Chapter I


1.      For the first time in recent history, since 1999 the people of Cambodia have enjoyed an environment of peace, political stability, law and order, democracy, respect for human rights and economic stability. A comprehensive reforms agenda is being implemented by the Royal Government in spite of many on-going challenges. The process of making a transition from a centrally planned economy to a market based system that began in the mid-1980s is continuing. Cambodia's accession to the WTO in October 2004 is a testimony of how far along the nation has progressed. The Royal Government's concerted efforts to rehabilitate and develop the nation's social, economic and physical infrastructure are continuing to put the nation back on a holistic path that will achieve the national goals of poverty reduction and sustainable development.

2.      The successful implementation of the Royal Government's Triangular Strategy set the stage for a profound transformation of Cambodia from a region of uncertainty, war, internal strife, instability and backwardness into an epicenter of sustained peace, security and social order, respect for democracy, human rights and dignity, cooperation and shared development. The Rectangular Strategy of the Royal Government outlines the economic actions agenda for its current mandate, building on the achievements attained as a result of the implementation of the Triangular Strategy. Over a very short period, relative to the long histories of many developed countries, the Royal Government has demonstrated that Cambodia is fully capable of engagement on an equal footing with all partners, in regional and international affairs. 

3.      As in any human undertaking, the Royal Government’s efforts and achievements have not been exempt from insufficiency of actions and weaknesses. Indeed, the current national production structure is still far too small and concentrated in a few areas and must be expanded and diversified to ensure sustained economic growth.  Although many well conceived and well designed mechanisms have been put in place by the Royal Government to improve the management of the budgetary system they have not become fully functional because of many cross-influences and constraints which have jeopardized the objectives set for increasing revenue collection and improved public expenditure allocations. Coordination among various ministerial and administrative partners remains weak.

4.     To strengthen the rule of law, legislation in various areas are being drafted and enacted. The Royal Government is however concerned that while enactment of the Laws is an important first step, without developing capacities of concerned institutions to rigorously enforce and manage the Laws in a transparent and accountable manner the objective will continue to face many challenges. Reorganizing and restructuring the judicial apparatus remains a challenge for the Royal Government in the short to medium term mainly because of lack of qualified legal professionals. The shortage of Cambodian legal experts has meant that much of Cambodia’s existing legal framework has been heavily influenced by international experts. This has created a range of inconsistencies in the formulation of Laws which makes enforcement difficult. Law enforcement remains a challenge for a range of reasons but especially low salaries. It is difficult to enforce laws transparently and without fear or favor when the salaries of law enforcement officers are lower than a minimum subsistence level.

5.     Over the past five years, significant progress has been made in implementing pro-poor development policies, achieving macroeconomic stability, implementing public finance management reforms, strengthening democracy, rule of law and good governance, mobilizing technical and financial resources to support planned development, and improving the delivery of public services to meet the needs and expectations of the population. All of these efforts have been focused on reducing poverty and achieving the development goals of Cambodia. At the same time, the Royal Government recognizes that Cambodia still has a long way to go, and has to overcome numerous obstacles to achieve sustainable progress and prosperity for the country and its people. The promotion of harmonized efforts by the Cambodian people to reduce poverty continues to be the most important objective of the Royal Government.

6.       This document begins by highlighting what has been achieved since the last CG meeting in Phnom Penh in December 2004. It provides an update on macroeconomic performance, monetary and fiscal performance, and Government’s policy performance. The next chapter outlines the priorities for implementing the National Strategic Development Plan for 2006-2010. Section four presents Royal Government's update on building partnerships to enhance Official Development Assistance (ODA) effectiveness, and lays out the challenges and proposals as the way forward.  Chapter five outlines the  financial requirements for implementing RGC's National Strategic Development Plan (NSDP) through the Public Investment Program (PIP) for 2006-2008, and finally the conclusions.

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