Opening Remarks by Mr. Arjun Goswami Country Director, Asian ...

Opening Remarks by Mr. Arjun Goswami
Country Director, Asian Development Bank Cambodia Resident Mission
Third Cambodia Economic Forum
Raffles Hotel Le Royal, Phnom Penh, Thursday 5 February 2009
Agriculture Diversification and Infrastructure Development
Your Excellency Samdech Akka Moha Sena Padei Techo Hun Sen, Prime Minister of the
Kingdom of Cambodia
Excellencies from the Royal Government of Cambodia
Fellow Development Partner Representatives
Distinguished Guests, Ladies and Gentlemen
1. On behalf of the Asian Development Bank (ADB), I am honored to have been asked to
present some opening remarks at this Third Cambodia Economic Forum, which has been
prepared and organized by the Supreme National Economic Council (SNEC), with the
assistance of the United Nations Development Program (UNDP). As the theme of this year's
Forum suggests, [and as my distinguished colleague from the World Bank has already
highlighted in his remarks], the key twin socio-economic objectives of the Royal Government of
Cambodia of sustaining high economic growth and accelerating poverty reduction have been
made even more challenging over the last year or so by two economic shocks; first, by the spike
in inflation and now, by the still unfolding global financial crisis. The first of these two shocks
caused significant hardship for an estimated 2 million people already below or very close to the
poverty line, and has yet to be fully reversed. The second may turn out to be the onset of one of
the severest recessions in decades in several of Cambodia's key export markets. This new
external shock will sharply curtail, at least over the next two to three years, three of the four
current main Cambodian sources of growth; namely, garment exports, tourism, and
construction. In any event, growth in 2009 will certainly be significantly lower in 2009; indeed,
the Government now projects growth at 5% for this year, still respectable but less than half the
11.1% annual average rate achieved between 2004 and 2007. Meanwhile, the labor force
continues to grow by about 250,000 entrants a year. Against this background, it seems entirely
appropriate and opportune for today's Forum to be devoted to a rigorous assessment of the key

vulnerabilities of the economy to external shocks to help pinpoint and focus on the priorities
which need to be addressed.
2. One clear priority, which the Royal Government is surely right to emphasize, as it has in
the recently launched Phase 2 of the Rectangular Strategy, is accelerating agricultural
diversification and infrastructure development. The ADB supports this for three reasons. First, it
will help mitigate the adverse social consequences of inflation and slowing growth by linking
farmers to markets, moving up value chains, and widening the geographical reach of, and social
participation in, the growth process. This more socially-inclusive growth will not only help sustain
economic growth and make it more equitable and pro-poor, but also help strengthen the
underlying grass-roots support on which the inclusive growth process depends, as well as
complement and reinforce the Royal Government’s laudable initiatives towards decentralization
and deconcentration. Second, in terms of mitigating macroeconomic vulnerability to inflation, the
events of 2008 related to food price inflation have clearly confirmed that there is a need to
promptly relieve the underlying structural constraints that contributed to the spike in headline
inflation (as we will learn from the presentation on “Explaining Inflation in Cambodia” this
afternoon), including by improving rice storage capacity and distribution mechanisms, and
increasing the supply of other domestically-produced food items, including chicken, pork, and
fish. While food price inflation is now on a declining path, as indeed is the headline rate, the
potential for renewed bouts of food price-generated inflation will remain until supply and
distribution bottlenecks are eased. Third, as highlighted during the Second Economic Forum in
May 2007 and confirmed since by several studies, including an ongoing analysis by the ADB,
there is now a clear and broad consensus that agricultural output could be much less volatile
and higher, at least over the medium-term. This would require higher public and private
investment in the sector and improvements in the coordination and implementation of the
Strategy on Agriculture and Water, 2006-2010, including with respect to land tenure security,
irrigation and drainage, fertilizer and seed use, technology, extension services, and access to
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finance, while improvements in natural resource management could result in higher sustainable
outputs from fishery, forestry, and livestock activities. These improvements alone would go a
long way to diversifying the sources of growth from the agricultural sector and thereby help
generate higher rural incomes. Assuming favorable climactic conditions, it is hoped that
agricultural output will receive a welcome boost from the stimulus measures taken last year in
response to the domestic food price hike.
3. While higher agricultural sector output may be necessary, it would not be sufficient for
sustaining the growth and poverty reduction dynamics in Cambodia. Indeed, rural development
and poverty reduction will also require measures to: (i) support the creation of adequate nonfarm
livelihood and employment opportunities in rural areas, including through the creation and
growth of micro and small and medium enterprises; (ii) extend social infrastructure, such as
rural education and vocational training, in terms of quality as well as quantity; and (iii) provide
key physical infrastructure, including rural water supply and sanitation, rural roads, including
maintenance and linkages to the provincial, national, and developing subregional networks, and
rural electrification. In summary, rural development in Cambodia is not merely about agricultural
sector performance, important as it is, but about the effective coordination of multi-sector issues
and indeed strategies in terms of a sensibly integrated rural development approach.
Your Excellency Samdech Hun Sen
Excellencies from the Royal Government of Cambodia
Distinguished Guests, Ladies and Gentlemen
4. Let me conclude my opening remarks by thanking all those who have organized today's
important event, especially the SNEC which has been not only the main driving force behind
today's impressive line-up and stimulating agenda, but is also increasingly establishing its
credentials as a top-notch policy advisor to the Royal Government. I very much look forward to
today's discussions and doing whatever I can, as Country Director of the ADB in Cambodia, to
assisting the Royal Government in reducing poverty and improving the lives and prospects of
ordinary Cambodians.
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