5th Asia Economic Forum

“ Asia’s Challenges and Opportunities during the time of Global Economic and

Financial Crisis ”

H.E Dr. Son Koun ThorAdvisor to Samdech Prime Minister Hun Sen

Vice-Chairman of SNEC

The Financial Crisis Affect and Government’s Policy Measure

I- Financial Crisis

The world economy has gone through deep changes since the end of 2007 caused by the increase in oil prices and the real estate crisis in United State.

In 2008, oil price were rising had caused the prices of food, especially rice and also caused the of many other goods to increase. This has created inflationary on the world economy including Cambodia.

In generation, this global financial and economic crisis have impacted to Cambodia’s financial and economic systems, especially the decline in the sources of financing and private investment capital outflow, the fall in demand in key Cambodian markets and reducing tourist visit to Cambodia. As a result, the most vulnerable sectors to the crisis are :– Garments– Tourism– Construction and Real estate

II- Government’s Policy Measures

1- Macroeconomic Policy:1-1 Monetary and financial policy

1-2 Fiscal policy

1-3 Policy to mobilize and increase disbursement of

Official Development Assistant (ODA)

2- Measures related to Structural and Sectoral Reforms:

2-1 Garment sector

2-2 Tourism sector

2-3 Agriculture sector

1-1 Monetary and Financial Policy

RGC continues implementing prudent and flexible policies to keep inflation under check and to ensure stability in financial sector especially the robust banking system such as regularly monitoring and ensuring the health of banking system, ensure the solvency and the strength of commercial banks.

1-2 Fiscal policy

In order to compensate the drop in private investments, RGC has to introduced a stimulus package to the extent it can afford to support and stimulate growth in the ways that would not adversely affect economic stability, especially the management of inflation, as well as to effectively mobilize additional resources from the development partners.

In 2009 expenditures policy, the RGC gave priority to increasing public investment in physical infrastructure including transportation, irrigation, increasing agriculture output, reducing manufacturing costs and implementing social safety nets.

Nevertheless, The RGC is vigilant in monitoring the implementation of the budget-on both expenditure and revenue side.

1-3 Policy to mobilize and increase disbursement of ODA

In 2009, RGC mobilized approximately USD 1 billion in ODA, which was highest outcome in its effort to attract Official Development Assistance from development partners. This cooperation financing is one of the important instruments to reduce the impacts on Cambodia from financial meltdown and global economic downturn.

2-1 Garment sector

RGC still see the possibility and need to improve procedures and to reduce barriers and difficulties in doing business which can help reducing production and transportation costs and also seeks sources of financing for business activities, diversifying markets and coordinating between employers and workers.

RGC looks for appropriate budget and establish fund to provide scholarships for special skill training including the provision of short-term training to our young and lay-off workers.

2-2 Tourism Sector

RGC pays greater attention to strengthening tourism sector over the short, medium and long terms, by ensuring peace, security, political stability, social order and tourist safety; building more infrastructures; improving legal framework and institutional capacity; developing human resources; and diversifying tourist market.

In order to support Agriculture, RGC continue to enforce zero tariff policy on importing agriculture materials such as seeds, fertilizers, pesticide and agricultural equipments etc.

RGC is drafting legal procedures for investment projects in agriculture especially investment projects in agriculture produces processing such investment projects in rice stockpiling and processing.

2-3 Agriculture sector

• RGC has given serious thoughts to the factors of production costs and output as well as capacity in purchasing, stockpiling and processing Cambodian rice.

• RGC has increased RDB’s capital to USD13 million for pilot project in Agriculture supporting especially Rice.

• RGC provided credit line of USD15 million including USD 3 million is RDB’s counterpart fund to Rural Development Bank (RDB).

• RGC is establishing “Agriculture Support and Development Fund” which is managed by RDB to support private sector especially SME, on a number of targets including :

– Providing short-term credit for collecting paddy/rice from farmers at appropriate price to maintain price stability and ensure food security.

– Providing medium-term credit to rice millers to increase capacity in stockpiling, drying and processing.

• RDB has successfully

implemented this special loan

of RGC to the farmers

associations which started

since 2005 in the amounts of

USD 2 Million and increased

to USD 4 Million in 2006,

USD 6 Million in 2007 and up

to USD 16 Million in 2008.

Expected result

“ “ Transforming Cambodia Transforming Cambodia

into White Gold-Rice exporter into White Gold-Rice exporter

””

(The vision of Samdech Hun Sen, Prime Minister of Cambodia)

•Rice millers have ability to compete with the neighboring dealer in buying paddy.

• To set up rice market which enabled farmer in avail themselves of precise price of paddy and market as well as enable rice miller to collect paddy for better storage facility to ensure domestic supply, national food security and export.

• Rice miller has capacity of milling

process and export.

• To take immediate action in preventing

from sudden change of rice price.

• To participate in Emergency

Food Assistant Project living

surround Tonle Sap Basin

Provinces.

The Rural Development Bank has provided a soft loan to the Green Company to build rice milling facilities to mill rice for export and local consumption.

Thank You for your attention!