Excellencies, distinguished representative of the donor community

Excellencies, my colleagues from the Royal Government

Excellencies, Ladies and Gentlemen

On behalf of the Royal Government of Cambodia (RGC) and myself, I would like to express our profound gratitude to all of you, Excellencies, Ladies and Gentlemen, for participating in this important meeting. At this meeting you have provide comprehensive, candid and constructive suggestions and recommendations and paying much attention to Cambodia’s development and push the reform momentum to new high.

You have spent the whole day listening to the presentations and thorough clarifications of my colleagues on major topics related to the government’s reform programs. Therefore, there is no need to repeat the details raised in the presentations. I wish, however, to take this opportunity to sum up the achievements resulted from the efforts deployed by the RGC to push forward the reforms during past year and highlight the government’s resolve and determination to speed up the reform momentum. By doing so, we have made our utmost to address all the challenges and remove the impediments to ensure the sustainability of our actions, which are critical to the survival of our nation and the Cambodian people.

Overall, year 2001 is another turning point for Cambodia’s reform agenda, as we have reached the mid-term of office for this government. Therefore, it is time for us to do an evaluation of the past achievements, draw experiences and lessons that we have learnt and set new directions to accelerate and deepen the reform programs. As you are aware, I have reiterated that the RGC will push hard to maintain and move this momentum further regardless of the difficulties or challenges.

During the last two years after the July 1998 elections, Cambodia has witnessed considerable developments, notably the collapse of the political and military organizations of the Khmer Rouge and the integration of their forces into the mainstream of the society. This has brought peace to Cambodia for the first time over many decades. Having enjoyed peace, security, stability and unity of territory, which were difficult to attain, the Royal Government has adopted the most important agenda of speedy poverty alleviation and economic and social progress. We have formulated and subsequently implemented the "Triangle Strategy" with the view to getting over political games, to cleaning up internal and external political environment and creating conditions to put the country on the path of reforms.

Since the CG Meeting held in Tokyo in February 1999, I had announced to the whole world that our reform programs are truly national requirements and not to please donors. I am confident that after monitoring and following up on the implementation of these programs during the last two years, you are even more convinced that what we had said is true. Our policies and measures have been translated into reform actions, which have become encouragingly fruitful in all the fields.

With the Royal Government’s strong determination and resolve, the efforts and support from the people from all walks of life, as well as the generous assistance provided by our external partners, we have definitely achieved national reconciliation, restored peace and stability in the country. Cambodia’s image on the international arena has rapidly improved and the country is now fully involved in regional and world affairs. Moreover, our economic performance has been good, with positive growth during the last few consecutive years, while countries in the region were mired in a financial turmoil. Notwithstanding these achievements, we should not be complacent. The RGC is conscious that its own capability is still limited and is deploying considerable efforts to further strengthen and improve those achievements. The year 2001 will witness a number of important developments, such as the organization of a tribunal to bring the Khmer Rouge leaders to justice and the organization of the commune elections with a view to promoting decentralization and strengthening democracy at the grassroots level.

Excellencies,

Ladies and Gentlemen

After making the above introductory remarks, I would like to proceed to the evaluation and sum up the achievements made by the RGC in 2000, highlighting the strategies, policies and concrete measures put in place and implemented by the government to speed up the reform programs.

The performance of economic and fiscal reforms was strong, despite the most severe flooding in 70 years. Cambodia is moving decisively forward on the path of economic reforms, designed to maintain macroeconomic stability, strengthen the banking and financial institutions, implement fiscal reform measures, strengthen public expenditure management, ensure a sound management of public property and increase public investment in physical and social infrastructure and human resource development.

Having rigorously deepened the reform programs, real GDP rose 4.5 percent against the 5.5 percent projected, despite the unusually severe flooding. The inflation rate (4^th quarter moving average) declined from 0 percent in December 1999 to –0.8 percent in December 2000. The exchange rate was fairly stable ranging around 3,900 Riels per USD. The international reserves increased 16 percent, covering 3.3 months of imports.

To strengthen the banking system and corporate governance, the National Bank of Cambodia (NBC) proceeded to bank relicensing, in compliance with the Law on Banking and Financial Institutions, with the view to closing nonviable banks, either voluntarily or through liquidation process. These measures are necessary to establish a sound banking system, promote savings and increase the confidence of the public in the banking system.

With rigorous implementation of the fiscal reforms and strict management of public expenditure, we have received encouraging results, with improved revenue mobilization and expenditure restraint to make room for flood relief advance payment of CR 73 billion or 0.6 percent of GDP.

Having rigorously implemented the fiscal reform measures, domestic revenue increased by 7 percent compared to 1999. At the same time, we recognize that we have experienced some difficulty in the collection of certain tax and non-tax revenue. Measures have been put in place by the RGC to strengthen customs administration to prevent the decline in international trade tax. Special measures are being implemented to improve collection of revenue from PTT and improve the efficiency of non-tax revenue collection.

With increased revenue collection, overall public expenditures was contained to make room for flood relief expenses. Even with increased contingency funds for flood relief, current budget surplus for 2000 was estimated at 1.6 percent of GDP, compared to 1.3 percent budgeted. This surplus was used to finance counterpart fund and locally financed projects, as well as debt amortization. The share of defense and security spending has gradually declined from 43 percent in 1999 to 37percent of current budget in 2000, while civil administration outlays increased from 57 percent in 1999 to 63 percent of the current expenditure in 2000. Since 1994, defense and security expenditure dropped from 6.38 percent of GDP to 3.9 percent of GDP in 1999 and to 3.5 percent in 2000.

To endure stability and social order, the RGC has decided to introduce a 10 percent salary rise for the public servants and retired from 1January 2001. At the same time, the RGC has displayed its strong willingness to continue the implement action of the administrative reforms as scheduled.

The Royal Government places a high priority on social and economic spending, notably on Education, Health, Agriculture and Rural Development. Actual disbursements and advance to the priority sectors, including advance payment on flood relief, which accounted for CR 73 billion, increased by 55 percent compared to last year, In nominal term, current disbursements to Health increased 25 percent (83 percent of budget target), Agriculture-13 percent (91 percent of budget target), Rural Development-161 percent (104 percent of budget target) and Education- 24 percent (99 percent of budget target).

The RGC recognizes that increased spending on priority sectors is key to ensuring successful implementation of the its social policy and reducing poverty. In this sense, the RGC has taken measures to improve the expenditure framework and budget execution for the social and economic priority sectors, especially through the Priority Action Program (PAP). The Ministry of Economy and Finance (MEF) is committed to fully disburse the 2000 PAP appropriations and the spending for the Accelerated District Development (ADD) as budgeted .PAP coverage for 2001 will be expanded to the Ministry of Agriculture, Forestry and Fisheries and the Ministry of Rural Development.

Excellencies

Ladies and Gentlemen:

Senior Minister Sok An presented a comprehensive report on the plan and the implementation of the government demobilization program. Our primary concerns at this stage, is the delay in fund transfer to finance the demobilization project. Even with the delay in disbursement, the RGC is strongly committed to ensure successful completion of the Pilot Demobilization Project, whose lessons can be drawn for the preparation of the full mobilization of up to 15,000 soldiers in 2001. I would like to take this opportunity to thank the World Bank for increasing its commitment from US$5 million to US$15 million, accounting for one third of the expected cost of the RGC’s full demobilization project.

To ensure the implementation of the full demobilization project before the rainy season, I wish to urge the Council for the Demobilization of Armed Forces (CDAF) to do an evaluation and arrange for an audit of the pilot demobilization project to ensure transparency for donors’ decision to finance the full demobilization program. I am aware of the concerns voiced by many donors, regarding the procurement process for goods and services. I would like to take this opportunity to assure all donors that the RGC will do its utmost to ensure transparency and prevent corruption during the implementation of the demobilization program. In this sense, I urge the Council for the Demobilization of Armed Forces to discuss thoroughly with the World Bank the procurement guidelines and procedures in order to speed up the implementation of the project. Moreover, attention should be given to strengthening financial management capacity of CDAF.

I instruct CDAF to cooperate with the Ministry of Land Management, Territorial Planning and Construction and other relevant ministries to resolve the question of land and shelters for demobilized soldiers and their families. I would like to appeal once again to all donors to speed up fund disbursement and provide some degree of flexibility to facilitate expedient and successful implementation of this important project. I am very seriously concerned about this funding issue, since with no funding or the delays in disbursement, the whole reform project will fail or will be implemented with some delays. Given the sensitivity in the implementation of the reform program, it will not be possible for the RGC to commence the implementation of this program so long as committed funds for this project has not been transferred to a trust fund account in Cambodia. Otherwise, the RGC would run the risk of swallowing political pains, due to the negligence in implementing this program. Moreover, Senior Minister Sok An also raised a number of issues, which constitute the impediments to the efforts to speed up demobilization at this stage, including uncertainty in funding for the project and the CDAF secretariat and the red tapes in implementing certain procedures. I would like to appeal for mutual understanding, cooperation and flexibility in expedient resolution of these issues.

Excellencies

Ladies and Gentlemen

I have reiterated on many occasions that my political career depends on the implementation of forest policy. I even went further to announce that I would resign from the current position if the Royal Government has failed to crack down on illegal logging and ensured the implementation of the reform program to improve forest management. With such determination, even with good performance and achievements, the RGD has always been vigilant. In this sense, the RGC established and has provided full support for the Forest Crime Monitoring Unit (FCMU), which acts as a watchdog and assists the RGC in monitoring illegal logging in order to effectively stamp out corruption from this sector. At the same time, the Ministry of Agriculture, Forestry and Fisheries (MAFF)should prepare a legal framework to ensure efficient monitoring and prevent rogue concessionaires from using loopholes in the existing laws to fight the authorities back. The new legal instrument shall include provisions for surprise control visit and provisions ensuring the security and safety of investigators., Efforts will be deployed GRC to maintain the participating and full support by the Royal Cambodian Armed Forces (RCAF), relevant authorities at all levels, the civil society, NGOs and Cambodia’s external partners in the forest sector.

The government’s Progress Report on Forest Policy Reform, prepared by MAFF illustrated the achievements attained by the RGC in this area, reflecting the main directions of the reform process underway. Over the immediate to short run, attention will be given by the government to establish and strengthen a mechanism to monitor forest crimes and ensure sustainable management of forest concessions. I order the authorities at all levels to conduct serious investigations on findings identified in Global Witness Forest Crime Investigation Report, notably the increased illegal logging in some forest concessions and continue to take actions to crack down on illegal sawmills mentioned in the report. The continued monitoring of illegal logging, coupled with measures put in place and planned to improve the concession system, will enhance revenue mobilization from the forest sector and ensure sustainable utilization of these vital natural resources.

The RGC is strongly committed to forest reform and has deployed all our energy to prevent and combat illegal logging, as well as to improve forest management. With technical assistance from the World Bank, the RGC has commenced the implementation of the Forest Concession Management and Control Pilot Project.

With the view to ensuring smooth implementation of the sub-decree on forest concession management passed by the Cabinet meeting in February 2000. Relevant ministries and agencies should ensure effective implementation of this subdecree. The Ministry of Economy and Finance (MEF) and the MAFF should ensure a proper and transparent sale of government shares in any joint venture concessionaire and should prevent the sale of government shares to any concessionaire, which had been involved in illegal logging. Such a sale of share would undermine the prestige of the Royal Government in forest reforms.

Another crucial matter, which should receive our immediate attention, is the preparation and adoption of the Forest Law. To shore up legal framework for forest management, a draft Forest Law has been prepared by the RGC with technical assistance from the ADB. A public consultation was launched for this draft law in July 2000. However, the draft law still contains some ambiguities, especially regarding the assignment of responsibility and jurisdiction among the Ministry of Environment (MOE) and the Ministry of Agriculture, Forestry and Fisheries (MAFF). Moreover, the provisions regarding the structure of the Department of Forestry and Wildlife (DFW), forest registration and procedures for the collection of timber royalties are still unclear and require further elaboration . Thus, I order the MAFF to submit this law for discussion at an inter-ministerial meeting to allow relevant ministries to contribute to the provisions that are specific to them, finalize the draft law as soon as possible and submit it to the cabinet meeting by end February.

Excellencies

Ladies and Gentlemen

There is a strong correlation between sound natural resource management and poverty reduction. The plight of the poor can be improved by widening their access to forest, fisheries, water resources and other public goods. Therefore, providing access to fisheries and water resources is critical to improve the living standards of the people living in the Tonle Sap and riparian regions. Releasing the importance of such actions, the RGC has introduce a pro-poor policy by canceling or reducing the size of official fishing lots to improve access by the poor to traditional fisheries with a view to ensuring equitable distribution of the fruits of economic growth. Over the past weeks, the RGC cancelled a total of 495,000 ha of fishing areas, accounting for some 53 percent of the total fishing lots to allow the poor to eke out their existence from fisheries.

To maintain social order, the RGC has accorded priority to the preparation and implementation of land policy, which will focus on land distribution, land management and land administration. The core program of the RGC land policy consists of the development of a national land policy, improved management of the national land stock, commencement of systematic land registration, tax reform, the establishment of a legal framework to enforce property rights, the establishment of provincial, municipal and national master plans and zoning and the development of rural housing. A draft Land Law was adopted by the RGC in July 2000 with a view to securing land tenure, providing a basis for reduction in land ownership conflicts, and facilitating land management, natural resource monitoring and state property protection. With technical assistance from the Federal Republic of Germany and Finland, the RGC has conducted a pilot systematic land registration project using state-of-the-art technology and delivered land title certificates for the first time to the inhabitants of Samrong District, Takeo Province.

Excellencies,

Ladies and Gentlemen,

Today the meeting also thoroughly discussed the government’s project and actions in the implementation of the administrative reform, which includes strengthening good governance and judicial reform in Cambodia. The RGC is conscious that the administrative reform is key to ensuring successful improvement in service delivery and strengthening governance. The experiences of our neighboring countries show that there is a strong correlation between improved public service quality and accelerated economic growth and poverty reduction. We have successfully completed the civil service census and established a computerized payroll at the central level. The next step will be establishing a computerized payroll at the provincial level, issuing ID cards to public servant, formulating a strategy for rationalization of civil service and strengthening the human resource management information system.

With rigorous implementation of these programs, the RGC has commenced the preparation for the implementation of next phase of the administrative reforms, namely,

1. Preparation and adoption of a legal framework for public service management;
2. Formulation and implementation of a strategy for the establishment of priority groups;
3. Continued conduct of a functional analysis of government ministries;
4. Preparation and implementation of deconcentration and decentralization;
5. Preparation and introduction of a new remuneration system;
6. Preparation of a human resource management master plan.

As you are aware, the RGC is committed to rigorously implementing deconcentration and decentralization in order to ensure the devolution of power from the central to the grassroots level. The RGC expects that the forthcoming commune elections will contribute to further strengthening democracy and improving the efficiency of public services at the grassroots level. I would like to assure all donors that the RGC has strong political will and commitment to complete the implementation of this program as scheduled.

Excellencies

Ladies and Gentlemen

I have stated on many occasions that the RGC is conscious that good governance is a sine qua non condition for promoting social and economic development and sustainable social equity. A draft Governance Action Plan (GAP) was prepared by the RGC and distributed for discussions at the meeting.

The GAP identifies two categories of governance reform where action will be critical to Cambodia’s development over the near- and the medium-term. The first category involves four cross-cutting areas:

(1) judicial and legal reform: improving the legislative process, promoting dissemination of laws and regulations, developing a legal framework for private sector, developing human and material resources and infrastructure, enhancing the integrity of the judiciary and meeting private sector’s needs for the arbitration of commercial disputes;

(2) fiscal reform: streamlining customs control, combat smuggling, developing a modern customs administration, improving VAT refunds, undertaking a comprehensive reform of investment incentives, ensuring integrity of the budgetary process, improving performance of spending units, strengthening the public investment management program, enhancing the banking system and the management of state assets and natural resources;

(3) civil administration reform: rationalization of employment structure, review of remuneration and establishment of management system, enhancing productivity and motivation, reinforcing transparency and participation, ensuring a close link between administrative and financial decentralization and developing human managerial and human resources at the sub-national level; and

(4) anti-corruption: setting ethical standards, enacting special anti-corruption legislation, enforcing the sub-decree on public procurement, strengthening enforcement and scrutiny, and operationalizing the National Audit Authority.

The RGC recognizes that without credible actions in these areas, the basic virtues of good governance will not take hold in Cambodia. We have genuine willingness to implement all these programs. In fact, we have been implementing some of the above programs, thus achieving encouraging results.

However, what I want to stress here is that the GAP is very comprehensive, thus requiring prioritization, establishing a checklist, costing of the projects and setting concrete schedules to facilitate implementation and monitoring. Moreover, we should select low-cost projects that can be implemented immediately. Therefore, the key to successful implementation of the GAP is a human factor. The RGC is required to provide incentives to civil servants and the court personnel. As you are also aware, our resources are limited and do not allow us to implement the above wide-ranging programs over a short period of time.

Excellencies

Ladies and Gentlemen:

2001 is a crucial turning point for the people of Cambodia, paving the way for development of our country in the new century and millennium. To this end, we have introduced and implemented sectoral reform programs. However, to ensure their sustainability and the continuity of the reform momentum, a number of conditions should be met:

1. Maintaining favorable conditions for peace, security and national reconciliation, which were so difficult to attain recently;
2. creating a sound and enabling environment for promoting economic growth and development through rigorous implementation of the government’s poverty reduction strategy;
3. ensuring ownership of all reform programs and strengthening a genuine partnership with all players involved;
4. Strengthening good governance, which is the backbone for successful implementation of the government’s reform policy and poverty alleviation strategy.

Excellencies,

Ladies and Gentlemen:

Our practices have clearly shown that the Kingdom of Cambodia is among only a few countries that open the door to their external partners to be involved in discussions, provide opinion and recommendations, ensure the monitoring of the reform programs by checking performance against goals. We have confidence in this open partnership and we expect that all Cambodia’s external partners would understand and would be convinced about our sincerity and candor. In return, they will respond by enhancing effective cooperation to meeting the real needs of Cambodia in ensuring fruitful implementation of these ambitious reform programs.

After the whole day’s deliberations, you can see that the RGC has strong political will and commitment, as well as clear policies, strategies, programs and action plans to address these pressing challenges. Indeed, our own resources are limited. Therefore, we are in need for generous assistance from our external partners in order to achieve our ultimate goals set earlier. I hope that you will share the same view that cooperation and joint efforts, coupled with due coordination, will help put Cambodia on its own feet and ensure that Cambodians will become the master of their destiny and programs.

In conclusion, I would like to extend to all of you my best wishes for your good health, the success of your missions and all the best.

Thanks for your kind attention and I am delighted to announce the closing of this Monitoring Meeting between the Royal Government of Cambodia and the Donor Community.

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