Address at the Regional Conference on “The CLMV Countries and ASEAN Economic Community (AEC) 2015 –Bridging the Development Divide” Organized by Institute of Southeast Asian Studies, Asian Development Bank and Konrad Adenauer Stiftung
Raffles Hotel Le Royal, Phnom Penh, 28th November 2011
Excellencies, Ladies and Gentlemen,
It is my great pleasure and honor to address the opening of this the Regional Conference on “The CLMV Countries and ASEAN Economic Community (AEC) 2015 – Bridging the Development Divide”.
Taking this opportunity, I would like to warmly thank the Institute
of Southeast Asian Studies, the Asian Development Bank and Konrad
Adenauer Stiftung for organizing this event in Cambodia.
The
topic before us here is “How the establishment of the ASEAN Economic
Community can contribute to bridging the development divide between
CLMV countries and the older ASEAN members”. These two key factors:
building ASEAN Economic Community and bridging development divide
should be complimentary and closely reinforcing one another.
That
is, on the one hand, economic integration through economic community
building is meant to bring people and societies closer together
through sharing markets and economic spaces, attracting FDI,
employment generation and of course to improve the quality of life of
the people. Bridging development divide, on the other hand, is meant
to accelerate economic development through economic integration to
catch up with the rest of ASEAN.
The
role of economic community building therefore is essential because
economic integration enables the expansion of the economic and market
space. Inevitably, the processes of development and economic
integration help to improve the way we work, they help to transform
our societies, and they help to improve our institutional
arrangements.
Development Challenges in the CLMV Countries
The
CLMV countries, located in the heart of mainland Southeast Asia, are
instrumental for geo-politics and geo-economics of ASEAN and are
crucial for shared prosperity of mainland South East Asia. The CLMV
region is endowed with bountiful natural resources, and inhabited by
about 160 million people, which presents a tremendous potential for
the economic and market opportunity.
Our
economies constitute a building block of ASEAN, which is closely
intertwined and mutually reinforcing our objectives of creating the
ASEAN Community by the year 2015 and the East Asian Community over the
long run. Thereby it would enhance ASEAN competitiveness and narrow
the development gap amongst ASEAN members.
In
retrospect, the CLMV countries had suffered from the legacy of
political wars and social instability. It was torn by political and
ideological warfare. Decades of wars within our region ultimately
destroyed local economies, political and social institutions that in
so many ways contributed to the erosion of social unity, destruction
of infrastructure, regional peace and stability that ultimately led to
the present predicaments such as poverty, economic deprivation and
social insecurity.
However, at the dawn of the 21st century, we have witnessed the following transformation of the whole CLMV Region:
- Firstly,
its transformation from a region, stricken by internal conflicts and
instability to an oasis of peace, security, stability and cooperation.
- Secondly,
its gradual transformation from an under-developed region into a
sustained economic growth at a faster pace in the lead up to the
Global Financial Crisis in 2008/2009. Most of CLMV countries have gone
through a gradual shift away from agriculture towards manufacturing
and services. More importantly, economic progress has resulted in
improvement of human resource development across the CLMV region; and
- Thirdly, CLMV countries have become more and more openness and liberalized through their membership in ASEAN, AFTA and WTO.
I
trust that our past experiences have taught us that the lack of
cooperation among nations of the region has made the region vulnerable
to external shocks and mire in poverty. Therefore, the learned
lessons are to cooperate by becoming more integrated and resilient
through regional development.
In
spite of all the endless efforts and inspirations on accelerating the
development of the CLMV countries, the fundamental challenge of our
cooperation is financing. Thus, Foreign Direct Investment (FDI),
market integration, trade, and investment, in conjunction with ODA,
play a significant role for our development initiative.
Alongside
with the cooperation initiatives, we also have witnessed the
proliferation of countless meetings at different level.
In this regard, I would urge all CLMV countries to take serious strides to tackle the following issues:
Firstly, Domestic resource mobilization to ensure sustainable growth;
Secondly, Enhanced cooperation with development;
Thirdly, Private sector participation in all the initiatives;
Fourthly, Joint effort to improve market access to products originated from the CLMV countries;
Fifthly,
collective work to generate support for our initiatives under
multilateral frameworks, particularly in attracting international
financing.
I
would like to stress that economic integration is essential and
perhaps inevitable, but to accelerate the process such as integrating
markets and promoting free flow of goods, services and factors of
production requires not only policies coordination, capital,
institutional reform, but also the respect for national jurisdictions
and sovereignty.
At
national level, we also recognize the essence of structural reform,
if we are to accelerate the transformation of the CLMV countries. The
structural reform in the areas of public financial management, trade,
legal systems, investments regimes, and civil service reform are
critical for the sustainability of economic growth and economic
integration as well as for the development of human capital. With
this, at regional level, we recognize that good governance is needed to
ensure that the CLMV countries sustain its competitive edge and
provides the best investment environment.
Cambodia: Two decades of nation building
Taking
this opportunity, I would like to provide some stocktaking of serious
strides that Cambodia has made for the past two decades of nation
building.
Even
after the general elections of 1993 following the peace agreement,
unrest continued. The prerequisites for any serious development had
yet to be established. However, the rudiments of a market economy were
established during this period. Cambodia was firmly put on the path
of rehabilitation. The Cambodian economy was growing 6.3% per annum
during 1994-1998. Only the “win-win” policy of national reconciliation
that I initiated and implemented in 1997 finally ended the Khmer
Rouge regime and the remaining Khmer Rouge political and military
forces were integrated into the mainstream of the Cambodian society.
Since
1998, with the return of full peace, a sense of confidence and pride
pervades the country, a feeling that bodes well for bright prospects
for economic growth and job creation and a concrete vision of a
promising future. We have successfully implemented the triangular
strategy, focusing on strengthening peace and security, integrating
Cambodia into the region and the world, and promoting reforms and
development. Cambodia joined ASEAN in April 1999. The Royal Government
of Cambodia has embarked on wide-ranging reforms focusing on
macroeconomic management, public financial management and financial
sector reforms, and rehabilitation and reconstruction of physical
infrastructures, especially the national road network. Since then, the
Cambodian economy has undergone a dramatic and rapid transformation.
Economic growth during 1999-2003 averaged 8.8%. Although ODA continued
to finance growth, FDI particularly investments in garment and
tourism, was key to promoting growth.
The
economic take-off phase started from 2004. Considerable efforts have
been made by the RGC to implement the second generation reforms in all
sectors as envisaged in the Rectangular Strategy, in particular the
implementation of the Public Financial Management (PFM) reform program
and continued investment in provincial and rural roads. Economic
growth during 2004-2008 averaged 10.3%. For the first time Cambodia
achieved sustained double-digit growth, financed mainly by the rapidly
growing banking sector, FDI inflows and the ODA. Cambodia was the
first Least Developed Country to join the World Trade Organization in
October 2004.
Cambodia
can be considered as a successful post-conflict country. With the
support of our development partners and the private sector, Cambodia
has made giant strides in development in the last decade. Since 1993
Cambodia’s Gross Domestic Product (GDP) increased fourfold from US$2.4
billion in 1993 to US$10.3 billion in 2008. During this period per
capita income has more than tripled from US$229 to US$739. Poverty
rate was reduced from around 50% in 1993 to 30% in 2007, then to 27.4%
in 2009. The structural reforms were undertaken to allow the
Cambodian people to live in a modern civilized society. These reforms
are necessary, a life-or-death matter, so that Cambodian society can
face the future confidently and achieve prosperity. With these reforms
Cambodia is moving on a right track. With the implementation during
the last 5 years of the Public Financial Management (PFM) Reform
Program, government revenue more than doubled from 2,220 billion riels
(US$ 553 million) in 2004 to 4,928 billion riels (US$1.2 billion) in
2009. The expenditure tripled from 3,043 billion riels (US$758
million) to 8,539 billion riels (US$2 billion). At the same time, we
have accumulated more than US$700 million in cash reserves in
government deposits. In 2009, the Gross Domestic Product experienced a
positive growth, though very small, as agriculture and services
sector maintained robust growth.
However,
with each stage of development accomplished, new challenges arise.
Cambodia’s economic performance has been affected in 2009 by the
global financial crisis. The RGC has successfully guided the economy,
like other Asian economies, through the most difficult period of the
global crisis. The RGC has acted swiftly to counter the social impact
of falling incomes and employment from declining garment exports,
tourism and construction pursuant to the crisis. Cambodia has managed
to maintain the stability of the financial sector as well as
macro-economic and social stability, especially the normalcy of the
people’s livelihoods.
ASEAN and Sub-Regional Cooperation: Efforts to bridge the development divide
The
Leaders of the Mekong countries have responded to changes and
challenges in the region by adopting the vision and long-term programs
for sustainable development of the Mekong Region. We have witnessed
the proliferation of different cooperation frameworks and sub-regional
initiatives intended to facilitate integration of the CLMV countries
aiming at narrowing development gap.These are: the
Mekong River Commission (MRC) under the auspices of the UN, the
Greater Mekong Sub-region (GMS) cooperation framework for 6 Mekong
countries spearheaded by the ADB, the ASEAN-Mekong Basin Development
Cooperation, the Mekong-Ganga Cooperation (MGC), the Ayeyawady – Chao
Phraya – Mekong Economic Cooperation Strategy (ACMECS) between
Cambodia, Lao PDR, Myanmar, Thailand and Vietnam; the Cambodia-Vietnam
and Laos Development Triangle, the Emerald triangle development among
Cambodia, Laos and Thailand.
Behind
the different cooperation framework lie the following strategic
objectives: (i) provide support to economic stability and peace; (ii)
establish ownership; and (iii) contribute more effectively to the
community by agreeing to the common objectives. Despite such
proliferation, a number of cooperation frameworks are inactive, only a
few sub-regional initiatives are gaining ground.
Under
the umbrella of ASEAN, the ASEAN Leaders adopted the “Initiative for
ASEAN Integration (IAI)” and approved "the ASEAN Integration System of
Preferences (AISP)", aimed at reducing the gaps among the ASEAN
economies. ASEAN launched the Initiative for ASEAN Integration in 2000
for a closer ASEAN Integration, through this mechanism the more
developed ASEAN members assist its less-developed member countries –
thus fulfilling the principle where to “prosper thy neighbor" is to
“prosper ASEAN”. Moreover, the CLMV cooperation was incepted in 2004
with the reason to strengthen and accelerate the integration of the
four countries with the other six ASEAN members in order to narrow
development gap. Now the cooperation has been deepened into sectors
level. The CLMV Economic Ministers’ Meeting has convened on regular
basis and laid out annual action plan covering a wide range of areas –
economic-trade activities, human resource development, and
coordination mechanism.
The
GMS cooperation constitutes a comprehensive effort to transform the
Mekong Region into a well-integrated economy with a market approaching
300 million people. Cambodia was honored to host the first GMS Summit
in November 2002, back-to-back with the 8th ASEAN Summit. The Summit
proposes the establishment of the GMS economic corridors, founded on
hardware as well as software pillars. The hard components are
cross-border infrastructure: roads, telecommunications and power. The
soft components are sub-regional policies, regulations and strategies
on facilitation of travel, transport, trade, investments, information
and HRD.
The
strategic objectives of the GMS are to attract investments and
transform the Sub-regional economy into a broad, rapidly growing
market of close to 300 million people who enjoy the benefits of
prosperity and peace. In this regard, I highly appreciate the active
role and assistance provided by the ADB in supporting a number of
flagship projects aimed at harnessing the economic potential of the
Mekong region. Among others, tourism was endorsed as the 11th flagship
program encompassed tourism development and visa facilitation.
At
the Phnom Penh Summit, the GMS Leaders launched the Phnom Penh Plan
for Development Management (PPP) to provide high quality education
through learning programs to participants from the GMS countries. The
project supports the GMS governments in improving internal
capabilities to shape the national development agenda and to align
themselves with regional priorities and programs. At the sub-regional
level, the PPP helps to build capacities to plan, coordinate, and
implement regional programs and projects to expand and sustain
cooperation.
The
ACMECS Economic Cooperation was proposed by H.E. Thaksin Shinawatra,
Prime Minister of Thailand, on the sidelines of the ASEAN Special
Summit on SARS in April 2003. Initially it included only Cambodia,
Laos, Myanmar and Thailand. Vietnam officially joined ACMECS Summit in
2005. ACMECS cooperation is based on the vision of “five nations, one
economy,” shaped by our commonalities and sustained, complementary
efforts to strengthen the linkages among respective governments,
entrepreneurs, and peoples. This cooperation framework was born out of
the conviction that the key to enhanced peace, security and shared
prosperity among the five nations is mutual cooperation and
coordination for mutual understanding, strengthened by continuing
dialogue, investments and technical and scientific cooperation and
exchange.
In
real terms, ACMECS cooperation achieved significant progress in
concrete projects in the areas of trade and investment facilitation,
transport linkages, agricultural and tourism cooperation. Cambodia
and Thailand also agreed to pilot ACMECS Single Visa based on an
ACMECS minus X formula.
I
believe that the development of the Mekong region should be an
interest not only of every ASEAN and Mekong member country but also
for the stakeholders who would benefit from the development of Mekong
region.
We
are convinced that these cooperation initiatives would help us to
exert our joint utmost effort to enhance trade facilitation and reduce
non-tariff trade barriers, improve transport linkages and upgrade
major border checkpoints and promote cooperation to a higher level
through greater intra-regional trade and investment, enhance
competitiveness and generate more employment and improved income and
quality of life in the sub-region, in which most are the less developed
new members of ASEAN. To this end, we would be able to timely
envisage challenges to our future and together to develop effective
measures to overcome these challenges.
To
facilitate the cooperation in infrastructure, the Royal Government of
Cambodia has put its utmost effort to rehabilitate and restore all
kinds of infrastructure including electricity, water supply, and
telecommunication and transportation network. The Royal Government has
also considered the development of irrigation system to be a top
priority in agricultural development. We need technical assistance and
additional financing to further develop the irrigation system. All
these efforts aim to achieve a target of one million tons of rice mill
export in 2015.
ASEAN Community Building and Closing Development Divide
The process of building the ASEAN Economic Community
is to promote free circulation of goods, services, capital and skilled
labour. Although tariff reduction program will be on track, our
challenges remain the non-tariff barriers. Therefore, ASEAN should make
further efforts to overcome all obstacles aimed at realizing the ASEAN Economic Community by focusing on the implementation of the ASEAN single window, trade facilitation, as well as measures identified by the ASEAN Economic Community Blueprint.
As the matter of fact, the ASEAN region now has a population of more
than 600 million citizens, with a combined gross domestic product of
nearly US$ 2,000 billion marked by high growth and political stability,
a growing middle income population, endowed by enormous natural
resources. These endowments result in great potential for rebalancing
growth from foreign to domestic sources, thereby promoting intra-ASEAN
regional trade and internal growth and its economic attractiveness to
external partners.
However,
the reduction of development gaps among ASEAN member states is the
pre-requisite condition in order to ensure competitiveness and to
achieve regional integration. Closing these gaps will require a lot of
resources. The ADB estimates that Asia Pacific countries need to
invest about USD 8,000 billion dollars over the next decade. Such
investment would not only boost productive potential but would also
help in the fight against poverty, by improving access to basic
services such as electricity and clean water. It is important
therefore that implementation of Greater Mekong Sub-region Program and
the Initiatives for ASEAN Integration (IAI) be strongly supported by
development partners and members of the regional community alike.
To
this end, the Greater Mekong Sub-region (GMS) program is crucial to
resolving the imbalances among the regional economies. The ADB
Strategic Thrust of the GMS has enabled linkages and connectivity of
the GMS countries among themselves. Lao DPR is no longer ‘land locked’
but ‘land linked’, owning to GMS Transport Corridors. Tremendous
progress has been achieved in connecting the GMS countries with each
other. Trade and Transport Facilitation (TTF) measures have been
implemented, and the GMS is poised to transform the transport
corridors into Economic Corridors. As a result, the GMS countries are
ready to enter a second generation reform which essentially increasing
investment on soft aspect of development such as greater financing on
human resource development, increasing institutional competency and
training; and cross border market management.
Development partners (Australia, EU and Japan) all expressed
continuing commitment in assisting the GMS Cross Border Trade
Agreement (CBTA). Financial and technical supports are available for
the Trade and Transport Facilitation action Plan. Australia’s AusAID
made available USD 230 million dollars for hardware and software
assistance. USD 170 million is made available for road and energy
sector development. The EU will provide expertise and TA through the
ASEAN-GMS framework; and Japan will finance human resource development
of three important projects.
In
this regard, I would like to welcome the recent plan made by the GMS
Ministers in Vietnam to connect regional rail lines under the GMS
cooperation. This will allow the Singapore-Kunming rail link to be
materialized by 2020. I also would like to welcome the US-Lower Mekong
meeting that was initiated by the Obama administration. At the same
time, Japan’s support for the CLMV cooperation is very much
appreciated.
Moreover,
the Master Plan on ASEAN Connectivity is the most comprehensive plan
underpinning the success of building the ASEAN Economic Community. To
achieve this goal, ASEAN needs to engage all ASEAN Partners, including
the Plus 1, the Plus 3 and other countries concerned, to support the
implementation of the Master Plan in order connect ASEAN by both soft
and hard infrastructures, in particular land, rail, air, waterway and
maritime connectivity. At this point, I would like to emphasize that
the Royal Government of Cambodia has given high priority to the
construction of transport infrastructure to link with all of our
neighboring countries including the missing railway section of about
257 km from Phnom Penh (Cambodia) to Loc Ninh (Viet Nam) within the
framework of Singapore-Kunming Rail Links.
Assistance
and participation in second-generation reform in the CLMV countries
is also much sought to create a healthy, stable and prosperous region
that in turn provides all development partners with the opportunities
to invest in ASEAN and working together for a dynamic business
environment for trade and investment for the long term. One will lost
nothing, but to benefits from ASEAN liberalized economy, political,
security, cultural; and social-health policies cooperation, sharing
information and cooperating in anti-terrorism measures, as well as
combating non-traditional security threats help to stabilize regional
security.
CLMV
countries must not only overcome impediments to growth through the
reform process, but must also create the conditions for sustainable
growth through equitable distribution of costs and benefits of
development. For a start business costs, costs that weigh upon
employment will be further reduced. We must map out a clear strategy
and implement it in order to enhance its attractiveness as an
investment destination.
In conclusion, much has been said and more needs to be done. I hope Regional Conference on “The CLMV Countries and ASEAN Economic Community (AEC) 2015 – Bridging the Development Divide”
will enlighten our understanding on the future shape of our region,
and ways we can work even more effectively together to enhance regional
cooperation and promote sustainable development and charter a roadmap
on how we are going to expedite the bridging of development gap in
this part of the region, while we are moving ahead toward the
establishment of the ASEAN Economic Community.
I thank you for kind attention, and I wish you all a successful and productive conference and a memorable stay in Cambodia.
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