5th Asia Economic Forum

The Fifth Asia Economic Forum, with its theme of "Asia’s Challenges and Opportunities During the Time of Global Economic and Financial Crises," was held on the 6th and 7th April at Raffles Hotel Le Royal.

Samdech Akka Moha Sena Padei Techo Hun Sen, Prime Minister of the Kingdom of Cambodia, was the guest-of-honour; he gave a keynote address on “Asia’s Rise and the Global Economic and Financial Crises: Prospects for the Future”. Other noted Cambodian speakers at this two-day event included representatives of various government ministries and the private sector. In addition, there were many overseas speakers: members of the international community in Cambodia, other representatives from ASEAN and various of its member countries (Indonesia, Lao PDR, Malaysia, the Philippines, Singapore, Thailand, Vietnam), and others from China, India, Japan and elsewhere.

Several consistent themes emerged during the conference.

• The Financial System Prime Minister Hun Sen noted that the United States’ investment bank model is now discredited, and there is a need for reforms. Lord George Carey[1] pointed out that the present credit crisis resulted from a moral failure on the part of bankers who made ill-judged loans, a point echoed by Dr. Benny Widyono.[2] The prime minister and several other speakers called for international reforms to avoid a repeat of the same problems in the future.

• Consequences for Global Trade The Prime Minister noted that this (including tourism) had been severely affected, with important consequences for Cambodia and the region: these and other emerging economies are caught in a vicious cycle not of their own doing.

  • The effects of the downturn for the Western countries are likely to be prolonged.

  • There is the risk of increased protectionism which, Lord George Carey pointed out, is also immoral; moreover, H.E. Ambassador Wang Xuexian[3] noted out that this would be equivalent to committing collective suicide. Fortunately, H.E. Dr. Surin Pitsuwan[4] was able to inform the meeting that the recent G-20 meeting reached the same conclusions (although some other speakers questioned whether these countries would stand by their agreement on the matter, based on recent past experience).

  • Asia should not wait for the West, but should initiate a recovery on its own: thus H.E. Sok Chenda Sophea[5] said that there is a need to stimulate regional domestic demand in order to take up the slack, a view echoed by Dr. Kang Chan Dararot.[6]

• Monetary Consequences  H.E. Ambassador Wang proposed that there is the need to become independent of foreign currencies; he and others noted that considerable funds have been set aside according to the Chiang Mai Agreement of the ASEAN+3, which will provide a strong safety net for the region. Similarly, Dr. Akinori Seki[7] called for the establishment of an Asian Currency Unit, and Dr. Ngo Duy Ngo[8] also proposed  reducing dependency on the dollar.

  • In Cambodia's case, Mr. Sok Hach[9] noted that, although the riel and the baht were used rather than the dollar in rural Cambodia, de-dollarisation is not an urgent government priority.

• Fiscal Consequences Ambassador Wu Tao[10] reported that China has been able to prepare a massive stimulus package to help its economy through infrastructure projects and other means to stimulate domestic consumption.

  • However, Dr. Stephane Guimbert[11] observed that this is difficult for Cambodia and other poorer nations; given the likelihood that external investment will decrease, these countries should aim to make more effective and efficient use of what is available.

  • In the case of the fiscal stimulus recently agreed at the G-20 meeting, Mr. Noritada Morita[12] warned that there is a need to expect that the money will come with strings attached.

• Poverty and the Other Millennium Development Goals (MDGs) Mr. Douglas Broderick[13] considered that Cambodia was doing reasonably well in its pursuit of the MDGs, although problems of inequality of the rural communities compared with city-dwellers is increasing. Regarding the other MDGs, the main ones in need of urgent action are goals 3 (Gender equality) and 5 (Maternal health); to a somewhat lesser extent, goals 2 (Universal education) and 7 (Environmental sustainability) are also lagging behind, whilst best performance has been goals 6 (Infectious diseases) and 9 (De-mining).

  • Developing on this theme, Ms. Chanthou Boua[14] noted that the present crisis had already resulted in job losses in the garment and instruction industry with more predicted, and worried about increasing social discontent (especially given that 250,000 school-leavers enter the labour market each year). In the rural sector, she proposed that a comprehensive investment plan needs to be implemented, so that land concessions are fully utilised and farmers can become self-sufficient in food.

  • H.E. Mr. Andrew Mace[15] noted that the economic case for taking steps to cope with the threat of climate change remains strong, and was treated seriously at the recent G-20 meeting: the fiscal stimulus would make possible the development and implementation of green technologies. Both he and Mr. Koen Everaert[16] made the point that developing countries need to be involved, whilst not having their further development adversely jeopardised.

  • Both H.E. Mr. Ngurah Swajaya[17] and Mr. Lay Khim,[18] like other speakers, emphasized the need for rapid action to deal with climate change and the fact that it is the poor who will suffer the most (with the likelihood of social problems as a result of refugees); also, the ASEAN area is one of those most susceptible to climate change, with effects on food and water availability. H.E. Mr. Ngurah Swajaya also noted that, whilst it is easy to make plans and sign agreements, there is the need for follow-up implementation.

• Political and Social Consequences Decreasing trade and increasing unemployment as a result of the economic crisis can be expected to have knock-on effects.

  • Dr. Seki noted that there is evidence for a shift in power from the West to the East, whilst H.E. Sok Chenda Sophea concluded that there is likely to be a shift to a more multipolar world with power-sharing, a suggestion also made by Mr. Din Merican.[19] H.E. Ong Keng Yong[20] mentioned that this is the view of bankers also, but emphasised that the world will still be dependent on the world economy.

  • Ambassador Wu Tao said that there is a need for Asian nations to cooperate and work together, whilst recognizing and respecting their individual differences.

  • This opens up the possibility of new cooperative sub-groupings, such as adjoining regions of Bangladesh, China, India and Myanmar, as proposed by Mr. K.P.V. Nair.[21]

  • Mr. Hideki Wakabayashi[22] pointed out that there is a need to promote co-existence in the face of increasing competition; and that this will be helped by the creation of a middle-class (favoured by increased domestic consumption), which will promote social stability. Mr. Din Merican made a similar point with regard to the future role of civil society.

  • Ambassador Shashank,[23] however, cautioned that the same sort of problems which have been recently affecting the European Union may also threaten the unity of ASEAN.

  • Previously, in his keynote address, the Prime Minister took issue with a recent report from the Economic Intelligence Unit in London, which rated Cambodia as a “high risk” as a result of the present global crisis, with the consequent threat of social instability. Mr. Douglas Clayton[24] was also critical of their valuation.

• Security Issues  H.E. Jose T. Almonte[25] said that there are several possible flashpoints in the region, including the South China Sea which is crucial to the lives and security of the peoples living around  its periphery. Whilst China is extending its strategic reach (including the use of diplomacy to dilute American influences in the region), it is trying to avoid being perceived as a threat by others.

  • H.E. Ms. Margaret Adamson[26] also raised the problem of the increasing threat of piracy in the region, as a result of unemployment and poverty.

  • Mr. Koen Everaert pointed out that climate change is likely to have effects on security issues.

  • H.E. Ong Keng Yong raised the issue of non-traditional security problems related to the smuggling of people and small-arms, for example; as well as the spread of infectious diseases.

• Future Cambodian Development Goals The Prime Minister noted in his key-note address that there is a need for countries in the region to be smart and innovative in dealing with the challenges; they should be ready to seize the opportunities.

  • Mr. Clayton noted that, because investors tend to be risk-averse, it is difficult to persuade them to consider Cambodia. However, he noted that a crisis creates opportunities, especially as Cambodia can go straight to adopting new technologies; thus, as also pointed out by Dr. Jebamalai Vinanchiarachi[27] and Dr. Rajah Rasiah,[28] there is the need to identify particular niches.

  • Dr. Guimbert noted that, although the increase in Cambodia's growth rate over the decade after 1998 ranked sixth or seventh in the world (ahead of China), it is difficult to look to the long-term in the face of current uncertainty, but the country should position itself to prepare for when the crisis ends; this would be helped by the Government-Private Sector Forum, which should aim to maximise the amount of information available to the government.

  • Dr. Seki noted the need for new approaches, involving microcredit and social entrepreneurship, together with more corporate social responsibility. He identified priority areas in need of attention as being education, primary health care, agriculture, building up physical infrastructure and human resource capacity building, together with good governance and responsible environmental management. Similarly, Mr. Clayton also pointed to rural banking as one of the opportunities which presents itself now.

  • Mr. Sok Hach noted that agricultural products are Cambodia's main export (a point also made by Mr. Clayton); developing on this theme, Dr. Kang Chan Dararot said that there is the need to develop food-processing through support for small and medium enterprises, and to focus on the domestic market. H.E. Son Koun Thor[29] likewise reported that there is the need for much more investment so that rice mills can be constructed and allow Cambodia to reach its goal of being a major rice exporter; there is also the need for reduced dependence on imports of materials such as seeds and fertiliser.

  • On a more general note, Mr. Clayton said that exports should be of finished (including ‘fair-trade’) products, rather than just the raw materials. Other possibilities in this countercyclical period include “organic” farming and developing sustainable energy resources and affordable prefabricated housing.

  • Mr. Lay Khim pointed out that Cambodia could also gain from carbon-trading in order to conserve its forests, as one component of a strategy to deal with the threat of climate change.

  • Mr. Sok Hach also noted that there is the need to develop Cambodian human resources, so that there is no need to hire expensive foreign engineers and the like; to develop energy resources so as to reduce the price of electricity; and to reduce the costs of "official clearance" for exports and imports (a point also made by Dr. Guimbert).

  • H.E. Son Koun Thor reported that scholarships were necessary for special-skills and vocational training; thus these together with other improvements including increasing security and the development of infrastructure would strengthen tourism (a point also made by Mr. Clayton).

  • Ms. Chanthou Boua cautioned that there is the need for Cambodia to diversify its economy, so that it is better insulated against external shocks; this will require innovative government with public-private partnerships to make efficient use of dwindling resources.

• In his closing remarks, Dr. Haruhisa Handa[30] noted that there is a need for economists to take a more holistic view of the global system. Most speakers were upbeat that Asia would pull through; thus, for example, H.E. Ambassador Wang pointed out that their economies had become more resilient after the 1997-98 economic crisis and the fundamentals are good. All agreed that there was a need for increased regional and global cooperation in order to speed up a return to a functioning global system; Noritada Morita noted that there is a need for tolerance and respect between nations for this to be possible. 

  • However, H.E. Jose T. Almonte cautioned that, after the recovery, there is no guarantee that the same sort of situation will not arise again in the future.

  • Moreover, H.E. Mr. Ngurah Swajaya pointed out that we need to confront the fact that the problems posed by the present crisis are small compared with the much longer-term threat posed by climate change.