Economy Called Relative Success at Conference

After about three years of conducting studies and writing reports analyzing the export potential of certain products, now is the time to start seeing some concrete results, speakers said last week on the final day of a conference of donors, aid groups and government officials at the Hotel Cambodiana.

“Let’s move away from making another report to put on a dusty shelf and pull out again in six months,” British Ambassador Stephen Bridges told participants in a speech that he said targeted donors more than the government. “Let’s put our money where our mouth is. Let’s start doing and stop talking about it.”

In 2001, donors designated Cambodia, along with Mauritania and Madagascar, as a pilot country to launch an all-encompassing development strategy called the “Integrated Framework.” The idea was to streamline development efforts by the government, donor countries and international institutions, including the World Trade Organization, the World Bank, the International Trade Center, the International Mone­tary Fund and the UN.

Those efforts produced a study in early 2002 analyzing the competitiveness of many domestic sectors, including rice, handicrafts, tourism, garments, freshwater fisheries and agro-processing. The study identified specific barriers to exporting goods in each sector and gave specific recommendations that, if implemented, it said would remove those barriers and increase trade. This, the theory goes, would ultimately result in reduced poverty.

As of now, little has been done to implement the recommendations made in the competitiveness study. Many draft laws are floating around in ministries and many seminars are being scheduled. But the legal system is still in shambles, excessive bureaucracy continues to constrain industry and the infrastructure remains woefully inadequate.

From a domestic standpoint, it is difficult to see progress amid the discouraging signs. Yet in the eyes of the international community, Cambodia is looked upon as a model among the now 26 least developed countries that have started using the “Integrated Framework” approach to development.

“Everything is relative,” said Francesco Geoffroy, an official with the a Geneva-based ITC, an organization sponsored by the UN and the WTO. “Cambodia is considered the success of the Integrated Framework.”

When international institutions pressure countries like Laos and Burundi, which have also adopted the “Integrated Framework,” they complain that they do not have the good investment climate that Cambodia has, Geoffroy said.

“We don’t have the best conditions, but we do have some advantages internationally,” Geoffroy told participants last week. “If we can match labor intensive products with international demand, we will be able to see through the Integrated Framework.”

No specific timetable exists to implement the recommendations made in the competitiveness study, so nobody is necessarily to blame for the lack of “concrete results.” Bridges said he intended his speech as a “rallying song” for the international community to get moving.

“I don’t think we can let another year slip by conducting studies analyzing the competitive advantage of walnuts over rice,” Bridges said by telephone after the event. “We need tangible development on a regulatory framework to form the bedrock for trade and investment to take hold.”

The government spent most of its energy and resources in the past few years on acceding to the WTO, an enormous achievement given the difficulty of the process and the short amount of time for negotiations. Now that the WTO is a reality—assuming a new government forms and approves accession before March—those resources can be used to improve the legal system, cut bureaucracy and begin building industries from the ground up to take advantage of the country’s unprecedented market access.

It will not happen overnight. Geoffroy estimated that if donors, aid groups and the government stay committed to achieving the goals set forth in the “Integrated Framework,” concrete results are still five to eight years away. But, he said, work needs to begin now.

“Let’s make sure we have tailor-made technical assistance programs aimed at the business sector,” he said last week. “At the end of the day, the business sector is doing the trade.”

The economy currently hinges on garments and tourism—both of which are volatile, Ministry of Commerce Secretary of State Sok Siphana said last week. Nobody knows if garment factories will stay here when worldwide garment quotas expire for WTO members at the end of 2004. The effects of severe acute respiratory syndrome, coupled with the Iraq war, caused tourist arrivals to drop severely in the early part of this year.

Garments accounted for 96.5 percent of exports in 2002. The plan of the “Integrated Framework” is to strengthen the garment industry and turn other products into exportable goods. Researchers found that market potential exists for cashew nuts, black pepper, chilies, decorative wood and handloom silk, among others.

Getting these products to the market is an enormous challenge. The ITC recently studied the market potential for handloom silk. The problems were immense, including the absence of market information in villages, low quality of silk yarn, unreliable supply line and substandard dye quality.

Other problems, for every industry, are meeting international quality standards and raising capital to increase productivity. In some sectors, such as fisheries, a structure of domestic “informal fees” along trade routes provides no incentive for fishermen to add value to their product.

While the country still has a long way to go before its products can compete internationally, it does have an abundance of studies to work from.

“The tools are in place,” Ingrid Cyimana, a UN Development Program official, said last week.

The question is when all the studies conducted in the past few years will start to translate into jobs, skills and money for the vast majority that lives on less than $1 per day.

“Let’s stop fiddling around identifying priorities,” Bridges said. “Let’s get on with it now.”

 

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