Remarks at the 9th Government-Private Sector Forum

In his address at the Government-Private Sector Forum was held in Phnom Penh at the Government Palace Samdech Prime Minister Hun Sen said that the government and private sector should work together in solving the outstanding issues with the aim to improve investment climate. The following is excerpt of his statement:

As reflected in the key macroeconomic indicators and the forecasts for the year 2005, Cambodia’s macroeconomic situation is stable with a growth rate of 6.3%, regardless of the negative external impacts of higher oil price, and terrorism.

In this robust growth, the tourism sector, garment exports and construction activities still play an important role in improving the higher growth of 2005.

The industry sector will increase by 10.7% due to a garment manufacturing export increase of 13%, the construction sector by 13%, the service sector by 4.5% due to the increase of the hotel services of 15%, and the number of tourists visiting Cambodia will increase by 30-35%. Actually, the numbers of tourists in the first 8 months of the year 2005 have increased by 36.43% compared to the same period of 2004.

We have noticed that the increase of the oil price has had negative impacts on the economic growth, the inflation and the exchange rate. According to our forecasts the average inflation rate in 2005 will be around 5%. From the beginning of the year to October, the exchange rate has increased from 4,035 Riels/USD to 4,230 Riels /USD. The Riels value has dropped down about 4.8% during that period. The Royal Government has strived to maintain the macroeconomic stability.

Revenue collections are expected to reach 11.3% of the GDP. In the first semester of year 2005, due to the governance and reform measures, revenues have increased, especially, the tax department and the customs and excise department have collected 1,044 million riels or the equivalent of 60% of the amount budgeted in the 2005 financial management law.

It is clear that the increase of revenues reflects the result of the reforms of the public finance management, which will enable the smooth implementation of the 2005 budget.

As I raised in the 8th Government-Private Sector Forum the major Cambodian issue is the strengthening of good governance and institutional capacity in the development management. The following is the results of the implementation of my recommendations in the 8th forum :

First, Improvement of Trade Facilitation and Investment: following the recommendations of the 8th forum, the Ministry of Economy and Finance has issued the Prakas number 298 dated 17 June 2005 on the implementation of VAT for supporting industry or subcontractors who are supplying goods or services for garment export, textile, and shoes industries.

As provided in that Prakas, for supporting industry, the duty on inputs for the calculation of VAT on the import of production inputs and equipments used for the direct supplies to the garments, the textile and the shoes industries should be born by the government. The VAT on products and services used for export is at the 0% rate.

As for the enterprises under the real regime of taxation, supplying directly 80% of its production or services to exporters of the garments, textiles and shoes industries, the VAT on their production outputs is at 0% rate.

Second, Promoting of Market Infrastructures and Deregulation:

During the first semester of 2005, in the framework of the steering committee for private sector development, the Ministry of Economy and Finance, the Ministry of Commerce, the Ministry of Industry, the Ministry of Tourism, the Ministry of Public Works and Transportation, cooperated with other ministries and institutions for the consultations with the private sector, in order to discuss important draft of laws and regulations.

Some of those drafts have been adopted by the Council of Ministers while others will be submitted soon.

Third, Institutions Building and Strengthening of the Banking Sector to sustain the well being of the entire banking system , the National Bank of Cambodia has strengthened its monitoring capacity through the issuance of new regulations aiming at more transparency, by creating the unified charts of accounts and preparing the Draft Law on Anti Money Laundering.

However, we have to acknowledge that we are living in difficult circumstances full of challenges. The regional and global landscapes have changed significantly since the Asian Financial Crisis, the growing uncertainty caused by terrorism, troubles, wars, diseases and natural disasters around the world, and the ending of the Quota system under the Multi Fiber Agreement and the recent increase of oil price represent the new challenges for Cambodia.

The challenges for Cambodia in the future is also to improve governance in order to attract more private investments and the competitiveness of enterprises in Cambodia in order to benefit from our potential in agriculture, agro-industry, labour intensive industry, processing industry, tourism, manufacturing, and other services.

I also take the opportunity to sincerely thank the Government of Japan for sending experts, in recent months, to study and push for the creation of the Special Economic Zone in Sihanoukville.

We strongly believe that the mechanism which will be implemented in those Special Economic Zones will help streamlining the administrative procedures and reduce considerably the inspection activities, as would wish investors.

We note that all the tasks that I have pointed out above require a Participatory Approach, promoting discussions, consultations and dialogues between all partners.

Therefore, I would like to appeal to all the members of the Working Groups from the Government side as well as from the private sector side, foreigners as well as Cambodians to actively involve in such dialogues.

INDEX:

	GMS Boat Race Phnom Penh, Cambodia 15-17 November 2005
	Remarks at the 9th Government-Private Sector Forum
	Cambodia Joins Melbourne International Arts Festival
	Australia to Hold Talks in Cambodia on Landmine Clearing
	Mekong Countries Unveil Joint Tourism Strategy to Promote New Era of Prosperity