Prime Minister Hun Sen on Nov 21 took policy proposals from the heads of Cambodian industry, giving the nod to plans to help farmers better market their produce but warning the banking sector that stiff prudential measures will stay in place until further notice.
Intermingled with wisecracking remarks made during several hours of roundtable discussions during the 14th Government-Private Sector Forum, Hun Sen said that he ordered a $100 reduction to the price of passports issued to Cambodian migrant workers, which will now cost only $24 including the price of photographs.
The premier also said that $200 million in recently granted Chinese credit would finance road construction within Mondolkiri province and link Kompong Thom and Preah Vihear provinces and Stung Treng and Ratanakkiri provinces.
Starting in March, he said, Phnom Penh would receive an additional 200 megawatts of electricity to be purchased from Vietnam while increased capacity from power projects in Sihanoukville and Kampot and Pursat provinces will also soon be available.
Despite a recent IMF growth forecast for 2009 of under 5 percent, Hun Sen said that a heavy rainy season—which helps rice crop—-could help bolster GDP growth to 7 percent. However dropping demand and “international financial turmoil” had considerably darkened the country’s economic horizon, he said.
Hun Sen also agreed to suggestions that farmers be offered contract farming to help assure reasonable prices for their products, and he ordered tourism and civil aviation authorities to redouble efforts to attract more direct international flights in order to boost tourism arrivals.
Khov Buon Chhay, co-chair of the forum’s technical working group on banking and finance, told the prime minister that his sector remained stable, liquid and solvent and had also avoided exposure to toxic financial instruments sold by Western banks. However the government should consider easing restrictive banking rules established this year, he said.
To help curb inflation and stabilize the banking sector, the National Bank of Cambodia earlier this year limited real estate lending to certain categories of speculative borrower, tripled minimum capital requirements of banks to $37.5 million and doubled their deposit reserve requirements to 16 percent.
Hun Sen said easing or reversing such banking policies would depend on the government’s reading of the circumstances, which he compared to driving a car.
“Whether we should increase the speed, whether we should decrease the speed, it depends on the situation,” he said. “If any of our banks does become bankrupt it will hurt us all.”
Van Sou Ieng, president of the Garment Manufacturers Association of Cambodia, and Nang Sothy, co-chair of the working group on industrial relations, painted a bleak picture of the keystone garment sector, with strikes rising even as international demand and orders from buyers decrease.
Local garment factories are now operating at only 70 percent capacity, some with no orders yet placed for January, said Van Sou Ieng.
Hun Sen said good industrial relations were necessary to prevent disaster, and that strikes could force factory closures and job losses.
Ath Thon, director of the Coalition of Cambodian Apparel Democratic Workers Union, said Friday that garment workers were not solely responsible.
“Strikes in Cambodia are because the employers don’t respect the labor law,” he said. “The problem doesn’t come from one side.”