Op-Ed: Cambodia’s Developments Continue to Shine Despite Dark Cloud from Covid-19

AKP Phnom Penh, June 23, 2020 —

Leadership plays the most important element in every country’s welfare regardless of whether it is a big or small nation. For instance, when it comes to handling the hardship of Covid-19 around the globe, some small countries like Cambodia are considered as one of the best models in terms of taking preventive measures against Covid-19, as proclaimed by Prime Minister Hun Sen. This explains the big picture of why Cambodia’s developments continue to shine.

There are more than 9.1 million Coronavirus cases globally, including more than 474,000 deaths, and more than 4.9 million recoveries have been reported.

In Cambodia, no one has died of the Covid-19, although there are reports of 130 cases, including three still hospitalised.

Despite that, no projects have been suspended in the Kingdom of Wonder, thanks to the great leadership of Prime Minister Hun Sen, who has been in power for more than 30 years.

“All projects in the country continue their operation and no companies have faced financial shortage so far,” said the Premier on June 22, 2020 when he visited the construction of the US$1.5 billion new international airport about 30 km to the south of the capital.

This is a prime example of how a mega-project continues to shine against the hardships of Covid-19. Now, tens of thousands of unemployed people are being re-employed, mostly in the construction sector. “Just the construction of the new airport needs as many as 20,000 workers a year,” said the Prime Minister

He added that the government is spending US$100 million in rural development to create jobs for the locals while improving the country’s infrastructure.

At the same time, as many as 600,000 poor Cambodians benefit from government subsidises of US$25 million.

The government owes no payments to its state employees although revenue collection has dropped to between US$400 million to US$500 million a month. That means the government spends more than US$200 million a month in salaries for government servants.

The great leadership of the Prime Minister has inspired as many as 60,000 officials to volunteer to cut their salaries, contribution of more than US$10 million towards fighting Covid-19. While, the government is ready to handle any crisis should it occur, such as in manufactured food processing, medical facilities, and so on.

“So any underestimate, of the government’s performance, by the opposition is wrong,” said the Premier who reiterated that he will be in power for not less than the next 10 years from now.

“We have cash in banks. We need to save more, including cutting spending for overseas meetings. We have saved a large amount of money from travelling to meetings overseas,” PM Hun Sen told the public live on social media.

Lower growth, E-commerce, culture of savings

Cambodia, however, sees that its growth for this year could be as low as –1.5 per cent from the earlier projection of +6.5 per cent for 2020 due to the Covid-19 crisis. Although the country has never experienced such low growth in 20 years the country’s leaders continue to handle the situation well. With continued support from the private sector, the government’s deregulation of business transactions, along with providing facilities for companies to invest in Cambodia, such as dealing with business registration and paying taxes online, has boosted its resilience.

The government also sought ways of supporting companies by reducing some tax payments for certain businesses along with other approaches to help them amid the hard times of Covid-19. Everything the government has been doing is to secure sustainable business operations.

On June 15, 2020, Deputy PM Aun Pornmoniroth, Minister of Economy and Finance, announced the Cambodia Data exchange (CamDX) system in which all companies are required to register online, as part of the government’s facilities for trade and businesses, transparency, and accountability.

There are, however, many factors contributing to Cambodia’s economic stability, such as the key elements of peace, stability, financial management, and other related policies.

The government’s culture of saving is critical in this context. It does not mean the government is stingy, but it always pays attention to the top priorities when it comes to budget allocations.

“The government is still able to support payments for its state’s employees, although there has been a drop in revenue collections this year. We can still pay salaries every two weeks,” said Prime Minister Hun Sen.

He also said that the government has a culture of saving and that it has more than US$3.5 billion deposited in banks. Currently the government has more than US$3 billion in cash and another more than US$20 billion in reserves.

The government continues to ensure that the seven ministries regularly receive their “capital expenditures” for 2021 and 2023.

These are the Ministry of Public Works and Transport, Water Resources and Meteorology, Rural Development, Education, Youth and Sports, Agriculture, Forestry and Fisheries, Interior, and Land Management, Urban Planning and Construction.

Rebound next year

Cambodia, however, expects its GDP growth to be around 3.5 per cent for 2021, thanks to a slight increase of overseas demand and domestic business confidence. The small increase of growth for next year will be contributed by agriculture of 1.6 per cent, industry 4.1 per cent due to rebound of the sector, services of 3.6 per cent with an expected rebound of the tourism sector.

The inflation rate for 2020 is projected to be around 2.8 per cent with an expectation of demand shock, and 3.1 per cent next year with an expected increase in the international price of oil.

The exchange rate of Riel against USD for 2020 and next year will be around 4,100 Riel/USD since the people have greater confidence in Riel thanks to the de-dollarisation policy introduced by the Royal Government.

The country’s international reserves for this year are expected to slightly lower to below US$17 billion, but still be in good shape overall.

Stick to its Strategic Rectangle Policy

As always, enhancing peace and political stability, security and public order are most important, followed by other factors.

The government continues balancing the economy during the crisis by promoting exports, reducing reliance on external assistance and partially turning towards domestic support.

Ensuring macro-economic and public finance to support economic growth for the long and medium terms and addressing domestic issues of all forms, enhancing the effectiveness of the budgetary plan for 2018- 2025, continuing its strategy of managing the public debt for 2019- 2023, with effectiveness and efficiency will ensure the sustainability of the debt.

At the same time, the government also looked to accelerate its industrial revolution for 2015 – 2025 by supporting small and medium enterprises – SMEs, enhancing human resources and skilled work forces through vocational training, diversifying agriculture and tourism products, increasing productivity, agricultural production, processing of products, and modernising trade and business.

To achieve these goals, the government must readjust its budgetary allocations to support sustainable development, which means domestic revenues for 2021 should be 18.35 per cent of GDP, including the current revenue of 18.17 per cent of GDP and capital revenue of 0.19 per cent of GDP.

The 2021 budget should be 25.07 per cent of GDP, including 23.99 per cent which will go to national level and 1.94 per cent of GDP will go to sub-national level.

The government will improve its revenue collection for 2021, through tougher implementation of revenue collections by customs officials and tax collectors, so that the country will be able to respond to its challenges, given the fact that apart from its yearly current and capital expenditure, the government will have other issues to address, such as Covid-19.

The government will facilitate the trade and business environment by introducing new initiatives, such as e-registration, e-payment, e-filing, among others. It will also take tough measures when it comes to spending, to ensure the country’s economy overall will continue to stand in good shape.

By Ek Tha

Spokesman of the Council of Ministers,

Advisor to the Ministry of Information,

Standing Vice-Chairman of the Royal Government Spokesperson Unit.