CDC - Statement of the Government of Japan

Statement of the Government of Japan at the 6^th Consultative Group Meeting for Cambodia *Session I: Macro-economy/Financing*

1. I believe that fiscal reform is of utmost importance among various reforms which Cambodian Administration is currently undertaking. From this viewpoint, Japan highly regards the progress Cambodia has made in a number of sectors, particularly banking reform, macroeconomic stabilization, as evidenced by annual growth rate of 7 percent over the last three years, as well as the comprehensive tax reform, including the enlargement of tax base in 2001, strengthening of its tax collection capabilities and clampdown on smuggling. 2. With a view to assisting Cambodia in its fiscal reform, Japan has been dispatching advisors on fiscal policy and inviting Cambodian experts to Japan for special training courses on tax administration. In addition, to help upgrade the capacities of Cambodian administration, Japan will continue to send short-term experts on tax systems and start to dispatch an expert on tax policy. We will also study on what additional support we can offer in taxation and tariffs. 3. Having said that, I would like to stress the importance of investment in private sector for sustainable economic growth in Cambodia. Japan is therefore appreciative for the consultation process which Cambodian Administration is conducting with the private sector on the amendment of the Law on Investment. In light of globalization and regionalization we are experiencing throughout the world, I hope that Cambodia will strengthen its efforts to facilitate further private investments. Session II: Poverty Reduction Strategy and Its Implementation (a) Status of the Poverty Strategy 1. Japan highly appreciates Cambodia’s draft budget for 2002, which cuts spending for military and security purposes and increases budget allocations for priority areas such as health care, education, rural development, agriculture, and gender. Japan also appreciates the establishment of the Poverty Targeted Program (PTP) in the draft, which aims at improving education, nutrition in Cambodia’s poorest provinces, and the finalization of expenditure mechanisms in the PRSP. These measures clearly demonstrate Cambodia’s positive efforts for improving the management of its spending for social sectors, and the provision of public services. 2. For the poverty reduction to be successful, I would like to underline the importance of Cambodia’s ownership and its partnership with donors. Japan therefore hopes that the PRSP will be finalized through continued coordination within the Cambodian government and the participatory process where donors, civil societies, and other stakeholders can join. 3. To reduce poverty, the administration should ensure an adequate allocation of national income for social development, while expanding the scale of the economy through sustainable economic growth. Japan hopes that Cambodia will continue to step up its efforts in such areas as improving environment, fostering domestic industries, developing legal system and human resources and expanding trade. I think that particularly important in this perspective are the establishment of an effective tax collection system and development of human resources in. communes after the regional elections as well as the building of a framework for the implementation of the PRSP in rural areas. 4. Japan places highest priority on the development of social and economic infrastructure. We will at the same time address directly poor people. Such measures include grassroots grant assistance for NGO, support for vocational training and basic education programs by UNESCO for street children, support for projects to help displaced settlers by UNCHS (the United Nations Center for Human Settlements). (b) Mainstreaming trade into poverty reduction-Status of IF-Trade and Investment Linkage 1. Let me first reiterate that, while sufficient spending is required for social development, the efforts for poverty reduction should be underpinned by economic growth. Japan believes that appropriate trade policies, particularly the promotion of exports by the government, are critically important, and we look forward to intensified efforts of the Cambodian government in this area. 2. In this respect, Japan highly values the efforts the Cambodian government is making for its early accession to the WTO. Japan has supported IF (Integrated Framework for Trade-related Capacity Building) project in Cambodia. Japan has also conducted the training of Cambodian officials through the “Project for Capacity Building for Pro-Poor Trade Reforms,” utilizing $500,000 from its fund to the UNDP Human Resources Development. 3. In view of the fact that poor progress is being made so far in domestic capital formation and human resources development, it is necessary for the Cambodian government to stronger its efforts to formulate industrial development policies, foster export industries, and improve Cambodia’s investment environment to attract foreign capital. 4. On the other hand, it is also important for Cambodia to foster its domestic industries by utilizing its own natural and human resources. As Cambodia’s main industries are the primary industries, the improvement of agricultural productivity, the development of processed agricultural products need to be further pursued through such measures as micro-credit. Tourism industries deserves further promotion since there are a number of valuable tourism spots in the country. 5. Japan is also currently conducting a development survey focusing on industrial development in the corridor formed by National Roads Nos. 3 and 4, leading to Phnom Penh, with the Sihanoukville Export Processing Zone (EPZ) as the core area. Session III: Review of Governance-Implementation and Links to Poverty Reduction 1. The Government of Japan considers that good governance is a central element of Cambodia’s poverty reduction strategy and has an important bearing on all efforts towards development. In this sense, we strongly expect that the Royal Government of Cambodia will continue to exert accelerated efforts in such areas as legal and judicial reform, strengthening the rule of law, enhancing administrative capacity, improving the quality of public services, an early implementation of anti-corruption law and other anticorruption measures, enhancing tax collection capabilities, carrying out strong anti-smuggling measures, etc. Transparency, accountability and a fair implementation of the law are the key ingredients of good governance. The Royal Government has been moving in that direction. The donor community is expected to support the Government in partnership, at a time when reforms are experiencing a difficult phase. 2. Since the last CG meeting in Tokyo, we have witnessed a number of important improvements in the area of governance. For instance, the Government has made serious efforts to implement the Governance Action Plan (GAP). The Council for Administration Reform (CAR) has made progress towards rationalizing the civil service and started to prepare for the implementation of the priority mission group (PMG). We also note a step forward in establishing a mechanism to cope with smuggling. There still remains a few other achievements to be accomplished and we would like to encourage the Government to make further progress in improving the governance situation in Cambodia. 3. As for demobilization, the Government of Japan highly appreciates the completion by the Royal Government of Cambodia, with the cooperation of the donor community, in demobilizing 15,000 soldiers last year as the Phase I project. Demobilization is one of the central reforms to reduce poverty and since last year the Japanese Government has supported the Pilot and Full-scale Demobilization Projects with the contribution of over 10 million USD. Needless to say, it is very important that the demobilized soldiers settle down and re-integrate themselves into civilian life as soon as possible. The Japanese Government, through JICA, conducted a field survey very recently on the status of the demobilized soldiers in two provinces: Takeo and Kompong Speu. It was found that the implementation of the re-integration process was in delay and a large number of former soldiers wanted skills training in order to make their life sustainable. Also, many families remain in a vulnerable situation. We strongly hope that the loan agreement of the World Bank will be implemented as soon as possible to improve the situation. Based on the JICA studies, our Government intends to continue our support with a view to an early and smooth re-integration of the demobilized soldiers. 4. Legal and judicial reform is the key factor of good governance. It is an indispensable element to construct a democratic society and also to promote economic development based on increasing Foreign Direct Investment (FDI). The Royal Government of Cambodia is expected to show a strong determination to accelerate this important reform. The purpose of the reform in this area would be to establish a legal and judicial system which is transparent, competent and independent from the political power. 5. In order to assist the Cambodian Government’s efforts in this area, the Government of Japan has been providing cooperation in the codification of the civil code and civil procedure code. This represents a large-scale Japan-Cambodia joint codification exercise with the simultaneous purpose of building the capacity of the Cambodian legal and judicial personnel involved in this exercise. The entire work will near completion early next year with the Khmer translation of these two important codes. A Civil code and a civil procedure code are the fundamental legal instruments for the life of the people and their economic activities and must form the basis of the civil law system. In this respect, we appreciate that the Royal Government with the cooperation of the World Bank, has been elaborating a strategy paper on legal and judicial reform. We would like to express our strong hope that these and various other activities in legal and judicial reform should take into account the ongoing joint exercise of the Japanese and Cambodian legal experts in codifying these fundamental legal documents so that the entire legal system is coherent and capacity building support activities are well coordinated. 6. Quite a few Government agencies and donors are involved in pursuing legal and judicial reform. The Government of Japan has been respecting the ownership of the Cambodian Government in all its reform efforts. From this aspect, we hope that the Government of Cambodia through the Council of Legal and Judicial Reform takes the initiative to coordinate and accelerate the whole exercise with a spirit of ownership. In this sense, we welcome a new, strengthened structure of the Council as announced by H.E. Mr. SUM MANIT of the Council of Ministers yesterday. *Session IV: Natural Resources Management-Environmental Sustainability for Poverty Reduction* (a) Forestry and Fisheries Reform 1. The Royal Government considers the rigorous implementation of the forest management policy as the top priority and Prime Minister Hun Sen has repeatedly expressed his strong determination to control illegal logging. We appreciate such a policy orientation of the Government of Cambodia. Last year, the Government pursued the elaboration of the Sustainable Forestry Management Plan. My delegation hopes that the talks between the authorities and the forest concessionaires will be accelerated and that the authorities continue to take strict measures in combating illegal logging and the transportation thereof. 2. The Government of Japan welcomes the drafting of the new Forestry Law. We also consider capacity building, enhancing the awareness of local authorities and people as well as reforestation activities to be very important. From this point of view, my Government has started a JICA reforestation project with the dispatch of three experts and the provision of equipment. 3. We also appreciate the reform of the traditional fishing lots system. We hope for follow-up action by the Government, especially by establishing a sustainable management mechanism of fishery resources. The Japanese Government has dispatched a long-term JICA expert in this field and we will continue to study how we can effectively cooperate in this area. (b) Land Management 1. Land management is an important issue in poverty reduction. It also forms part of a central agenda of governance and the protection of the basic rights of people. The promulgation of the Land Law in August last year is an important achievement and we appreciate the efforts of the Government to prepare related sub-decrees and system building. The fair implementation of the Land Law is very important in order to protect the interests of poor people as well as to accelerate economic activities. 2. In implementing the land law and its related sub-decrees and regulations attention should be taken to realize a fair treatment of those people affected, especially in remote provinces and border areas. The problem of land grabbing by powerful people is often pointed out. Efforts to cope with this situation should be strengthened. *Session V: Summary of Working Discussions for Decentralization and Partnerships and Aid Coordination* (a) Decentralization 1. The Government of Japan highly commends the strong determination and the efforts of the Royal Government of Cambodia to carry out the decentralization reform. It also appreciates the fact that the commune elections on February 3rd were conducted in a peaceful manner nationwide, although it was regrettable that a number of violent incidents occurred prior to the election day. The next important step now is to make the commune councils function as expected. Although the Government is preparing a wide range of measures to empower the communes including providing an interim budget to support them, it is of urgent importance to build up a system that provides a solid financial revenue basis for the communes’ activities as well as to improve the capacity of the commune officials. 2. In this endeavor, the Central Government is expected to take into consideration the real needs of the communes and their inhabitants and to support a real decentralization or transfer of power to the local authorities so that those communes with an enhanced capacity can manage their own development. It is also important that the policy of poverty reduction and various reform activities being carried out at the national level should go hand-in-hand with the prospective activities of the new communes. 3. The presentation by H.E. Mr. PRUM SOKHA in the Working Discussion was impressive. It indicated that the Cambodian Government is moving in that direction. The donor community is expected to assist the Cambodian efforts in partnership. My Government has been assisting with the human resource development of Cambodian Government officials and intends to continue to contribute to the capacity building of the communes’ officials in the future. (b) Partnership and Aid Coordination 1. Japan strongly supports the ownership of the Government of Cambodia to address diverse challenges in its economic development. While the coordination and consultations among donors are important, the ownership of recipient country should play a pivotal role in the process of PRSP or any national development plans. In this context, I would like to make some comments on establishment of the Government Donor Partnership Working Group. Harmonization of aid procedures is important in terms of improving aid effectiveness, as it is deemed to reduce administrative burdens of the Cambodian government. On the other hand, Japan believes that it is the Government of Cambodia, not donors who have the responsibility and play a decisive role in formulating its development policy and strategy. I would like, therefore, to emphasize that the Government of Cambodia should strengthen its ownership and take initiative for consultations with donors. 2. I also want to point out that it is necessary to study on what procedures or aid modality are imposing burdens or negative impacts on recipient countries. Japan has been supporting a survey of DAC Task Force on the needs of harmonization of aid modalities in developing countries. Given the fact that it is the headquarters of each aid agencies which determines its aid procedures, we should request DAC, in which representatives from headquarters are coordinating their policies, to discuss on concrete actions for harmonization. 3. Let me here make clear the position of my government with regard to aid harmonization. Japan is not categorically opposing to the notion of, for example, SWAPS or common fund. Japan is willing to participate to such modalities whenever Japan considers it’s appropriate. However we are against the argument on aid modality which rule out the other aid modalities. The recipient country should have the ownership and a wide range of choice among a variety of aid modalities. *Session VI: External Financing Requirements and Pledging Session* 1. The situation of the world after the end of the Cold War indicates that economic development and the construction of peace are both wheels on a car. Based on this notion, Japan has been actively contributing to the rehabilitation of Afghanistan and East Timor. Japan continues to be deeply involved in the restoration of Cambodia, a commitment that has already lasted more than 10 years. 2. Cambodia has been steadily developing over the ten years since the Paris peace conference was held. During this period, it acceded to ASEAN and will host a series of ASEAN summits when it chairs the Association. Thus it has been steadily increasing its political influence in the region. 3. Japan is very pleased with Cambodia’s progress towards development. On the occasion that Cambodia itself hosts the CG meeting for the first time, Japan reaffirms its determination to support the country jointly with the international community of nations. Of course, the success or failure of development in Cambodia depends on its own efforts. From this point of view, we frankly pointed out, at the Tokyo meeting held last year, the need for Cambodia to proceed with various kinds of reform based on greater commitment. While evaluating the steady attainment of positive results in the subsequent months after the Tokyo meeting, we hope for its continued efforts in that direction. 4. Currently, it can be stated that Cambodia is heading for the turning point from rehabilitation towards full-scale development. Japan intends to accurately grasp the situation in the country, continually seeking to enhance Cambodian efforts for reform, and to extend detailed and close support matching the development plan and development needs of the country. Details of our thinking regarding support in individual sectors have already been explained in individual sessions, so we will not repeat them here, but we would like to outline the basic position of our country regarding its assistance to Cambodia. (1) In the context of poverty alleviation, we believe that the most important factor in the economic development of Cambodia is the realization of sustained economic growth and an equitable distribution of its fruits. This being the case, we would like to cooperate in the country’s endeavors for the re-establishment of an economic infrastructure, including main national roads, and for growth-related development as well as for capacity and system building in various fields this fiscal year. In addition, through policy advice and human resources development in the fields of financial, administrative and judiciary reform, and other specific realms, we would like to promote good governance and support the enforcement of various reforms in the country. Furthermore, we Intend to positively address the main problems that hamper development in the country, such as the spread of infectious diseases and the continued presence of land mines. (2) In the process of economic growth, it is necessary to give sufficient consideration to the most vulnerable people in society. Based on this assessment and also paying attention to the improvement in the needs standards of the Cambodian people, we intend to positively extend support in the fields of basic human needs, health, education, and such like. Furthermore, from the context of the development of the entire ASEAN region, we would like to continually place emphasis on the need for the rectification of regional economic imbalances, while paying due attention to the need for conservative and environmental issues. (3) Based on this thinking, the Government of Japan plans to expand the scale of its grant cooperation from ¥ 8 billion in the last fiscal year to ¥ 10 billion in this fiscal year. By adding the technological cooperation amount of about ¥ 3 billion and the multilateral cooperation amount of about ¥ 1 billion to be supplied through international organizations, Japan hereby expresses its Intention to provide new assistance totaling about ¥ 14 billion as our ODA to Cambodia this fiscal year (4) Japan’s economic situation is rigorous, and its ODA budget is not an exception. The aforementioned statement under this situation is a statement of Japanese commitment to continue to assist in the economic and social development of Cambodia. Because funds for the ODA come from Japanese people’s taxes, we strongly hope that the Cambodian government will utilize these ODA funds effectively in transparent manner and resolutely push for various kinds of reform to attain sound development within the country.