diversification of agricultural production, (ii) land reforms and de-mining, (iii) fisheries reforms, and (iv) the forestry sector reforms.

IMPROVED PRODUCTIVITY AND DIVERSIFICATION OF AGRICULTURE

300. For the agriculture sector the foremost priority of the Royal Government is to improve the agriculture sector's productivity and to achieve a greater diversification of agriculture activities to enable the agriculture sector to serve as the dynamic driving force for economic growth and poverty reduction. The policies proposed in the Rectangular Strategy to improve productivity and diversification of the agriculture sector activities include;

• Shifting the direction from «expansionary» or «extensive» agriculture to «deepening» or «intensive» agriculture, especially by increasing the yields using the existing land.

• Creating a favorable environment conducive to private sector participation in the agriculture sector by accelerating the distribution of land and the issuance of secure land titles within the framework of Social Land Concessions, particularly in the rural areas.

• Developing irrigation facilities and strengthening the management of water resources to improve productivity of the existing irrigation systems thus reducing the vulnerability of communities using irrigation systems to natural disasters.

• Expanding support services such as agricultural research and extension services, developing markets for agricultural products, distributing inputs, seeds, fertilizers and increasing availability of micro credit facilities in rural communities.

• Directing public investments and encouraging private investments in agriculture sector to increase agricultural production while ensuring that the quality of Cambodian agricultural products is improved to international standards.

• Developing border and remote areas to reduce out migration to urban areas.

• Developing township centers that are adequately equipped with infrastructure to promote local economic activities and to provide livelihood for local population.

• Promoting "one-village one-product" movement to encourage creativity and building confidence of the rural people by adopting four principles: (i) encouraging modes of production that are suited to village contexts and market needs, (ii) facilitating the identification of appropriate markets, financing, technology transfer and supply of inputs, (iii) providing support for human resource development and training in management, and (iv) facilitating the creation of agricultural communities in order to ensure stable prices for agriculture products.

301. To modernize the agriculture sector, the Royal Government will:

First, increase the percentage of public investment allocations to agriculture and for rural development, particularly at the provincial and local levels for irrigation facilities, rural roads and other rural infrastructure, where construction services shall as much as possible be contracted by and accountable to Commune Councils.

Second, encourage increased private sector investment in farm and village-level enterprises in key sub-sectors including small-scale commercial, market-oriented aquaculture, crop and livestock production, and agro-enterprises such as processing, post-harvest facilities and mechanization.

Third, accelerate and stabilize broad-based growth of agricultural output through sustainable development of high-value products.

Fourth, increase local-level expenditures and investments in: (i) extension services focused at increasing the productivity of farmers; (ii) farmer-owned and operated irrigation; (iii) rural enterprises; (iv) enhanced skills and capacity in lending to agricultural and agro-based enterprises; (v) decentralized public investments and de-concentrated budgeting and services for the agricultural sector; and (vi) revolving funds for farmers’ groups managed according to micro-finance principles.

302. In terms of specific actions, the Royal Government will:

1. Continue the implementation of National Water Resources Policy by rehabilitating the existing irrigation systems, constructing new effective irrigation systems, and strengthening their management.

2. Increase cropping time per year including double cropping in lowland areas, and expand agricultural production on de-mined land and on unfertile unused land.

3. Continue to focus on food security and increase food production, especially rice production and subsidiary crops.

4. Increase agricultural products quality and promote processing agro-industrial development to increase farmers' value added and income.

5. Increase the availability of micro-finance facilities to farmers for agricultural production.

6. Develop agricultural diversification and intensification through improvement of soil quality, crop protection, seed supply system and agricultural mechanization (Production and harvest).

7. Strengthen support for major services such as agricultural products market, extension services and research, and agricultural cooperatives.

8. Improve cropping system, including crop diversification and animal production in form of " one village one product".

9. Control and reduce the spread of infectious diseases.

10. Assure public health by controlling animal and animal products.

11. Enhance quality and safety products assuring public health as well as responding to market demands.

12. Strengthen and enlarge animal production, and process animal waste.

13. Promote privatization of state-owned rubber plantations.

14. Promote smallholder rubber development, investment in rubber plantation, and increasing management of rubber sector.

303. To support rural development the Ministry of Rural Development will continue to: (i) act as a catalyst and coordinator working with other ministries, IO's, NGO's and private partners by coordinating the implementation of their projects in rural areas and assisting international aid programs; and (ii) directly implement projects or programs necessary to develop market based economies in rural communities. It will continue to promote human resource development, establishment of the rural development structures, especially formation of village development committees, and information and communication management. It will also continue to implement programs such as road rehabilitation and construction, clean water supply, health care promotion, small irrigation expansion, household food security promotion, rural credit promotion, and village development. 

LAND REFORMS AND LAND MINES CLEARANCE

304. As stated in the Rectangular Strategy, land and water are the two fundamental natural resources that serve as the basis for socio-economic development and poverty reduction, especially in the rural areas. The policies outlined in the Rectangular Strategy on land reforms and mines clearance include:

• Commitment to continue to implement the Land Law and land policy to strengthen an equitable and efficient system of land management, distribution and utilization, including land registration and distribution, land tenure security, eradication of illegal settlements and land grabbing, and the control of land ownership concentration for speculative purpose.

• Review of idle and vacant State lands, as well as State land illegally occupied by private entities in contravention with the regulations and procedures.

• Strengthening of land tenure rights of the people who need small lots for settlement and family production within the social land concession framework, as a mechanism to assist poor households and vulnerable groups.

• Continue to guide the implementation of de-mining activities in accordance with international security standards and international obligations to ensure safe and well-coordinated implementation of the national de-mining plan.

305. Land Reforms: In terms of specific actions, the Council for Land Policy and Ministry of Land Management, Urban Planning and Construction will:

• Develop a comprehensive land policy based on the Interim Paper on Land Policy Framework and lessons learned in the implementation of Land Management and Administration Project.

• Study to develop Policies and Procedures on the Registration of Indigenous Peoples’ Land Rights.   

• Develop policies and Sub-degree on State Land Management and Economic Land Concessions

• Contribute to develop land valuation system

• Continue the development of Policies and Circular on Co-ownership Registration and Right of Way (Road Corridors).

• Amendment to the law 1994 on Land Management, Urban Planning and Construction.

• Circular on the implementation article 18 under the Land Law in order to recover state land that unlawfully occupied.

• To implement social land concession, the Ministry carries on preparing guidelines on land identification, identification of target groups, and integrated development.

• Formulate construction code/standards and urbanization.

• Continue the development of National Housing Policy.

• Establish the regulatory framework for data management, NSDI (National Spatial Data Infrastructure).

• Establish surveying and mapping standard.

• Continue to study and research on land related issue such as state land economic, base line study on land, and potential social impact assessment.

• Adopt the joint declaration on the Role and Responsibility of Commune/Sangkat Administration in the area of land registration.

• Prepare the draft instruction manual on “Local Government in Land Issue, Land Administration and Construction”.

• Continue to prepare the process of proper Demarcation of Commune/Sangkat’s Boundary, and the pilot was carried out to begin the work that was later extended nation-wide implementation and printing Commune/Sangkat maps. 

306. Institutional Development:

• Restructure the Ministry of Land Management, Urban Planning and Construction to cater globalization, information technology evolution, and the effective public services delivery.

• Develop human resources including (1) staff’s capacity building in technical, legal, management and leadership areas, (2) continue to enhance educational quality in the Faculty of Land Management and Administration, (3) Prepare in-house Diploma degree curriculum in order to strengthening capacity at district level .

• Develop and implement the transparency and accountability strategy in all line functions for strengthening of good governance.     

• With improvement of the exiting training manuals, train to  systematic land registration teams of 350 officials, 100 quality control officials, 6 orthophoto production officials, administrative committee of 2000 officials, 100 officials on sporadic land registration, 365 provincial/municipal facilitators on participatory Land Use Planning, and 40 provincial/municipal staff on District Strategy Development Plan.

• To implement the de-concentration policy, through the evaluation of specialized capacity, and the scope of responsibility, the Ministry will be granted the delegated power on cadastral documents to three more provincial departments.

• The Ministry is underway to design and construct a new Ministry’s building, the Faculty of Land Management and Administration’s building, six provincial/municipality Department’s buildings and 12 District/Khan Land offices.

• The Faculty of Land Management and Administration will recruit approximately 30 or 40 students for the 2004-2005 academic years.

307. Land Titling Program and Development of Land Registration Systems and Dispute Resolution:

• To assure land tenure security, decrease in land conflict and access to credit for investment the Ministry’s target is to issue title for approximately 300,000 titles through both systematic and sporadic land registrations by year 2005 and 1 million titles by year 2007. In addition, the Ministry continues to develop the culture of land registration, decrease the informal transaction of immovable property, thereby putting into practice an upgraded, efficient and transparent workflow in delivering services.          

• Provide services in boosting the revenue collection through land transfer tax, unused land tax, revenue occurring from land use conversion value added, and cadastral fees.

• Continue to establish horizontal and vertical geodetic networks nation-wide and orthophoto maps for the overall country.

• Registration on specific state land sites for benefit of the country such as Angkor areas.

• Continue to strengthen out-of-court land dispute resolutions system (through Cadastral Commission), including the provision of legal aid to the disadvantaged with monitoring and evaluation system in country-wide.

308. Land Management: the Ministry improves investment climate through effective management of state land, zoning and integrated regional, urban and national planning and pilot state land mapping in two districts. The Ministry continues to provide services in preparing and coordinating strategic development plans for four districts located along the border areas and another 20 districts and continues to finalize master plans and zonings that are not yet adopted. The Ministry continues to provide guidance on land development and land use conversion and also contributes to set-up zoning in Angkor protected area and national inheritance area.

309. Land Concessions: Based on existing pilot project and recommendations from the Poverty Impact Assessment Study of social land concessions project, the Council of Land Policy in collaboration with various development partners are in the process of designing the program of Land Allocation for Social and Economic Development (LASED) for at least 10,000 household beneficiaries. This program will contribute in carrying out the job generation strategy, access to land for the landless and the land-poor, provide further linkage between small, medium or large land holders by promoting agro-business and industry programs, which is expected to create job opportunity in both farming and off-farming sectors with Public-Private-Partnership (PPP).

310. Construction: to contribute to building infrastructure, the Ministry will continue to issue all kinds of construction permits in transparent and effective manner while encouraging and assuring the application of Khmer-style design; furthermore, administer permits of the business opening of construction and design companies.

311. Land Mines clearance: Cambodia continues to be one of the most heavily land mined and UXO (unexploded ordnance) affected countries in the world. The land mines and the UXO left behind from the Vietnam War and the internal strife in subsequent period continue to cause hundreds of fatalities of innocent citizens each year. The Royal Government's target is to clear all severe and high impact suspected mined areas of land mines and UXO's by 2012, and to be free of all land mines and UXO's by 2020.

312. The Cambodia Mine Action Agency (CMAA) has updated its Five-Year Mine Action Plan for the period of 2004-2008 to achieve the mine clearing targets of the Royal Government. To achieve the land mines and UXO clearing targets, the CMAA will take following actions:

1. Prioritize the clearance of high impact areas and have them cleared by 2009.

2. Integrate mine clearance operations with development programs.

3. Coordinate with de-mining operators to conduct technical survey as of 2005.

4. Assist building the capacity of the RCAF in de-mining for development.

5. Coordinate with operators to improve mine risk education activities.

6. Inform all stakeholders on the contamination and clearance achieved.

7. Improve cost efficiency of mine clearance as of 2006.

8. Ensure post-clearance monitoring from 2005.

9. Comply with the Cambodian Mine Action Standards as of 2005.

FISHERIES REFORMS

313. Fish is crucial to the lives of million of Cambodians in terms of food, income and livelihoods. The priorities of the Royal Government as outlined in the Rectangular Strategy are:

1. To enable community-based development of the fisheries sector by empowering local communities so that farmers can participate directly, actively and equitably in fishery plans, programs and management.

2. Transform fishing lots whose concession contracts have expired into fish sanctuaries, thereby helping increase natural fish stocks, and conserve endangered species.

3. Expand community-based fishing lots and promote aquaculture to respond to the increasing needs for fish as well as to reduce the pressure on fisheries resources.

FORESTRY REFORMS

314. As stated in the Rectangular Strategy, the goal of the Royal Government's forest sector strategy is to ensure sustainable forestry management based on the following three pillars:

1. Sustainable forest management policy, to ensure the rational and strict monitoring of forest exploitation according to the international best practices in forest management that require adequate forest reserves for domestic consumption, protection against drought and floods as well as wetlands that serve as fish sanctuary.

2. Protected Area System to protect biodiversity and endangered species.

3. Community Forestry as a sound, transparent and locally managed program.

315. To achieve the goal of sustainable forest management, the Royal Government’s priorities are to :

1. Strengthening Forestry Management and Conservation by:

1. Rationalizing and reclassifying the remaining forests to ensure ecological protection and biodiversity conservation by adopting and enforcing the Sub-Decree on Forest Classification.

2. Strengthening the enforcement of forestry law, especially the RGC's Order No.01 BB dated 9 June 2004 on the prevention and cracking down on forestland clearing and encroachment.

3. Strengthening conservation strategies such as protected forests, watershed management, genetic and wildlife resources conservation, eco-tourism, and other special conservation centers with participation of local population and a proper management plan.

4. Strictly implementing the forest management techniques including the sustainable management and use of forestry resources and concessions.

5. Promoting education and public awareness campaigns on forestry resources.

2. Promoting Forestry Contribution to Socio-Economic Development by:

1. Increasing the socio-economic values of forestry and biodiversity conservation.

2. Promoting man-made plantations to substitute for national forest demands by encouraging private investment and public participation.

3. Optimizing the use, processing and marketing system of forestry products to support domestic demand as well as exports.

4. Promoting re-forestation and tree protection.

3. Promoting Forestry Contribution to Poverty Reduction by:

1. Enhancing legal protection of the rights of local communities in the management of forestry resources to ensure food security and poverty reduction. These rights are protected under the Forestry Law and other regulations.

2. Ensuring that local communities benefit from the use and management of forestry resources.

4. Strengthening Capacity and Good Governance in Forestry Sector

1. Continue to build and strengthen institutional capacity at all levels.

2. Conduct education, training and public awareness campaigns to people in local communities to encourage their participation in conservation and sustainable forest management.

3. Strengthen the capacity of Forestry Administration at all levels to perform its duty in cooperation with concerned institutions.

4.3.2 REHABILITATION AND RECONSTRUCTION OF INFRASTRUCTURE

REHABILITATION AND CONSTRUCTION OF TRANSPORT NETWORK

317. As stated in the Rectangular Strategy, the transportation networks are the arteries that connect all corners of the Kingdom of Cambodia and thereby transform the country into an integrated economy. The transport networks are instrumental in integrating domestic markets and facilitating Cambodia's integration into the regional and world economies. Moreover, physical infrastructure plays a pivotal role as the «locomotive of economic growth», significantly contributing to poverty reduction and the alleviation of the people’s hardships.

318. A high priority of the Royal Government is the rehabilitation and reconstruction of transport networks, including bridges, roads, railroads, seaports, and airports that link all parts of the country, and Cambodia to its neighboring countries and the rest of the world. The objective is to create a convenient, comprehensive, safe, effective and price-efficient transport network that facilitates trade, promotes tourism and rural development and ensures Cambodia's economic integration into the region and into the world, while especially serving the interests of national defense. Other priorities outlined in the Rectangular Strategy for the transport sector include:

• Continuing support for the building of rural roads and road maintenance that will contribute to the development of rural communities.

• Rehabilitation of railroads and promotion of bulk and heavy goods transport by railroads.

• Further development of the civil aviation services to promote economic development and to boost tourism.

319. Over the medium term the Royal Government will:

1. Continue the rehabilitation and construction of the main national roads to develop a land transport system extending across the nation.

2. Improve the efficiency of the use of existing infrastructure.

3. Build road links to neighboring countries to promote international trade and tourism.

4. Increase revenue from the transport sector to cover an increasing share of maintenance and development costs.

5. Strengthen the institutional capacity for infrastructure sector planning and management.

6. Promote and increase private sector participation in the financing of transport infrastructure development.

7. Improve security and safety on all types of transport networks: air transport, maritime, railways, and road transport. 

320. Road Transport: A significant challenge in the rehabilitation of the road network is the large number of river crossings not only in rural areas but also on the main National Roads. Many existing bridges have load capacities below 20 tons and collapses are not uncommon. Therefore, during the third mandate of the Royal Government a high priority will be given to ensure routine and periodic maintenance of the road network. The Ministry of Public Works and Transport will: (i) prepare a road maintenance program, (ii) examine options for financing the maintenance activities, including the option of establishing a fund for road maintenance, (iii) install a financial and physical monitoring system; (iv) take actions to enforce vehicle weight regulations; and (v) prepare road and traffic laws to reduce the traffic accident mortality rate and enforce road regulations.

321. To rehabilitate and maintain the primary and secondary roads network in the country, it is estimated that at least US$ 100 million (US$ 30-40 million for maintenance) are needed annually. In addition, the annual requirements for the rehabilitation and maintenance of tertiary roads are estimated to be around US$ 50 million. This amount of resources is not likely to be available from both domestic and external sources. The Government therefore will be prioritizing needs and developing a comprehensive plan for road rehabilitation and maintenance. During its third mandate the Royal Government plans to rehabilitate and repair more than 2,000 km of the main and other national roads, and 1,000 km of Provincial roads.

322. The Royal Government recognizes that the country’s geographic location offers strategic opportunities for establishing Cambodia as a regional transportation hub in the Greater Mekong sub-region. The Government places a high priority on further expanding trade, particularly within ASEAN, and on improving cross border linkages. The main (primary) national roads have been designed as Asian/ASEAN or Regional Highways for facilitating transportation, trade and tourism across the borders. The other national and provincial (secondary) roads have been designed to serve not only as the feeder/supporting roads to the Asian/ASEAN or Regional Highways and the main national (primary) roads but also to strengthen linkages between the economic zones in the country. For the purposes of transport sector planning Cambodia is divided into three economic regions: the tourism Region, formed by Seam Reap, Oddor Meanchey, Preah Vihear and Kampong Thom provinces; agro-industrial & eco-tourism region covering the eastern region of Mekong River including Stung Treng, Ratanakiri, Mundulkiri, Kratie provinces; and the industrial region, defined by entire south-west costal region of the country. 

323. Within the Framework of GMS Cooperation Program the following roads network will be rehabilitated or reconstructed:

• The reconstruction of NR6 will continue, to link Siem Reap and Angkor Wat temples to Phnom Penh and Poipet/Cambodia-Thailand border.

• Upgrading of RN1 and RN5 constituted the first phase of the Ho Chi Minh-Phnom Penh-Bangkok Road (as the GMS: Central Sub-corridor) through Cambodia. Now RN48, RN3 and RN31 (as the GMS: Southern Costal Sub-corridor) will be rehabilitated to link Sihanoukville to Bangkok port and the other main international ports in the region.

• RN7 will be rehabilitated, to link southern Laos with Kratie with the assistance from People Republic of China and expanded to Phnom Penh and Sihanoukville via RN4 together with construction of a bridge over the Mekong River at Kompong Cham (as the GMS: Inter Corridor linkage) with support from the Government of Japan.

324. In the framework of economic cooperation between Cambodia and Thailand some more secondary and provincial roads will be rehabilitated  and linked with Cambodia-Thai border. In the frame work of bilateral and triangle socio-economic cooperation areas, the rehabilitation of national roads NR 78, 76a, 78a, 78b, 76, 74, 72, PR303a, PR303b in StungTreng, Ratanakiri Mundulkiri and Kampong Cham Provinces will be carried out  opening new opportunities to transport goods and people across the border and international trade and tourism.

325. Inland waterway: The priorities for port and inland waterways transport include rehabilitating dredgers to carry out regular dredging of all major waterways; upgrading  the Phnom Penh inland river port, as well as improvements to smaller domestic river and lake ports; and the upgrading of existing ferries. The Royal Government would like see a greater participation of private sector self-financing entities to own, manage and maintain the international ports of Phnom Penh, Sihanoukville and Koh Kong and to assist provinces in establishing locally-generated funding mechanisms to develop and maintain  island port facilities. Improvement of the Sihanoukville Port will continue in the third mandate through the construction of a new cargo wharf (400 m length), expansion of container wharf (160 m), building a Container yard 60 000 m² and container cranes supply, and improving the roads, power supply and lighting system in the port area. Port Security will be strengthened to comply with the convention on International Shipping and Port Security (ISPS) code in Sihanoukville, Phnom Penh and other ports to prevent and combat international terrorism.

326. As a maritime nation and a member of the International Maritime Organization, the Royal Government would like to establish a maritime training center to train seafarers to serve both at shore and sea, a maritime search and rescue operation to provide search and rescue services to vessels traveling to or within Cambodia’s waters, strengthen the management of ships operating under Cambodian flag, and to strengthen protection of the coastal territory of Cambodia.

327. Railways: The railway network is a vital element of the transport infrastructure that at the present time is in a severely damaged state and remains a grossly under utilized asset. The Royal Government's first priority is to restore the missing link of some 48km to the Thailand border. The Southern railway line between Phnom Penh and Sihanoukville port requires rehabilitation to reduce operating costs to make it competitive with road transport. The viability of rehabilitating the northern line also need to be explored.

328. Civil Aviation: The availability of Civil Aviation services is a pre-requisite for the development of the tourism sector that has a significant multiplier effect on the economy. The Phnom Penh International Airport (Pochentong) will be further improved under the ongoing BOT agreement. There is a need to upgrade: (i) the Sihanoukville and the Siem Reap international airports to international standards to cater to the growing traffic to the area, and (ii) the north-east domestic airports at Stung Treng, Rattanakiri, and Mundulkiri. To meet international safety standards the communication-Navigation-Surveillance /Air Traffic Management System (ATM) is required.

329. The Royal Government recognizes that the Ministry of Public Works and Transport lacks the capacity to perform its functions efficiently. It, therefore, urges all development partners to consider providing support to build the capacity of the MPWT to identify, prepare, implement, manage, and co-ordinate policy and investment priorities; and to assist the Ministry in carrying out the inter-modal transport study for the transport sector as a whole and to formulate a comprehensive long-term transport policy. MWPT is working with the Asian Development Bank to reorganize and restructure the Ministry to ensure the proper and efficient allocation of human resources. However, the Royal Government will welcome other development partners' support and assistance to strengthen the capacity of the planning unit of MPWT.

WATER RESOURCES AND IRRIGATION SYSTEM MANAGEMENT

330. As stated in the Rectangular Strategy, the national water resources policy and irrigation is a part of broad program of the Royal Government to protect, manage and assure sustainable exploitation of both fresh-water and marine resources while enhancing bio-diversity and sustainability. The Royal Government's efforts will focus on: (i) providing all citizens with clean and safe water; (ii) protecting all citizens from water-related diseases; (iii) providing adequate water supply to ensure food security, economic activities and appropriate living standards; and (iv) ensuring availability of water resources and an environment free from toxic elements, thus enabling a supportive fisheries and ecological system.

331. During the third mandate the priorities of the Royal Government are: (i) to develop and expand irrigated lands; (ii) to ensure effective water resources management by improving the efficiency of the existing irrigation system; (iii) to further develop and enhance the effectiveness of water use in farmer water user communities; and (iv) to reduce the vulnerability of the population to natural disasters and its total dependence on natural conditions.

332. To develop and expand irrigated land area, the Ministry of Water Resources and Meteorology (MOWAM) will take the following actions to ensure a sustainable supply of sufficient water for agricultural production:

1. Rehabilitate and reconstruct the existing irrigation system to meet the urgent water requirements for agricultural production.

2. Employ appropriate water management technologies that are particularly suited to rain-fed agricultural areas.

3. Expand surface water storage facilities such as reservoirs and ponds, water canal capacities and drainage systems to ensure water supply and environmental sustainability.

4. Extend the land area served by sustainable irrigation and/or drainage systems, particularly in areas with a high incidence of poverty.

5. Strengthen the technical and institutional capacity of MOWRAM to implement the I & D strategy.

6. Mobilize participation of farmers, stakeholders and the private sector at all stages of design, development and improvement of I&D systems.

7. Study and prepare short-, medium-, and long-term development plans for river basins by taking comprehensive account of modifications to the hydrological system, particularly river flows and aquifer levels, to ensure effective, efficient and sustainable use of water resources.

8. Develop an integrated approach to water resources and agriculture development and management that takes into consideration all sources of water, and linkages between the water resource, agriculture production, land use strategies and management, and natural environment. To conserve the ground water aquifers, priority will be given to the development of river basins.

9. The capacity of the FWUC’s will be strengthened to promote participatory irrigation management and development (PIMD) and to seek investments by international funding agencies and the private sector in supporting PIMD.

333. To ensure effective water resources management the MOWAM will take the following actions to improve the efficiency of the existing irrigation system:

1. Strengthen the implementation and enforcement of the Law on Water Resources Management, sub- decree on water management, irrigation management and transfer and other water related regulations to control and prohibit all construction projects that can adversely impact on water resources and/or eco-systems.

2. Develop and apply procedures for carrying out social and environmental impact assessments and mitigation measures.

3. Take appropriate measures to ensure the preservation of river flows and minimum water level of rivers, streams, lakes to maintain ecosystems, social and cultural values, and navigation.

4. Implement necessary measures to prohibit the infilling or excavation of or encroachment on watercourses, seasonally inundated depressions, permanent water bodies, and the sea, to minimize the adverse impact on water resources, aquatic ecosystems or the environment.

5. Conserve and strengthen the lakes and river basins to prevent floods and support aquatic ecosystems.

6. Strengthen and expand Farmer Water User Communities, to enable them to participate in water management and allocation and to maintain irrigation infrastructure with effectiveness and sustainability.

334. To reduce the vulnerability of the population to natural disasters the MOWAM will take the following actions:

1. Conduct studies to rehabilitate and construct a system of flood protection embankments and drainage to minimize the impact of natural disasters related to water.

2. Strengthen the capacity to provide timely forecasts of weather and floods to minimize their adverse impact by: installing a meteorological observation system that provides real-time weather data for forecasting purposes, and climatological data for agro-meteorology, design and other purposes; improve the existing and installing new hydrological and meteorological stations and staff/rain gauges in the selected rivers and locations including data collection and dissemination;  and establishing a hydrological observation system that provides real-time water level and flow data for forecasting purposes, and hydrological data for design of water resources projects, water resources management, and other purposes.

3. Develop a rapid response capability to serve communities suffering and affected by drought, flood, and other water-related hazards.

4. Develop and disseminate information to citizens and institutions at all levels on how they can participate in flood mitigation measures and drought intervention;

5. Strengthen in cooperation with MRC on Flood Mitigation and international programs to mitigate water related hazards.

DEVELOPMENT OF ENERGY SECTOR AND ELECTRICITY NETWORK

335. The Royal Government's long-term development vision for the energy sector is to put in place a domestic power generation and distribution system that will meet the needs of all urban and rural communities and a growing economy at low-costs. Achieving this vision will require major capital expenditures and a significant strengthening of the capacity of the national institutions responsible for planning, operations, and maintenance of such a system. The Royal Government would like to see strong private sector participation and investment in the development of the domestic power generation and distribution system to realize this vision.

336. Recognizing the constraints on the availability of capital resources needed to realize this vision, the Royal Government's short- to medium-term strategy is to:

1. continue to rehabilitate and construct domestic power generation plants based on resources that become available,

2. purchase electric power from neighboring countries, through bi-lateral agreements, to meet the current needs of the country, and

3. continue to expand the national power distribution/transmission system to supply power to all parts of the country from domestic power generating plants as well as power purchased from neighboring countries.

337. During the third mandate, the Royal Government plans to install power generating plants in Kamchay, Stung Battambang, Stung Atay and Stung Russeychrum, and a thermal power plant in the coastal zone. The construction of hydropower plants -- Kirirom III (13 MW) and Kamchay (180 MW) will be carried out by private developers and is expected to be completed by 2010. The construction of middle Stung Roeusseychrum hydropower plant (125 MW) will be carried out under Cambodia-China cooperation program. A feasibility study on Stung Metoeuk hydropower plant will be conducted using a grant from the Government of Thailand. The construction of a thermal power plant preferably a gas turbine combined cycle of 180 MW in Sihanoukville will be constructed in 2 phases (90 MW +90 MW) and is expected to be financed by Japan. The first phase of this plant is planned to be completed by 2008. The hydropower project lower Srepok II is also expected to be financed by Japan.

338. The power distribution/transmission network will be extended. The power distribution/transmission master plan is to rehabilitate and construct the following elements of the national power distribution grid:

• Southern National grid -- 220 kV -- from the border of Viet Nam to Phnom Penh via Takeo provincial towns to be completed by 2007 with assistance from ADB and NDF.

• National grid -- 230 kV -- between Takeo and Kampot to be completed by 2007 with assistance from the Federal Republic of Germany, including grid substations of 230/115/22 kV which will be located midway at Chhouk district to supply surrounding areas and a 115 kV grid link from Chhouk to Banteaymeas to supply power to the area, especially to fertilizer and cement factories.

• National grid -- 230 kV -- connecting Kampot to Sihanoukville to supply power to Sihanoukville, including the industrial zones, is expected to completed by 2008 with assistance from ADB or the Federal Republic of Germany. It will also transmit power from the 180 MW thermal powerplant in Sihanoukville to Phnom Penh.

• National grid -- 115 kV -- from Thailand border to Banteay Meanchey, Siem Reap and Battambang, that will be developed by the private sector, is expected to be completed by 2007.

• A feasibility study to connect the southern and northern grids is planned to be carried by POSCON corporation soon and the inter connection between the southern and northern grid will be established thereafter.

339. The agreements to purchase electric power from neighboring countries will be periodically reviewed and the quantity of power supply imported will be renegotiated to meet the high priority power needs of the country.

DEVELOPMENT OF INFORMATION AND COMMUNICATIONS TECHNOLOGY

340. The long-term development vision of the Royal Government is to develop a cost-efficient and a world class post and telecommunications system that has a nation-wide coverage. The realization of this vision will require significant investment for building the backbone infrastructure of the telecommunications systems, especially high-speed optical fiber cables for the development of rural telecommunication systems.

341. During the third mandate of the Royal Government, the telecommunications network in Phnom Penh, Sihanoukville, and Siem Reap will be expanded and extended to smaller cities and towns. Microwave/fiber optic cable communications will be installed to connect: (i) Kompong Cham - Phnom Penh - Takeo - Kampot - Sihanoukville; (ii) Kompong Cham - Kompong Thom - Siem Reap - Sisophon; (iii) Kompong Cham - Kratie - Stung Treng; and (iv) Mondulkiri - Pailin - Preah Vihear - Oddar Meanchey. The postal network and the capacity of concerned institutions will be strengthened to improve the quality of postal services. Radio and TV broadcast networks will be strengthened to improve efficiency. National guidelines will be developed and adopted on investment plans and cooperation for telecommunications facilities, services and information technology, including standards and regulations on the use and practice of information technology and use of the internet.

342. The Royal Government will enhance the implementation of an open policy in promoting private sector participation in information and telecommunication technology without discrimination, consistent with Cambodia's commitments and obligations as a member of the WTO.

4.3.3 PRIVATE SECTOR DEVELOPMENT AND EMPLOYMENT

STRENGTHENING PRIVATE SECTOR AND ATTRACTING INVESTMENTS

344. As stated in the Rectangular Strategy, the Royal Government considers the private sector to be the engine of economic growth. The Royal Government will continue to play a strategic role in creating an environment conducive to enhanced private sector development and in managing the development process. The Royal Government will continue its efforts to improve access to the international markets by: (i) implementing policies to enhance economic integration of Cambodia into the regional and world economies; (ii) developing both software and hardware national infrastructure networks; (iii) strengthening the legal framework for enterprises, including laws, regulations and institutional capacity that facilitates business, trade and private investment, especially fair competition, transparency, accountability and fruitful partnership between private and public sectors.

345. The Royal Government recognizes that improving the business climate and creating an enabling environment for private sector development are key pre-requisites for fostering growth, creating jobs, reducing poverty and achieving sustainable economic development. To remove the critical bottlenecks impeding the development of the private sector as well as to provide inputs in the processes of administrative and regulatory reforms, a Government-Private Sector Forum was established in December 1999. It has been meeting once every six months and is supported by seven Business-Government Sectoral Working Groups, which meet monthly to identify and recommend actions to resolve sector-specific problems. To further strengthen the key institutional mechanisms to support the implementation of the Rectangular Strategy, at the last Government-Private Sector Forum held on 20 August 2004 Samdech Hun Sen, the Prime Minister announced the formation of a Steering Committee for Private Sector Development. This Committee is chaired by Sr. Minister and Minister of Economy and Finance, with Sr. Minister and Minister of Commerce as Deputy Chairman, and the Governor of the National Bank of Cambodia and the Ministers of MIME, MAFF, MPWT and MOT as Members, and the Secretary General of CDC, as its Secretary. The Steering Committee will be responsible for carrying out the following tasks:

1. Act as the "Etat Major" of the Head of the Royal Government in leading, implementing, and monitoring the implementation of the Rectangular Strategy on Private Sector Development.

2. Propose and implement measures to improve investment climate.

3. Propose and implement measures for trade facilitation

4. Propose and implement measures to promote Small and Medium Enterprises.

5. Propose and implement other measures to promote private sector development.

346. The Steering Committee is supported by the following three Sub-committees: (i) Sub-committee on Investment Climate and Private Participation in Infrastructure (PPI) -- chaired by Sr. Minister, Minister of Economy and Finance; (ii) Sub-committee on Trade Facilitation -- chaired by Sr. Minister, Minister of Commerce; and (iii) Sub-committee on SMEs -- chaired by Minister of Industry, Mines and Energy. The Steering Committee and its three Sub-committees will work closely with our development partners who want to assist Cambodia in developing the private sector, including the WB, ADB, IMF, UNDP, JICA, AUSAID, GTZ, AFD and others, based on a SWAP arrangement for private sector development.

347. The Royal Government will continue to facilitate and provide support to private investments in the following six priority sectors:

1. Development of agriculture and agro-industry by giving priority to agricultural irrigation.

2. Development of transport and telecommunications infrastructure systems.

3. Development of the energy and electricity sectors.

4. Labor-intensive industries and export-oriented processing and manufacturing.

5. Tourism-related industries.

6. Human resource development.

348. To create an enabling environment for private sector development, a high priority of the Royal Government during its third mandate is to implement measures that will:

• strengthen both public and corporate governance;

• facilitate trade and improve the climate for investment; and

• promote human resource development to effectively respond to market needs.

349. To facilitate trade, the Royal government will take the following actions:

1. Streamline Government procedure that impose high costs and delays in approving private sector investment, such as those units under the responsibility of the Ministry of Economy and Finance, particularly the Custom and Excise Department, the Ministry of Interior, the Ministry of Commerce, the Ministry of Public Works and Transport, the Ministry of Industry Mines and Energy, the Ministry of Health, the Ministry of Agriculture Forestry and Fishery as well as the Ministry of Social Affairs and Labor;

2. Reduce transaction costs on the import and export of goods while increasing Government’s revenue;

3. Reduce unnecessary and overlapping transaction costs in trade transactions,

4. Reduce time of import and export process,

5. Increase predictability of time and costs of export and import process, and

6. Maintain compliance vis a vis the guiding principles of the World Trade Organization and World Customs Organization (WCO).

350. To promotion market infrastructure and deregulation, the Royal government will:

1. Reduce time and costs imposed by different types of inspections.

2. Establish an information system to facilitate firms to have access to bank credit and to help commercial banks evaluate investment proposals.

3. Facilitate the operation of the labor market by developing a registry of required skills, training needs and availability of human resources for the private sector.

4. Improve infrastructure, expanding the coverage of electricity, telephone and communications network, water supply and sewerage system, increasing the efficiency of ports, reducing the costs of electricity, port handling, transportation and communications.

5. Discourage monopolistic trading arrangement through the relaxation of licensing and inspection requirements.

6. Increase the participation of firms in the formal economy by reducing the regulatory burden on firms.  This will involve: reducing the cost of registration; elimination of obsolete and unnecessary licensing requirements; elimination of minimum capital thresholds for registration; and reforming the inspection regime.

7. Introduce a law governing all forms of private participation in infrastructure.

8. Revisit the generous provisions on overtime, nightshifts, and holidays, while upholding the core labor standards with the view to make Cambodia's garment industry competitive.

351. To enhance market access and access to information, the Royal Government will take the following actions:

1. Strengthen trade promotion and market information activities.

2. Develop a directory of enterprises, to be combined with the computerized registration system.

3. Develop a website to promote local products.

4. Strengthen capacity of Customs Department to prevent smuggling.

5. Develop export promotion potential through the establishment of industrial zones for exporters.

352. The tourism sector has attracted a significant amount of private sector investment. The Royal Government will continue to support the rehabilitation and construction of infrastructure needed for the expansion of the tourism by the private sector. Specifically, the Royal Government will:

• Implement measures to ensure the security and safety of tourists throughout the country, especially at all tourist destinations.

• Take proactive measures to attract investors to rehabilitate and construct airports, harbors, roads, electricity and water supplies, and waste management at major tourist destinations.

• Under the Mekong Tourism Development Project  explore the possibilities of carrying out :

• Airport Improvement Projects in Rattanakiri and Stung Treng.

• Cheng Ek Genocidal Site Road Access Improvement Project in Phnom Penh.

• Implementation of Wastewater Management Project in Siem Reap.

• Simplification of travel at Don Kralor International Border-crossing Checkpoint.

• Support the construction of national roads-linked from Thailand and Vietnamese borders:

• National Road 6 Poi Pet - Siem Reap

• National Road 67 (Cham - Sragnam - Anlong Veng - Siem Reap)

• National Road 48 (Koh Kong - Sre Ambel)

• National Road 78 (O'Yadav - Ban Long)

• Encourage the reconstruction of local airports in Preah Sihanoukville and Koh Kong.

• Promote the formation of a Tourism Marketing and Promotion Board to enable the private sector to participate in marketing and promotion.

• Establish Tourism Information Offices at International Ports of Entry and International Airports.

• Promote tourism via internet and domestic and international television channels such as CTN, CNN, CCTV, TV5, NHK and KBS.

• Promote the establishment of Hotel and Guesthouse Association of Cambodia, Tour-guide Association of Cambodia, Aviation Association of Cambodia, Restaurant Association of Cambodia, and Transportation Association of Cambodia.

PROMOTION OF SMALL AND MEDIUM ENTERPRISES (SMEs)

353. The Royal Government has committed itself to promote the development of small and medium size enterprises during its third mandate. The priorities outlined in the Rectangular strategy are:

1. Encourage the development of SMEs, especially through the provision of medium and long term finance.

2. Suppress smuggling.

3. Reduce registration procedures and start-up processes for companies.

4. Facilitate export-import activities by simplifying procedures such as licensing and other letters of permission.

5. Support for newly-established industries for an appropriate period

6. Promote linkages between SMEs and large enterprises.

7. Establish a national center for productivity to assist SMEs in enhancing their productivity and reducing production costs.

8. Establish a national standards institution to help ensure the quality of domestic products to meet regional and international standards.

9. Establish national laboratories for physics, chemistry, micro-biology, mechanics and tests for quality and criteria of products.

10. Strengthen mechanisms for the protection of industrial intellectual property rights, to prevent illegal copying, re-creation and illegal use of new techniques and technology.

11. Promote vocational/skills training, both domestic and overseas.

12. Expand and accelerate the "one village, one product" program

13. Strengthen the legal framework by creating laws on concerns such as: factories, industrial zones, patents and inventions, measurements and industrial safety.

354. The Royal Government recognizes rural credit as an important mechanism in rural economic development. Rural credit plays a crucial role in alleviating poverty by supporting the creation and expansion of businesses as well as increasing productivity, generating incomes and raising the living standard of rural population. The Royal Government will continue to promote the rural credit sector to ensure that loans at a reasonable interest rate are available to the poor, especially those in remote areas and along the borders, and to small and medium enterprises (SME). Specifically, the following actions will be taken to promote the development of a healthy micro-finance sector:

• Monitor and supervise the management and professional skills of credit operators to ensure financial sustainability by reducing high risk lending and eliminating fraudulent practices.

• Strengthen the capacity to enforce laws and regulations related to the management, monitoring, and supervision of micro finance institutions.

• Support training of credit operators to upgrade their professional skills to ensure higher efficiency and sustainability of their credit program.

• Negotiate with rural credit operators to reduce the interest rate by increasing the loan supply to meet the demand for credit.

• Promote savings mobilization to increase domestic rural credit resources.

• promote the creation of a competitive environment for micro-credit operators.

• Continue to attract financial resources and technical assistance from outside.

• Assist rural people to find markets to sell their products in domestic and international markets, by promoting Small and Medium Enterprises (SMEs) and giving loans to support SMEs, Agro-industries and “One-village One-product” movement.

• Extend rural credit services to remote areas.