"Cambodia's Economic Reconstruction and Regional Cooperation"

June 8, 2001

Hun Sen
Prime Minister of the Royal Government of Cambodia

Ladies and Gentlemen,

It is a great honor and pleasure for me to address the international conference on "The Future of Asia: Beyond Globalism, Ways to Harmonize Competition and Cooperation". "Cambodia's Future in Southeast Asia: Problems, Potentials and Perspectives of the Asian-Pacific Networks". I would like to take this opportunity to express my appreciation to Japan's Nikkei newspaper for organizing this conference.

Today, I wish to take the opportunity provided by this conference to share with Your Excellencies, Ladies and Gentlemen some of my thoughts on our efforts to rehabilitate and develop Cambodia in this geopolitically strategic part of Southeast and East Asia.

We are gathering today, at the time when the world and regional economies are facing major challenges. Overall, the world economy turned in an impressive performance since 1999. At that time the underlying fundamentals of the world economy have more generally strengthened and a more sustainable pattern of growth has been created. At the same time, the Southeast Asian economies continue to recover rapidly from the cataclysm that had wrecked havoc many countries in the region a few years ago. However, the global outlook for 2001 is becoming significantly more adverse, with the unexpected economic slowdown in the United States, lower growth in Europe and problems in the Japanese economy. This is compounded by weakness in the global IT sector. With some ASEAN economics heavily depend on the production and exports of electronic goods. The current situation has created some problems and difficulties for the economies of Southeast Asia.

Therefore, we can consider past achievements and experiences, envision the challenges to our future and together put in place effective measures to overcome these challenges. The above factors have made the outlook for the economies of Southeast Asia and East Asia more uncertain.

I am sure that this meeting will provide East Asia countries with much needed opportunities to discuss ways to sustain the recovery of regional economies, to build up business and investor confidence and to mitigate the impact of China joining the WTO on the regional economies. It also provides forum to discuss ways to turn these developments into "win-win" opportunities for the development and progress of the whole East Asian region. It is my conviction that it is important to sustain the momentum of growth in our individual countries and the region, thereby securing greater economic stability and resilience of the region, which is crucial for long-term, sustainable development.

In this context, I believe that we should focus mainly on the following issues:

(i) coping with regionalism and globalization:
(ii) reducing and eradicating poverty of our populace, in particular bridging economic disparities and digital divide in the region and the world; and
(iii) enhancing economic cooperation based on our country's comparative advantages and mutual benefits

Let me now turn to the issues that are of utmost importance for Cambodia and how we will cope with regional and global affairs.

First, in the areas of international affairs, Cambodia has given priority to strengthening its international relations and deepening its commitment to open makers and trade as a member of ASEAN. Cambodia's joining ASEAN is the necessity of the geo-politics and geo-economics. For Cambodia, ASEAN's attractions are fourfold:

l. The principle of non-interference in each other's internal affairs is the pillar of ASEAN existence since its inception.

2. The consensus principle in ASEAN's decision making process. This principle provides each nation with the status of equality and equal rights regardless of its size.

3. Even though so far some ASEAN members have faced with many economic challenges, including the financial turmoil a few years ago, ASEAN remains the economic center, which is capable to generate high growth over the long-term. Through its involvement in regional affairs and cooperation, Cambodia will be able to succeed in achieving this potential and share the win-win situation with its ASEAN partners.

4. ASEAN has long tradition of cooperation with its dialogue partners and therefore is a major international gateway and the arena for diplomacy for Cambodia, provides opportunity for economic cooperation with other countries and open access to international markets.

In this sense, Cambodia is looking forward to participating in all regional endeavors aimed at establishing and ensuring an environment of security, peace and stability, which constitutes the instrumental foundation for sustainable development and prosperity of the people. The commitments to democracy, the respect for human rights, the safeguard of peace and national reconciliation, especially the dismantling of the Khmer Rouge's political and military organization - which constitute long-term instability for the country and the region - are invaluable contribution to ASEAN and East Asia.

On the economic front, the Royal Government of Cambodia (RGC) has taken considerable strides to boost economic growth and reduce poverty. Hence, even after the most severe flooding in 70 years, the Roya1 Government of Cambodia (RGC) is committed to taking necessary measures in order to reach the GDP growth target of 5.5 percent. According to our latest estimate, real GDP growth was 5.4 percent in 2000 against the projected 5.5 percent. This testifies to the fact that the growth momentum, which commenced in 1999, was maintained. It is necessary to recall that, according to our official data, after rapid growth of 3.7 percent and 1.5 percent in 1997 and I998 respectively growth rate for 1999 reached 6.9 percent against 4 percent projected. According to government's forecast, real GDP growth will be 6.1 percent in 2001 and 2002. Inflation will be kept at a low level and the exchange rates will be broadly stable.

In the regional context, we are actively involved in ASEAN's affairs and cooperation projects, such as the ASEAN Free Trade Area (AFTA), the ASEAN Industrial Cooperation Scheme (AICO) and the ASEAN Investment Area (AIA). This cooperation also helps strengthen economic and trade relations and promotes investment across the borders.

Second, strengthening relationships with countries of Northeast Asia (Japan, China and South Korea) within the framework of ASEAN plus three is of paramount importance for Cambodia. At the recent fourth ASEAN Informal Summit in Singapore, ASEAN plus three leaders raised the possibility of holding the East Asian Summit instead of the ASEAN plus three and plus one Summit. In fact, the recent financial turmoil in the region more than three years earlier has shown that the future of countries in East Asia is inextricably linked together and the debate on "the East Asian Free Trade Area" or "the East Asia Community" is no longer a taboo. The Chiang Mai Initiative (CMI), - through the expansion of the ASEAN Swap agreement (ASA) to all ten ASEAN members and the establishment of Bilatera1 Swap Arrangements (BSA) and the Repurchase Agreements (Repo) between ASEAN members and the plus three countries (Japan, China and South Korea) - constitute a remarkable progress for strengthening financial cooperation. It also provides a financial underpinning for East Asian economic integration. This self-help mechanism is expected to become an effective instrument to prevent and resolve economic and financial crisis in the future. These initiatives testify to the fact that East Asia has actively endeavored to establish a regional financial architecture, which is to supplement and complement the existing world architecture. Cambodia voices full support for the commitment and the initiatives to strengthen the East Asian cooperation in all fields, including political and security cooperation.

Third, we will also intensify our cooperative involvement within the framework of the Mekong River Commission (MRC) and Greater Mekong Sub-region (GMS) project. The two developments will have great repercussions for emerging economies in Southeast Asia. This kind of cooperation is very important and imperative for countries in the sub-region, since the Mekong River is the lifeblood of agriculture, inland fishery and river navigation in each country and the whole sub-region. Any development upstream might have far-reaching environmental and economic consequences on the downstream countries. Moreover, the development of the Greater Mekong Sub-region (GMS) is instrumental for ASEAN, given its great potential for economic growth and development. In terms of geo-economics, the GMS is an important "economic gateway", linking Southeast Asia to China, a political and economic superpower in East Asia. More importantly GMS countries consist mainly of ASEAN new members with lower level of economic development, compared to more developed old members. This huge economic disparity is the main cause and impediments to regional economic integration. Therefore, concerted efforts in promoting the development in the GMS are the only effective resolution in addressing the problem of economic gaps within ASEAN and building up capacity of new member nations. This will remove the impediments to regional economic integration. In this spirit, I have proposed a number of initiatives to strengthen cooperation in the sub-region, especially the proposed establishment of a joint working group consisting of members from ASEAN countries, Republic of Korea, China, Japan, ADB, the Economic and Social Commission for Asia and the Pacific (ESCAP) and other donors to evaluate all existing initiatives, studies and projects and draw up a comprehensive, realistic master plan to set the direction for cooperation and development in the GMS over 20 to 25 years. At first, I believe that efforts should be geared toward developing a network of physical infrastructure linking regional countries and turning them into agricultural, industrial, trade and investment zones. Cambodia is ready to be fully involved in all these endeavors, aimed at turning the GMS from a region stricken by poverty to a center of prosperity in the 21st century. It is my conviction that the GMS deserves this and can materialize this aspiration.

Fourth, Cambodia will also strengthen its engagement with the international system through accession to the World Trade Organization (WTO), the Asia-Pacific Economic Cooperation (APEC) and the Asia-Europe Meeting (ASEM). APEC has grown into a very promising regional organization. It is not an economic grouping in the same mould as the European Union, the WTO or the North American free Trade Area (NAFTA). It has elements of each of the above, yet has maintained its unique character and identity. APEC is often referred to as an "open economic association" or "open regionalism". It is open because it does not seek to discriminate against non-members. It is economic because it deals basically with economic growth, trade and investment. The recent Singapore ASEAN Informal Summit voiced support for Cambodia and other non-APEC members of ASEAN to participate in the APEC Working Group Meeting on Human Resource Development. Cambodia warmly welcomes this initiative. The Asia-Europe Meeting (ASEM) is also on our next agenda. Although ASEM is a consultative process and not a formal mechanism for cooperation, it provides an important forum for furthering relations between ASEAN and the European Union. It also brings added value to bilateral and multilateral arrangements. Cambodia continues to increase its international participation not least because discussions and rules on such issues as trade, foreign investment and the international financial architecture have implications for Cambodia's efforts to strengthen her national capacity for active involvement in the regional and worldwide cooperation. It also allows the country to share appropriately the win-win situation in the current wave of regionalism and globalization. Moreover, the engagement with the international system is the key to ensure that Cambodia is not excluded from such negotiations and cooperation because of lack of capacity or lack of access to negotiations.

Fifth, human resource development should play a key role in implementing the strategy for cooperation in East Asia. This is especially important for intra-ASEAN integration. At the Singapore Summit ASEAN leaders paid special attention to the problem of integrating the economies of the four new ASEAN members into ASEAN. In this regard, attention is given to human resource development based on the principle of "prospering your neighbors". Cambodia enthusiastically welcomes all initiatives that have been proposed in this area.

Sixth, the revolution in information technology and telecommunications has created a new development paradigm, which makes the economy to become digitalized and knowledge-based. The intellectual capital has become an important production factor in the 21st century. In this sense, highly qualified and skilled human resources are key to gaining competitive advantages in the newly structured world economy. We are therefore required to give high priority to the development of information and communications technology (ITC) and the use of Internet for conducting studies, research and training and to promote the use of English language to enable the Cambodia people to benefit from globalization and regionalism. In the regional framework, attention is given to these issues. At the recent ASEAN Informal Summit, the 10 ASEAN Heads of State and Government signed the E-ASEAN Framework Agreement, which we intend to use as our main instrument to bridge the digital divide in the region. Moreover, I believe that ASEAN should take advantage of all opportunities presented by Japan's initiative at the G8 Summit in July 2000 to provide US$15 billion over the period of five years to assist developing countries in information technology and telecommunications. Particularly for Cambodia the priority areas for government interventions are to promote the learning of English and the use of Internet. Cambodia is prepared to take an active part in the work of the ASEAN + 3 Working Group on IT Development with a view to reducing the digital divide among countries in the region. Cambodia also welcomes the initiative to establish a communication link among countries in East Asia, which ultimately connecting East Asia with Europe and America. It is my conviction that human resource development and the promotion of IT will help Cambodia reduce poverty, ameliorate the living standards of the people and enhance the country's capacity in engaging in the regional and world affairs, while boosting Cambodia's competitiveness in the current of globalization.

I have spent some time elaborating on some important issues relating to the government's visions, strategies and policies, which determine Cambodia's position in the regional and world affairs. I expect that the deliberations during this conference would contribute to promoting cooperation and creating a bright future for Asia. In this sense, I would like to wish for successful completion of this conference.

In conclusion, I would like to extend to Your Excellencies, Ladies and Gentlemen and all participants to this conference good health, success in your missions and happiness.

I sincerely thank all of you for your attention.

Titles of speakers, names of companies, etc., were correct as of the time when the forum was held.