title by allowing time for announcement and dispute settlement over a period of 4 to 5 months on average. As I have mentioned, the Government wants to speed up land titling, for example, we want to reach 50.000 land titles per month. However, given our limited physical capacity, we warmly welcome all development partners who wish to provide more assistance in order to achieve a more ambitious goal.
Therefore, as a direction to resolve the land issue, we have to promote land title registration toward achieving the MDG goal. This means that we have to achieve 32% of all land titles by 2010 and reach 65% by 2015. I have seen that a systematic registration of land title in each commune is the best way to address the concern of the people in land tenure. Indeed, land which is a source of many conflicts is land without proper tenure, with no fence, no cultivation, and no clear boundary. The Government is actively promoting state land registration which would enhance the effectiveness of management in state property, and help strengthen a security of private tenure of land adjacent to the state land.
Landlessness has become a concern for our government. We must work together to reverse this trend. There are people who take advantage of the current situation to take over state land to keep for speculative purposes. To this end, we must review the existing economic concessions in order to cancel idle concessions and transform them into productive assets or redistribute in an orderly manner to the poor landless households. Moreover, the Government will carefully promote implementation of the Social Land Concession Program in order to accelerate rural poverty reduction.
Indeed, many of the poor rely on "common resource" such as forestry and fisheries resources. However, when a community receives the right to use those resources, they need assistance to develop an institutional structure for their own management in order to ensure sustainable use of those resources and help reduce their poverty in a longer term. In forestry, the Royal Government has committed to implement policy and concrete measures to ensure continuous and sustainable resource use, including inspection and prevention of logging and illegal log trade. With this last point, I would like to emphasize that the Government has taken a position of extending a contract to the monitor of logging crimes, in case there is a development partner who would like to provide grant for such contract extension until there is a concrete decision on a new mechanism.
To further advance Rural Development, accent will be on building rural infrastructure -- roads, markets, drinking water facilities, sanitation facilities, minor irrigation, school and health buildings, etc. -- much of it through devolution of funds to remote rural areas and the most poor citizen. The report on micro finance activities showed a trend of increase in available credit, borrowers and geographic scope of micro finance and micro/small enterprises. The report also showed the capacity of the poor in using credit to earn their living and improve their livelihood, which reflects through their ability to pay back at a rate ranging from 95% to 98% of the total borrowers. Having seen this enormous benefits, the Government will do its best to expand and enhance access to micro finance services, especially by making further effort to bring down the prevalent high interest rates.
Our priorities in rehabilitation and improvement of physical infrastructure include: primary and secondary roads, railways, airports, ports, irrigation facilities, telecommunications, electricity generation and distribution networks of clean water, etc., with maximum attention being paid to attracting private sector both domestic and international. The Government is making utmost efforts to remove the current major obstacles for private investment through targeted reforms aimed at facilitating trade and improving investment climate, especially enhancing governance. Key practical measures include introduction of a system of single administration document (SAD) and an overall risk management strategy to speed up the clearance of imports and exports, which would significantly streamline procedures and unnecessary documents and high "transaction costs". I have signed a Sub-decree on Trade Facilitation Through Risk Management, which will take effect from the 1st March 2006. To this end, the establishment of "Special Economic Zones" along the international check-points is another efficient solution. Moreover, enhanced entrepreneurship and SMEs are receiving high attention, especially through improvement and facilitation in access to credit both for medium and long term.
With our utmost efforts and strong determination, opportunities for Trade with neighbouring countries and others in the world have been enlarged and strengthened. However, the Government recognized that Cambodian people are not being adequately availed of to create demand for, and to export, goods and services using the competitive advantages of the country. Therefore, the Government still has a long list of agenda in development of international trade.
Your Royal Highnesses, Excellencies, Ladies and Gentlemen:
The education system has made impressive gains, thanks to the Priority Action Program (PAP) that was put in place since 2000. Spending on education more than double (or increased by 112%) in nominal terms, from 165.8 billion CRs in 2000 to 350.7 billion CRs in 2005. This has resulted in increasing primary enrolment rates, which have risen particularly fast for girls and for children from poor family, lower direct costs to poor families and more schools and better trained and more motivated teachers. Since 2000, primary school enrolment has grown from 2.2 million to 2.7 million with the majority of growth being in poor and rural areas. At the same time, the percentage of children needing to repeat grades has fallen considerably from 26 percent in 1997 to 10 percent in 2003. At the same time, concerns for improving quality at all levels have become priority for the Government to address.
The Royal Government adopted the Education Sector Strategic Plan (2006-2010), aimed at providing universal basic education, vocational training and higher education to start building a ‘critical mass’ of educated, skilled, talented, capable people to serve the development needs of the county in various spheres.
Health Sector has witnessed significant progress but some of the health indices are still quite high. Health spending has also risen significantly from 101.8 billion CRs in 2000 to 224.6 billion CRs in 2005 (an increase of 120%). Indeed, nutrition for children remains a serious problem, and incidents of disease that can be prevented remain high. However, we have good progress in disease prevention (eg. vaccine, protection for pregnant women from infectious diseases) and curative diseases. The high rate of maternal mortality remains a major concern for all of us. The sensational success is the rapid decline in the spread of HIV/AIDS (the rate dropped to 1.9% among adults aged 15-49 in 2003, compared with 3% in 1997). The spread of Tuberculosis also showed a declining trend. All these are the result of the strong commitment of the Royal Government and its good cooperation with the development partners.
Overall, we shall pay priority attention to expand availability of health care facilities by construction and/or rehabilitation of facilities -- hospitals, health centers, etc., in rural areas; expand and strengthen sustainable methods for provision of help to the poor to access public health care system; elicit, encourage and involve private sector in provision of health care, both in urban and rural areas; pay special attention to curtail spread of HIV/AIDS, especially to families, by information and education efforts; and similarly be very vigilant to detect early and prevent outbreak of new communicable diseases like bird flu, which remains the highest priority of the Government.
Health contracting out to NGOs for healthcare has improved equity impact with significant reduction in out-of-pocket health expenditure of the poor and dramatic increase in the utilization of public facilities. Performance-based contracts signed with service providers improve staff salaries and motivation.
Overall, the Royal Government expects that some CMDG targets could be met while for others specific actions need to be pursued. However, we recognize that we have a long way to go as we have many challenges that we have to overcome. In this regard, the provision of public health care services to the people, especially to the poor living in rural and remote areas, and the prevention of the spread of infectious diseases is at the core of the government’s strategy and program to achieve a long term vision, aimed at building a socially connected, educationally advanced, and culturally vibrant Cambodia, free from poverty, illiteracy, and disease.
Your Royal Highnesses, Excellencies, Ladies and Gentlemen:
As I have mentioned earlier, we have achieved an encouraging result in macro-economic and fiscal management. Economic growth accelerated in 2004 and reached 7.7 percent and in 2005 is estimated to be 7 percent, reflecting stronger agricultural growth, continued expansion of exports, tourism and construction activities. Fiscal performance in 2005 has been good, with improved revenue mobilization and expenditure restraint. Domestic revenue in 2005 reached 11.7 percent of GDP, compared to 11.3 percent of GDP in 2004. The tax revenue increased from 8.4 percent of GDP in 2004 to 8.7 percent of GDP in 2005.
We are conscious that steady and robust macro-economic growth, fiscal discipline, and vibrant financial sectors are vital to pursue progress. Accordingly, the sectoral policy of the Government is intended to:
The RGC’s focused efforts to strengthen macroeconomic management and fiscal reforms has resulted in robust economic performance in recent years, in spite of negative external factors such as higher oil prices, concerns about the on-going avian flu, and adverse weather conditions. The Royal Government’s fiscal policies are designed to ensure a level of spending that is consistent with macroeconomic stability; The expenditure program is being restructured as part of a systemic reform package aimed at promoting domestic savings, productive investment, and efficient resource allocation.
Prospects for economic growth in Cambodia are good in light of the future discovery of offshore oil and gas resources in the Gulf of Thailand. This will give further impetus to economic development in Cambodia. The RGC has undertaken several studies and put in place necessary infrastructures to optimize use of these valuable resources and revenues to flow from them.
Overall, the public financial management reform (PFM) program, which I launched during the CG meeting in December 2004 has been well on tracks towards achieving a credible national budget. In the near future, the Ministry of Economy and Finance will cooperate with relevant development partners to take stock of progress and draw experience from the implementation of the PFM reform program over the last one year, and to outline measures to improve and accelerate its implementation for the coming years.
As Senior Minister Keat Chhon just raised, the reason that the IMF decided recently to write off Cambodia’s debt amounting to 82 million US dollar is not by hazard. This fair judgment and kind gesture is encouraging for the Government and Cambodian people to continue their effort to work more actively to implement reforms in all sectors, which is a "life and death" issue for Cambodia. On behalf of the Royal Government and people of Cambodia, I would like to express my profound gratitude to the IMF and other development partners concerned in debt relief program for Cambodia. The Government wishes to ensure that we will use these additional resources in transparent, accountable and efficient manner in order to achieve the goal of poverty reduction for Cambodian people.
Samdech, Royal Highnesses, Excellencies, Ladies and Gentlemen:
Since the last CG Meeting in December 2004 there have been significant developments in both the international arena and within Cambodia to address the aid effectiveness issues. Internationally, new standards were set for both developed and developing countries to address the aid effectiveness issues, which include far-reaching and monitorable actions to reform the ways in which aid is delivered and managed.
Domestically, the Royal Government in close collaboration with development partners has made significant progress in the following areas:
Firstly, putting in place a new government-donors coordination mechanism that has enabled the Royal Government to monitor progress, on a quarterly basis, on the implementation of ODA supported activities and in achieving the agreed targets of the joint monitoring indicators. The joint Technical Working Group (TWGs) and the Government-Donor Coordination Committee (GDCC) mechanism that has been put in place in 2005 represents a fundamental change in the institutional set up for planning, managing and monitoring progress on the implementation of development assistance to improve ODA effectiveness. The quarterly meetings of GDCC in 2005 have provided an opportunity to both sides to regularly review progress and be informed about constraints that are being experienced, and enabled them to take necessary actions.
Secondly, while implementing the Action Plan on Harmonization and Alignment, the Royal Government recognizes that there is an urgent need for development cooperation partners to give a high priority to:
Indeed, government officials should be supported to take real ownership of development cooperation activities. In this regard, I would like to urge all development partners to work closely with relevant government ministries in order to upgrade government ownership to a higher level in the CG process. With this, we may change the direction of this CG meeting to become an annual GDCC meeting. To this end, we might review the setup and process of TWGs and GDCC mechanism which includes:
In this regard, I expect that TWGs would become much more active and meet more regularly and purposively to carry out effectively the immense tasks outlined in the NSDP. I also hope that both TWGs and the GDCC will monitor not only of "process indicators" as done so far but would also pay focused attention to "progress indicators" already developed in the NSDP.
As part of the harmonization exercise, I would like to propose that the NSDP be used as agreed strategies and policies for government-donor harmonization, with financing through a focused and prioritized Public Investment Program (PIP). In order to strengthen the monitoring mechanism, I would like to urge the Ministry of Planning to work closely with the CDC and the Ministry of Economy and Finance and other line ministries to report annually on the progress of implementation of NSDP. This report will be used for joint review between the Government and development partners, which is considered as an important part of monitoring on "Progress Indicators".
Samdech, Royal Highnesses, Excellencies, Ladies and Gentlemen:
I have very broadly laid before you the many important areas of progress made so far and plans for the future. Setting down strategies and targets on paper is the first step. Far more important is to plan and pursue practical actions to achieve them. Doing is much harder than saying. We more than any one else are acutely aware that there is a long march ahead.
Cambodia’s past achievements and current solid performance merely serve to highlight the many problems and challenges to overcome in order to push our reform and development agenda. We need to work on further improvements in governance if we are to make more than a dent in poverty. Furthermore, we should instill the sense of ownership of the development process and our achievements among all social strata.
Indeed, policy reforms across sectors have constituted the substance of our development thrusts. Yet we also realize that while good policies do matter, their rigorous and consistent implementation remains vital. Therefore, coordination and information sharing between and within ministries/institutions should be improved. The challenge to ensure that systems of governance work efficiently with increased access to and use of modern knowledge and technology.
Reform is not a just shallow word. Implementing reforms require not only political will, but also considerable human and financial resources. Cultural and political context has to be taken into account. I realize the immensity of efforts and the challenges that lie ahead of us. This requires that all stakeholders are involved, and not just observers and critics.
The broad picture, I have tried to place before you today, shows the vast distances Cambodia has traversed in mere ten years, accelerating significantly in the last four years, to transform itself from a strife-tom, problem-ridden, poor country to one firmly on the path to progress and realization of its true potential. But every step we take shows up new challenges ahead. Nevertheless, we have the horizon firmly in our sights and we will spare no measures to take Cambodia forward for betterment of its people.
In closing, let me thank you all for your patience and attention. My intention is to assure you of our unity, sincerity and seriousness of purpose in pursuing progressive policies and measures of our own. The road ahead has become much clearer, but is still long and difficult, and the solidarity of the international community with the aspirations of the Cambodian people continues to be vital.
The Royal Government of Cambodia is represented in the CG meeting by an experienced and able senior delegation led by H.E. Keat Chhon. They will be with you and share with you the details of our programs and all the information required about the various aspects of our socio-economic situation and needs for development assistance.
I wish you all, Excellencies, Ladies and Gentlemen, good health and success in your endeavor, and I wish a good success for the CG meeting.