4. CAMBODIA’S SOCIO-ECONOMIC
    DEVELOPMENT PRIORITIES

175.    The “Triangle Strategy” of the Government, which was adopted after the July 1998 election, is designed to achieve this Vision.  Restoring peace and stability, and maintaining security for the nation and people, which formed the first side of the “Triangle” has been accomplished. Cambodia's integration into the region and normalization of relationships with the international community, the second side of the “Triangle” has also been achieved.  Cambodia regained its seat at the United Nations and became the 10th member of the Association of South East Asian Nations (ASEAN) and the process of joining the World Trade Organization (WTO) is well advanced.

176.    The third side of the Government's strategic triangle is to promote economic and social development through the implementation of an extensive reform program. Significant progress has been made in the implementation of these reforms, and economic growth has been strong in the last two years despite the impact of the 2000 floods and the global slowdown in the last quarter of 2001 following the September 11 terrorist attacks in the United States.  However, much remains to be done.

177.    In the context of the “Triangle Strategy”, and building on the “Interim Poverty Reduction Strategy”, the RGC’s development strategies are: (i) to foster broad-based sustainable economic growth with equity, with the private sector playing the leading role; (ii) to promote social and cultural development by improving the access of the poor to education, health, water and sanitation, power, credit, markets, information and appropriate technology; (iii) to promote sustainable management and use of natural resources and the environment; and (iv) to improve the governance environment through effective implementation of the Governance Action Plan (GAP).

178.    The timely implementation of the GAP, and its specific strategies for civil service reform, decentralization, military demobilization, legal and judiciary reform, gender equity, public financial management, anti-corruption and natural resource management, is therefore a key priority for the Government.

179.    The RGC’s strategic message is that economic growth is a prerequisite for poverty reduction and that the key to economic growth is private sector development. At the same time, it recognizes that the pace at which private sector can develop depends largely on sustained improvements in the governance environment.

180.    The Government is committed to maintaining a stable macroeconomic environment, as sustained economic growth with poverty reduction cannot be achieved in an environment of macroeconomic instability or of serious fiscal and external accounts imbalances. The targets of the RGC’s medium term macroeconomic framework include: achieving an average annual economic growth rate of 6-7 percent, keeping inflation below 4 percent, containing the external account deficit to a level consistent with concessional financing and foreign direct investment flows and increasing gross official reserves to about 3.5 months of import coverage.

181.    Faster growth is essential in order to improve social indicators and to provide the tax base needed to finance higher levels of public expenditure on social sectors. Adherence to the on-going reform program is crucial for achieving higher economic growth, diversification from garments to other types of basic manufacturing, and development of Cambodia’s tourism potential. The development of the tourism sector is important because of its significant multiplier effects on other sectors of the economy.

182.    The RGC’s strategic focus is on implementing those measures that have the dual benefits of both promoting growth and reducing poverty. This will include initiatives to enhance state effectiveness, develop physical infrastructure particularly in underserved rural areas, increase investment in human resources particularly women and children and to combat epidemic diseases, especially HIV/AIDS. Success in promoting growth and reducing poverty will require close cooperation within and outside the Government, so that timely actions at the macroeconomic level and across and within sectors are implemented in the way intended.

183.    Continuing fiscal reform is critical in order to build on recent increases in revenue capacity and to accelerate the shift from defense and security expenditures to the socials sectors. The implementation of the military demobilization program is a key element of the reform program, as savings from downsizing the army are essential for redirecting spending to the social sectors. Public administration reform is also an important component of the fiscal strategy and its civil service reform component is vital to achieving planned sector wide reforms in health and education. Key priorities for the Government include promoting financial transparency and addressing corruption issues particularly in health and education disbursements.

184.    Decentralization offers a range of possibilities including the opportunity for broader political debate about development strategies and new ways of holding government accountable to its actions. The extent to which the development potential of decentralization will be realized depends crucially on success in dealing with other related governance issues concerning the health, education, and transportation sectors as well as gender issues.

185.    Accelerating growth in the rural economy would result in the largest reduction in poverty because its incidence is highest there and inequalities are lowest, an important consideration given that economic growth will benefit some more than others. Agricultural and irrigation improvements are key to broad based economic growth and poverty reduction and there is little doubt that there is much potential for improvement.

186.    In addition, the development process must deal with the unexpected, in particular the harm done to the fragile welfare of the poor and the health of the economy as a result of natural disasters. Strengthening national disasters preparedness, relief, mitigation and rehabilitation of flood control systems are important poverty reduction priorities of the Government. As is providing targeted special programs for those who are unable to effectively participate in the growth process as well as enhancing ongoing preventative measures to combat Malaria, tuberculosis, and in particular the HIV/AIDS epidemic.  Establishing Cambodia as a popular ecological and cultural tourism destination will also provide an additional boost to economic growth.

187.    Gender equality is integral to the development process and cannot be separated from other population issues. The key issue is how to improve gender equity across a range of sectors in order to give women the skills and status needed to participate in contemporary society on an equal footing with men. In the education sector, ensuring that girls are enrolled in school and stay enrolled is imperative. Women’s education is a crucial determinant in birth spacing and reproductive health and in determining the educational level and employment of their daughters. In the health sector, providing more accessible reproductive health services to the current generation of women will produce better maternal and child health and help reduce the current high rates of maternal and child mortality.

188.    Further development of rural infrastructure will help rural and remote communities, which include the poor and the poorest, facilitate market access for those without it and put essential services within reach of the most needy. Improving the access of the poor to education and health services, making better use of human capabilities, improving the income earning potential of the poor, widening their range of choice, improving the quality of their lives and reducing their social exclusion are crucial priorities of the Government. Women’s education is a crucial determinant in birth spacing and reproductive health and in determining the educational level and employment of their daughters

189.    In short, macroeconomic stability, implementation of the GAP, continuing trade liberalization and expansion of economic and social infrastructure will facilitate private sector expansion and thereby fuel higher economic growth, raise incomes and create jobs that will pave the way for durable poverty reduction. For those unable to benefit from direct participation in the economic growth process special support programs will be implemented.

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