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

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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