i. Higher Oil and Food Prices: Inflation and Economic Growth
ii. Governance: Anti-Corruption, Legal and judicial reform
iii. The Preparation of the Second CDCF
iv. Any other business
In response to the proposed agenda 1, H.E. Hang Cuon Naron, Secretary General, Ministry of Economy and Finance has been asked to make a presentation on the Inflation and macroeconomic Development. Cambodia has implemented macroeconomic strategies well, generally. GDP growth rate averaged 9.4% p.a during the last decade, and 11% p.a during the last five years. The increase rates reached two digits in the peak period of 2004, 2005, 2006, and 2007. However, the speed of growth will be reduced by regional competition and a decrease in demand and export targets. In addition, Cambodia’s banking system remains well capitalized and highly liquid.
Inflation, it is accepted that the international crisis in food costs continues to spread. To understand well about inflation, three root cases of inflation have been identified: (1) demand-pull inflation, (2) cost-push inflation and (3) Built-in inflation. To cope up with inflation, Cambodian government has taken actions by providing policy responses to inflation such as conduct prudent and tight monetary policy, pursue the exchange rate policy of managed float, promoting de-dollarization, increase reserve requirement of commercial banks, allow financially sound banks with excess of liquidity to invest some of their assets abroad, and increase minimum capital from USD 13 m to USD 36.5 m for commercial banks and increase to a minimum of USD 7.3 m for specialized bank. Also, key fiscal policies have been introduced to curb inflation.
In response to the efforts of government concerning with higher oil and food prices, an official statement has bee distributed. Development partners have strongly commended the Royal Government of Cambodia for sustaining high rates of economic growth in recent year. Development partners wish to highlight the government’s concerted efforts to improve rural infrastructure, extend microfinance into rural areas, and improve land tenure. Three areas have been commended by development partners: (1) efforts to contain domestic inflation pressure and publication of inflation statistics; (2) minimize the impact of the price shock on Cambodia’s poor; and (3) developing and rolling out a system for identifying poor households for the receipt of target assistance. The strategic commitment in the new Rectangular Strategy Phase II to more rapid agriculture and rural development has been welcome as well.
Anyway, development partners have raised their concern mainly on high inflation and slowdown of economic growth, if this case happens in the future, Cambodia will be off truck to achieve its poverty reduction goal by 2015. Poverty levels in rural areas remain much higher than urban areas, and rural households have smaller safety margins so are less able to manage shock. To mitigate the challenges concerning poverty, particularly in rural areas, concerned government ministries like Ministry of Agriculture, Forestry and Fisheries, Ministry of Water Resources and Meteorology, and Ministry of Rural Development have been recommended to strengthen rural governance.
Regarding land titling, German Embassador has asked government to show the progress. In this regards, H.E Chhan Saphan, Secretary of state of land management has shown the progress made, policy on land registration for indigenous people has been drafted, and waiting for the approval from the Council of Ministers. Moreover, government with the collaboration of provincial authorities has taken actions to stop issuing land titling for the purpose of buying and selling in Rattanakiri. However, government will continue to implement the legal framework of land, especially legal framework on land protection and the rights of using land for indigenous groups. In addition, government is accelerating the remaining land titling especially for marginal population groups, enhancing the redistribution of land to the poor (social concessions), and rationalizing the use of economic land concessions in target provinces.
Three key areas have been raised and asked by Australian Ambassador, on behalf of Development partners for discussion: (1) fiscal resource prioritization; (2) social safety nets; and (3) coordination for rural development. Before giving the floor to H.E. Hang Chuon Naron to respond to the first question, H.E. Keat Chhon has introduced the goal set in the Rectangular Strategy Phase II that, government has committed to sustain economic growth with GDP growth averaged 7% per year and inflation with a single digit, also poverty reduction will be reduced by 1% p.a.
He also stressed that, government will find the way to cope up the challenges in a good manner. H.E. Hang Chuon Naron informed the meeting in evidence-based that the government has committed to mobilize revenue collection, and increase budget allocation from 20% to 30% on annual basis to agriculture, rural development, infrastructure and human resource development as part of the commitment of the Rectangular Strategy Phase II.
As part of the public financial reform program platform 2, the efficiency of the resource utilization is every important., the concerned ministries like Agriculture, Rural Development, and water resource and meteorology have to strengthen their capacity to take more investment, especially agriculture sector.
In response to the second question regarding social safety nets, new social safety fund has been established by focusing on formal/social sector. Also, Government has increased more spending and give subsidy price to agriculture sector and other social sector to respond to the social safety net. To address the equity, even though the economic growth is high but we need quality of growth. In this regard, government can intervene the redistribution of land and land tenure for rural people, the poor and especially the indigenous people, and microfinance to make sure the social safety nets for the poor.
Regarding coordination for rural development, both government and development partners want to see the strong coordination between the Ministry of Agriculture, Forestry and Fisheries and the Ministry of Water Resource and Meteorology to support the Strategy on Agriculture and Water because this strategy has directly improved rural livelihoods. It is accepted that, both human and financial resources are not adequate for the sector. Therefore, development partners are committed to taking forward their partnership with the Royal Government to promote rural development as it is prioritized in the rectangular Strategy Phase II.
To cope up with financial sunami (crisis) , H.E. Keat Chhon has asked the development partners to increase their ODA for Cambodia in order to feed into the commitment of the OECD countries that they are committed to provide their financial support until 0.7% of their own GDP. In this regard, development partners would make redouble efforts to enhance development through the principles of ownership, alignment, harmonization, a focus on result, and mutual accountability.
H.E. Sok An, Deputy Prime Minister, Minister in charge of the Council of Minister has informed the major achievements from the implementation of Governance Action Plan include achievements in the Administrative reform, legal and judicial reform, anti-corruption and other sectors’ reforms. These three programs have been designed to enhance governance which are at the core of the Rectangular Strategy.
For Anti-corruption, Cambodia is a state member of United Nations Treaty on Fighting Corruption and signed the memorandum on Cooperation for Preventing and Fighting Corruption with eight ASEAN countries to enhance cooperation in the region and the world to fight corruption.
The Anti-corruption unit has been established since 1999 and was amended in 2006 to implement three coherent missions: Education, Prevention, and Enforcement with public support to fight corruption. Through this unit, government has already taken action against the corruption by sentencing people who were corrupt, and some people are under the investigation even though the law has not adopted yet. Now Anti-corruption law is started to review and finalize. It is informed that, Penal Code is in its last stage, with the Council of Jurists and the Economy and Social Observation, and the draft law on Anti-corruption will be sent to the national Assemble and Senate during the mandate of the fourth legislature in the appropriate time.
In this regard, Dps have urged government to improve governance, transparency with public service delivery, as it is a part of the efforts to solve current issue in stead of Anti-corruption law. However, Dps have encouraged government to speed up the process of the law with support from them. At the end, H.E Keat Chhon has informed the government and DPs still have time to work and discuss on Anti-corruption law.
For Legal and Judicial Reform, the main concerns of the passage of important legislation, the establishment of guidelines for legislative drafting, and training and selection of judicial professionals. However, progress has been made, such as the introduction in secondary schools and in universities of course on human rights and citizen rights; making tribunals and conflict resolution mechanisms outside the court closer to the people, legal support to the poor, the preparation of a law to protect minors, a law on family violence, and the public dissemination of laws.
The topic of the Second CDCF will be: For the first day, implementing the Rectangular Strategy Phase II, NSDP Mid-term Review, CMDG, Macroeconomic Management, PFM reform program, the national capacity development strategy, and public service enumeration, a law on the management of the Capital, provinces, municipalities, district and Khan. For the second day, we will discuss on Partnership and resource management, JMIs for 2009, Aid Effectiveness Report for 2008 focusing on challenges and recommendations, and the Multi Year Indicative Financing Framework will be discussed.
Three main documents have been planned to circulate in advance for the second CDCF. First, the Rectangular Strategy Phase II, formal launch by the Cabinet of the Council of Ministers on the 26 September, by Samdach Prime Minister. Second NSDP Mid-term Review, which is finalized by the Ministry of Planning, and waiting for the approval from the Cabinet. Third, the Aid Effectiveness Report 2008 has been completed for the first draft and waiting for comments, as it is focused on the implementation of the Harmonization, Alignment and Results, and also focused on the priority to promote the impact of development results and development outcomes in the context of the NSDP and the Rectangular Strategy.