Address by Samdech Akka Moha Sena Padei Techo Hun Sen

Prime Minister of the Kingdom of Cambodia on

"Rectangular Strategy" for Growth, Employment, Equity and Efficiency - Phase II

At the first Cabinet Meeting of the Fourth Legislature of the National Assembly

Phnom Penh, 26 September 2008

Excellencies Deputy Prime Ministers, Senior Ministers, Ministers, Secretaries of State, Members of the Cabinet

1. Today is a historical occasion when the Royal Government of Cambodia of the fourth legislature of the National Assembly holds its first cabinet meeting. As Prime Minister of the Kingdom of Cambodia, I am pleased to extend to all of you, colleagues­ members of the Royal Government of the fourth legislature, my greetings, warm welcome and best wishes.

2. To begin with, I would like to extend my profound gratitude to all compatriots who have once again for the fourth term, through the general elections held on 27th July 2008, reiterated their confidence in me personally to serve the nation as the Prime Minister of the Kingdom of Cambodia. The general elections on 27th July 2008 were upheld as open, free, fair and transparent. It was once again recognized as the "Miracle on the Mekong". The new Royal Government of Cambodia, created by the free will of our people, resumes its duties in the fourth legislature with renewed dynamism and commitment to building' and developing our country.

3. May I take this occasion of the first cabinet meeting to announce to our compatriots and development partners the prioritized policies of the Royal Government of the fourth legi­slature and its unwavering commitment to continue implementing reform programs in various strategic fields. This is to serve the interests of the nation and respond to the aspirations of the people who have given the Royal Government this sacred duty by the vote of their confidence through the process of free and fair election.

4. I reiterate once again that reform is the matter of life or death for Cambodia. In this sense, Cambodia has no other choice than continuing with firm and conscientious implementation of all needed reform programs. Deepening and expanding compre­hensive implementation of these programs are the pre-requisites to ensure effectiveness and efficiency in sustaining high economic growth and reducing people's poverty. Indeed, this need is becoming even more relevant the current context of Cambodia and the world.

5. In this spirit, the "Political Platform" of the Royal Government of the fourth legislature has been formulated and endorsed through a comprehensive review of the predominance during the third legislature, people's will and desire, the national and international context and the prioritization of strategies for all key sectors. Our development policy has been fine-tuned to highlight the socio-economic policy agenda of this political platform and to develop systematic, coherent, interrelated, com­plementary, and simplified priority packages within key sectors. Through this socio-economic policy agenda, the Royal Govern­ment reiterates its mission statement and firm determination in continuing the reforms in order to strengthen good governance and stimulate high economic growth, the most important factors to ensure sustainable development and poverty reduction.

6. In this context, I would like to propose to our first cabinet meeting, compatriots, development partners, public and private sectors, and civil society organisations, that we will continue to implement the" Rectangular Strategy" for Growth, Employ­ment, Equity and Efficiency -- Phase II which is the "Socio­economic Policy Agenda" of the "Political Platform of the Royal Government of the fourth legislature of the National Assembly".

7. Let me elaborate the background and strategy as follows:

Part I - Performance of the Royal Government of the Third Legislature in implementing the Rectangular Strategy

1.1. Main Achievements of the Royal Government of the Third Legislature

8. Cambodia has been enjoying the fruits of peace and full territorial unity and integrity as the result of the "Win-Win Policy" of the Royal Government as evidenced by high economic growth and poverty reduction over the past decade. Cambodia has integrated into the region and the world and plays a dynamic role on equal footing and with equal rights in various sub-regional, regional, inter-regional and international organizations. The current political stability, achieved and consolidated through persevering efforts after many decades of conflict, allows Cam­bodia to implement its reform programs in all sectors to re-build institutional capacities, strengthen socio-economic infrastructure, and create a highly conducive climate to attract investments from both domestic and overseas sources to enable strong economic growth and poverty reduction. We have demonstrated our com­mitment to multi-party democracy as the only path for Cambodia toward the "rule of law" and to provide equal opportunity to all the people. In the third legislature, the Royal Government has attained major achievements in a number of fields, as follows:

1)        Peace, political stability, security and social order have been strengthened by implementing the liberal multi-party democracy.

2)        Respect for human rights and dignity, including political, economic and social rights, has been en­hanced; and decentralization and de-concentration reforms, aimed at strengthening democracy and efficiency of local public services, have been initiated.

3)        Good governance through state reform, especially civil service reform, legal and judicial reforms and armed forces reforms, has been strengthened to ensure that all government activities are increa­singly more transparent, accountable, predictable, effective and efficient.

4)        Macro-economic stability and unprecedented high, double digit economic growth has been ensured while maintaining low inflation and a stable exchange rate. Competitiveness of the national economy has been strengthened by improving agricultural productivity, building a rural economic base, and expanding the industrial sector, especially to further the dynamism of the garment sector. The services sector has also expanded rapidly. All these have created jobs and skills training for hundreds of thousands of youth.

5)        Through the "Public Financial Management Reform Program", budget credibility has been fundamentally achieved as reflected by substantial growth in government revenues and the rationali­zation of expenditure, especially to increase the current budget surplus, which contribute to expanding investments in the economic and social infrastructure aimed at enhancing public service and poverty reduction.

6)        The Private sector has emerged as the "true engine of economic growth", and made a very impressive contribution to socio-economic development, both in the physical economic sector and the financial sector.

7)        The rehabilitation and construction of the major national road networks has almost been completed and attention is now being paid to accelerate improvement of provincial and rural roads. The irrigation, energy and telecommunication infra­structure has improved significantly.

8)        Institutional and human resource capacity has been strengthened by concentrating on development of the education and health sectors. The obvious outcomes are the increase in the enrollment rates and the decrease in drop-out and repetition rates, infant and child mortality rates and HIV/AIDS infection rate.

9)        Partnership with all stakeholders especially official development partners, private sector and civil society has been strengthened by setting up a range of effective mechanisms, allowing for mobilizing and coordinating cooperative financing and invest­ments.

9. With unwavering implementation of the "Rectangular Strategy", the Royal Government of the third legislature has created a favorable environment and necessary conditions enabling Cambodia to step forward with increased hopes and strong confidence on the road of further reforms and development.

10. In this context, the Royal Government has adhered to the principle of national solidarity to rally all Cambodians, inside and outside the country, from all walks of lives and political tendencies, under the motto "Nation-Religion-King" with the objective to build and protect the nation and social achievements while ensuring the country's independence, integrity, sovereignty, peace, democracy and progress. The Royal Government would like to express its most profound gratitude to His Majesty Preah Karuna Preah Bat Samdech Preah Baromneath Norodom Siha­moni, the King of the Kingdom of Cambodia for constant support and encouragement to all government's activities following the path of wisdom and compassion of His Majesty the King Father Preah Karuna Preah Bat Samdech Preah Norodom Sihanouk, and Her Majesty the Queen Norodom Monineath Sihanouk.

1.2. Challenges faced by the Royal Government of Cambodia

11. Along with successes in the implementation of the Rectan­gular Strategy, Cambodia is facing a number of challenges as follows:

First- Despite remarkable progress in key reforms aimed at strengthening good governance, the quality, efficiency and delivery of the public service still remain as challenges and could not yet respond fully to the real needs of the people. The judiciary could not yet gain full confidence from the public. The develop­ment of legal framework has not yet been comprehensive, while law enforcement is still to improve.

Second- The economy is narrowly based and driven by four main sectors: garment, tourism, construction and agriculture. The garment and tourism sectors are vulnerable to external risks. Agri9ulture, which shares 30% of the GDP and accounts for more than 60 percent of the total employment, has not reached its full potential.

Third- Climate change, global economic imbalance and continuing and deepening financial crisis resulting in global economic slowdown as well as the increase in oil price, soaring food price and depreciation of US dollar have brought severe inflationary pressure on the Cambodian economy in the short and medium term. The increase in domestic demand as a result of recent high economic growth has also aggravated the pressure. These pose a threat to the growth prospects for Cambodia.

Fourth- Although we have managed to reduce poverty rate from 47% in 1993 to 35% in 2004 through high economic growth and pro-poor policies and preliminary estimates indicate further decrease in poverty rate to 32% in 2007, the rural poverty rate remains high. Furthermore, the gap between the rich and the poor, especially urban-rural inequality remains a challenge.

Fifth- Land concentration and landless people are on a rising trend, adversely impacting on the equity and efficiency of land use. On the other hand, large areas under economic land concessions have not been utilized efficiently as targeted, needing strict government measures to tackle them.

Sixth- The anarchy in illega11and possession, illegal claim of state land and protected areas as privately owned and unlawful logging are still taking place. At the same time, poverty and internal migration have added pressure on natural resources and places them at risk of destruction.

Seventh- Having achieved great progress in the rehabili­tation and reconstruction of the national road network across the country, our next challenges are to ensure traffic safety and proper maintenance of the entire road network across the country.

Eighth- The aviation sector plays a crucial role in tourism development. Further development of aviation infrastructure, in­cluding continuous improvement of flight safety, still continues to be a key priority to ensure the tourism development and absorp­tion of increasing number of tourists to Cambodia.

Ninth- Electricity tariff remains high compared to neigh­boring countries, and is a big obstacle in strengthening the Cam­bodian competitiveness as well as attracting investments and improving livelihoods. Access to electricity in rural areas is still limited.

Tenth- Irrigation system has not been fully developed and utilized to its potential, requiring more efficient management and investment.

Eleventh- Financing, management, and technology are the major challenges for SMEs in Cambodia.

Twelfth- The social safety net for workers and the poor has not yet become an efficient system.

Thirteenth- The quality of education at primary, secondary and tertiary levels is low. The production and trafficking of illegal drugs has become a social problem which harms welfare of the Cambodian youth at present and in the future.

Fourteenth- The shortages of technicians and skilled workers are a major obstacle to accelerating economic develop­ment in both urban and rural areas.

Fifteenth- The provision of quality public health services is still limited. In spite of numerous achievements in the health sector, the maternal mortality rate is still high. The progress in promoting health care services, sanitation and clean water in rural areas is needs to be speeded up to meet the targets set in the Mil­lennium Development Goals.

Sixteenth- Lack of education, domestic violence and human trafficking are the major factors that handicap women from realizing their full potential in contributing to socio-economic development.

Seventeenth- In general, institutional capacity of the Government is still limited due to low salary and incentive schemes. The cooperation between government agencies is still inadequate, while some legal and regulatory frameworks contain loopholes, and there is a shortage of resources to carry out our policies.

1.3. The need to continue implementing the Rectangular Strategy

12. The over-riding goal of the Royal Government of Cam­bodia is to firmly and steadily build a Cambodian society which enjoys peace, political stability, security and social order, and sustainable and equitable development, with strict adherence to the principles of liberal multi-party democracy, respect for human rights and dignity; and a society in which social fabric will be strengthened to ensure that the Cambodian people are well educated, culturally advanced, engaged in dignified livelihood and living in harmony both within family and society.

13. To achieve this goal, the "Rectangular Strategy" has laid out four objectives as illustrated by the motto: Growth, Employ­ment, Equity and Efficiency. In this sense, the "Rectangular Strategy" is a long-term strategy based on the following fun­damentals:

First­ - Ensuring sustainability of peace, political stability, security and social order through specific measures aiming at promoting the rule of law, respect for human rights and dignity, liberal multi-party democracy in order to create a favorable security and poli­tical environment for long-term sustainable development.

Second - Ensuring sustainable long-term economic growth at around 7% per year on a broader and more competitive economic base in the context of low, single-digit inflation, stable exchange rate and steady increase in interna­tional reserves.

Third - Ensuring equitable distribution of opportu­nities and the fruits of the economic growth.

Fourth - Ensuring environmental sustainability, espe­cially through sustainable management and use of natural resources.

14. In addition, there are other factors which necessitate con­tinued implementation of the "Rectangular Strategy":

First - The need to continue strengthening and ex­panding the achievements made by the Royal Government in implementing the "Rectan­gular Strategy" during the third legislature.

Second - As emphasized earlier, the implementation of the "Rectangular Strategy" during the third legislature has brought up numerous chal­lenges requiring the Royal Government to improve and refine, its prioritized policies and to accelerate the implementation of this policy agenda during this legislature.

Third - Continued implementation of the "Rectan­gular Strategy-Phase II" is a further step to achieve the "Cambodian Millennium De­velopment Goals".

Fourth - The will and aspirations of the Cambodian people coupled with changes in the world and domestic situation in Cambodia need to be addressed by the improved and refined "Rectangular Strategy" and its implement­ation in the second phase.

15. The Royal Government recognizes the need to ensure consistency in terms of hierarchy, role, substance, coherence and synchronization between the "Rectangular Strategy", the "National Strategic Development Plan", and the Sectoral Development Strategies, as well as other policy documents, investment programs and the national budget. This calls for a review of the timeframe of the "National Strategic Development Plan" and "Political Platform of the Royal Government" which includes the "Rectangular Strategy" as its socio-economic agenda.

16. In this spirit, in my capacity as the Prime Minister of the Kingdom of Cambodia of the fourth legislature of the National Assembly, I would like to launch the "Rectangular Strategy­ Phase II" as follows: