Diversification, inclusive growth helps build Cambodia’s resilience against future shocks

By taking strategic steps now to diversify its economic base, invest more in human capital, and promote an inclusive growth to narrow urban-rural income gap, Cambodia can become more resilient against economic distress as seen in the recent global financial crisis, said Mr. Ajay Chhibber, UN Assistant Secretary-General and UNDP Assistant Administrator and Regional Director for Asia and the Pacific.
 

“The crisis marked a watershed moment for Cambodia. It threatened the reversal, not just of growth and development, but of a process of structural transformation that had offered enormous potential for Cambodia to accelerate its development efforts,” Mr. Chhibber said.

Mr. Chhibber made his remarks at the 4th Cambodia Economic Forum (CEF), a high-level dialogue to influence policy direction for future development, on 16 February, the last day of his three-day visit to Cambodia. He arrived on 13 February for his first official mission aimed at deepening the partnership between the Royal Government of Cambodia and UNDP in working to reduce poverty in the country.

During his visit, Mr. Chhibber met with Prime Minister Hun Sen; H.E. Ing Kantha Phavi, Minister of Women’s Affairs; H.E. Aun Porn Moniroth, Minister attached to the Prime Minister, Chairman of the Supreme National Economic Council (SNEC) and Secretary of State of Ministry of Finance; and H.E. Chhieng Yannara, Minister attached to the Prime Minister; other high level officials, development partners; and the UN Country Team in Cambodia. They discussed a wide range of issues of strategic importance for advancing Cambodian development in medium and long-term.

One of the outstanding topics was a new South-South initiative, which could see UNDP, Cambodia, and China working in a trilateral partnership to pilot development projects to benefit the people of Cambodia. This followed an agreement UNDP Administrator Helen Clark and China’s Prime Minister Wen Jiabao made at the MDG Summit in New York last year.

Prime Minister Hun Sen offered his support in principle for the proposed partnership during his meeting with Mr. Chhibber on 14 February.

“The world is changing. It is no longer dictated by North-South, East-West engagements. The South-South partnerships hold great potential for Cambodia, which already has a long history of cooperation with China,” Mr. Chhibber said.

In his speech to the CEF, he noted that Cambodia’s impressive growth – which was on average 9 percent per annum before the onset of the global recession in 2008 – has contributed to significant reduction of poverty.

But the recession hit hard on the Cambodian economy, which has so far been powered mainly by garment exports, tourism, and construction. Although its economy begins to recover, he said expansion of the economic base beyond these traditional growth engines will help improve the country’s competitiveness and resilience against “adverse exogenous shocks” in the future.  

“If the crisis has brought one proposition to global attention, it is this: resilient growth is as important as high growth,” he said. “Resilience comes from greater inclusion, be it of citizens, of groups, of workers or of regions, in the process by which growth is generated,” he added.

“The quicker you can diversify the better. We hope that there will be no more crises, but it is better to be prepared because one never knows what will come out of future direction of the global economy,” he said.

Cambodia’s poverty rate dropped to 30 percent in 2007 from some 47 percent in 1994, a progress Mr. Chhibber said did not come easy given Cambodia’s tragic past. But he also stressed that, while achieving this gain, it is equally crucial for Cambodia to ensure that people who have come out of poverty do not fall back into it.

“Cambodia’s medium-term economic strategy should be focused on policies and interventions that support inclusive growth, like investing and improving services in the rural economy where most of Cambodia’s poor live and where investment can have the greatest human development impact,” he said.

Recovery is slow to take hold in the U.S. and E.U. where Cambodia has so far relied on for most of its exports. Meanwhile, Mr. Chhibber said, the economic gravity is shifting to Asia, led by growths in China and India, representing an “enormous dynamism” for Cambodia to expand intra-regional trade instead of just relying on U.S. and E.U. markets.

Emerging mining and oil and gas sectors will also help drive growth and accelerate progress toward achieving Cambodia Millennium Development Goals. “But for this to happen, transparent mechanisms need to be in place for effectively managing and using revenues, and channeling them for improving health, education and other development needs,” he said.

Mr. Chhibber and senior government officials also discussed the new UNDP’s country programme for 2011-2015. A key feature in it is support to the Government’s 10-year strategy to clear the country of all mines to release land for productive use thus contributing to the achievement of the 9th CMDG. H.E. Chhieng Yannara confirmed the Government’s endorsement of the programme in his meeting with Mr. Chhibber.