Stephane Guimbert has worked in Afghanistan and Nepal for the World Bank and six months ago became the senior country economist for the World Bank office in Cambodia. Prior to joining the Bank, the 34-year-old worked for the French Foreign Ministry.
In an interview with The Cambodia Daily’s Tim Sturrock and Kay Kimsong, he discussed the future of Cambodia’s economy, its industries, outside perception of the country and corruption.
Q: What is the outlook for Cambodia’s economy in 2008?
A: 2008 itself is reasonably positive. Most of the institutes would project 7 to 8 percent growth, which you might consider a slowing down compared to the 10 percent of the last couple years. But most countries would be very happy with 7 to 8 percent, of course.
That said, more and more people are concerned with the fragility of growth. So there is a question mark for how long Cambodia can grow at that pace. The key drivers for the last couple of years, you can question their viability. The garment industry is a key example where the prospects in 2007 already had slowed down considerably. And since most of the imports are going to the US market, anything happening in the US market could have an impact on Cambodia’s exports.
Agriculture is, as usual, very dependent on weather. Real estate is the other sector where people start to have concern. Many people talk about a bubble. I think it’s really too early to conclude whether there is a bubble or not, but most likely the very rapid growth we have seen in the last couple of years will start to slow down a little bit. Tourism might be the only one of the four sectors of growth over the last couple of years that will continue reasonably well.
Q: What effect will land disputes in the country have on development and is that something that could discourage investment?
A: You need to see it at two levels. One is in the most visible cases, which I think have an impact on Cambodia’s image. It’s more a perception issue.
Perhaps equally important is at the local level. If you are a farmer and you’re not sure whether you are going to keep your land over the next couple years you have very little incentive to invest, to move out of rice, to get your own pump or irrigation system, to buy some fertilizer. That’s where we see most of the impact.
Q: How big of an impact does the perception of Cambodia’s land disputes have on foreign investors?
A: It’s very difficult to separate that from other factors. When you ask [foreign investors] about Cambodia, they knew a little before they came to invest. They knew land mines, the Khmer Rouge tribunal, and something of land disputes. It’s not one topic. It’s an overall sort of branding issue of Cambodia’s name. Very few people know that Cambodia has been growing at almost 10 percent for 10 years, which is quite unusual by any historical standard across the board.
Q: Is Cambodia’s economy diverse enough? The garment sector is large, but does the country lag behind in other types of production like food processing, and how will this effect the economy in the long term?
A: Clearly the economy is not diversified enough and that’s very high on the government’s agenda. They know it’s problematic for two reasons. The first is that if you’re not diversified you need each and every sector to grow very fast…. Garments might not continue to do that….
And the second challenge is that if any of the four [main sectors] in one given year goes down then the whole economy will shrink…
Q: Is Cambodia doing enough to improve its infrastructure in the areas of transportation, education, and agriculture?
A: All these areas it’s never enough. That’s the whole process of development. I think what’s important is two things. It’s expanding the volume of what you can do…. That means collecting more revenues…. It’s never going to be enough, but then you have to spend your money well….
This is a moving target. I think they’ve done well in developing the national road system…. Power is one of the areas that’s lagging behind in our view, something that consequently affects businesses down to the poorest households.
Q: Is it risky to invest in Cambodia right now?
A: Risk is all relative. So if you compare to five to 10 years ago it’s safer than it used to be…. Now Cambodia is still a place with more risks than some other more advanced countries. That’s the point of development. One of the key risks, again in terms of coming back to your initial question, is that growth is fragile. It’s based on four sectors growing very fast. Each of the four are having some issues.
Q: Do you think that Cambodia is tackling corruption as fast as it needs to?
A: In a way when you see growth at 10 percent and poverty going down you feel that some things are done in a reasonable way. When you foresee the number of problems in the future and part of them being related to governance issues you feel it should go faster.
Q: If Cambodia doesn’t do anything about corruption, can it continue to grow and prosper over the next 10 and 20 years.
A: I don’t think it makes much sense to answer that question in aggregate form. You need to say what you mean by corruption. If you don’t do anything about making the life of businesses simpler, then no…. You have to really impact specific things in specific sectors that do impact growth.
Q: Is the mining and oil sector attractive to foreign investors and what role does it play in the economy?
A: These industries take a very long time to do [from] the exploration process [to] production…. The real impact will be two or three years down the line.
It’s important to attract good foreign investors. How do you do that? The key is to have a good legal and fiscal framework. And good doesn’t mean giving everything to the investors; it means stability and predictability and for now they don’t have it. That’s why you see all this back-and-forth between the government and investors. This is very capital intensive and very long term so you don’t do that unless you have some sense of what’s going to happen.
