Original report from Washington
13 October 2008
Financial woes spreading from the US and across developed countries could lead to decreased future investment—and aid—in Cambodia, a top economic official said Friday.
Aun Porn Moniroth, secretary of state for the Ministry of Economy and Finance and an adviser to Prime Minister Hun Sen, led a delegation to Washington over the weekend, as the World Bank and International Monetary Fund held meetings amid spreading economic worries in the US, Europe and Asia.
Aun Porn Moniroth said he planned to “to draw attention to our main development partners, who give significant donations to developing countries.”
All countries “worry,” he said, “and are spending much money to stabilize their individual economies,” he said, which could lead to a decrease in aid.
Cambodia receives around $600 million a year in aid from international donors to help its development, but that money could be affected, as well as investment, as the global economy slows down.
While the main focus of the weekend meetings was the global economy, Aun Porn Moniroth said Cambodia’s goals of poverty reduction and improvement of the health and education sectors remained a priority.
Independent economist Kang Chandararot, director of the Cambodia Institute of Development Study, said a sweeping crisis may still not hit Cambodia too hard.
Aid to Cambodia was minimal, he said, and not likely to stop.
“Up to $1 billion or more, it’s a sum that countries can cooperate on or take partnerships in helping Cambodia,” he said.
Outside of aid money, Cambodia’s main earners are tourism, construction, agriculture and garment export. Experts worry a sustained financial crisis could hurt there, too, though exactly how is not certain.
Export markets like the US, hurt by a shrinking economy, a debt crisis among lending institutions and wobbly markets, could affect Cambodia through lowered demand for produced goods, Aun Porn Moniroth said.
Cambodia’s garment sector employs up to 350,000 workers, and the government will have to take active measures to attract investors and coordinate incentives, Kang Chandararot said.
A “large-scale development plan” nationwide and especially the promotion of special economic zones attractive to investors will be needed, he said.
Meanwhile, outside investment will be hard to maintain at the same level, and microfinance institutions may have a harder time supporting borrowers, he said.
Aun Porn Moniroth said the government has a strategy to strengthen its own financial systems in the long term.
“The main goals of our strategy are to first strengthen the banking system and strengthen and continue to develop some of the other sectors…such as insurance, stocks, and so on,” he said. “But we are precautious now with the development of the stock market, for instance, as we are seeing this crisis around us in the world.”
Meanwhile, Cambodia hopes to maintain an economic growth rate of 7 percent, he said, even as Cambodians are being hit with rising inflation, food and fuel prices.