Aum Porn Moniroth, Minister of Economy and Finance Cambodia
Cambodia aimed to be higher middle-income country by 2030 where the agenda 2030 is broader, holistic and ambitious and to achieve this, Cambodia needs long-term strategies to guide development on social, environmental and economic development in the coming years. This growth has been translated into reduced levels of poverty and impressive progress towards reaching the Cambodia Millennium Development Goals.
Will the transition affect its access to development finance, particularly as Official Development Assistance declines? As Cambodia is presented with new opportunities from regional integration and prepares to take on new challenges, such as the implementation of its new Industrial Development Policy, where will financing come from? To find the answers, it is important to reflect on the wider development landscape over the last decade. For one, many other developing countries have moved in to the Middle-Income group over the last 20 years and are now expected to mobilize more of their own domestic resources to support socio-economic development and improve public service delivery. China, which is now Cambodia’s largest provider of development assistance, has emerged as a major player through the Asian Infrastructure Investment Bank which has a capital subscription of US$ 100 billion. Estimating the costs of development is far more challenging than identifying current and potential sources of financing. Investment requirements will depend on a wide range of factors related to the strategies adopted, the interaction between them, actual implementation, the impact and sustainability of development expenditures and the external environment.
Success in reaching the 17 Sustainable Development Goals will depend on managing a wide range of partnerships so that resources can be effectively mobilized and managed. This month, UNDP partners with the government to prepare a Development Finance Assessment to review recent trends in resource mobilization and consider new financing options. The study will assess potential revenue sources and identify capacities needed for resource mobilization and the management systems that will finance the country’s development and the 2030 Sustainable Development Agenda.The forthcoming Development Finance Assessment will thus support the government in identifying, mobilizing and managing these new sources of funding that are vital to its development effort. Cambodia’s gross domestic product is expected to increase by 7.1 percent in 2017 and 2018, slightly higher than the estimate of 7.0 percent last year, according to the Asian Development Bank’s flagship annual economic publication, Asian Development Outlook 2017, which was released yesterday. “While the short-term economic growth outlook for the Cambodian economy remains strong, labor costs and skills shortages are increasing,”he said. “Speeding up implementation of the Industrial Development Policy 2015-2025 will lower the cost of doing business and improve productivity growth and competitiveness through regulatory reform, and investments in infrastructure, logistics and a broader range of skills.” ADB’s report said that with growth firming up in the major industrial economies this year,Cambodia’s export prospects are robust. Agriculture is seen maintaining a similar pace of growth as last year, and government spending will likely increase. The report added that industry is projected to grow by a slightly higher rate of 10.8 per cent this year, with growth in garment and footwear production picking up. DB’s senior country economist, Jan Hansen, said at the ADB’s Asian Development Outlook Launch yesterday that Cambodia’s exports are expected to expand by 11.0 per cent this year, outpacing import growth at 9.0 percent while tourism revenues should remain strong this year and next year.
The official currency of Cambodia is riel, however almost 90% used US Dollar and even to apply for entry visa to Cambodia; payment must be in US dollars. Tourists need not worry about the need of changing to Cambodian riel as US dollar was widely accepted in all cities in the country.Only in the Cambodian countryside, most business accepts riel as payment for products purchased at their place but US dollar still accepted as another item of payment. In the border towns of Cambodia, other than US dollar and Cambodian riel, neighboring country’s currency also accepted such as Thai baht, Vietnamese dong and Laotian kip, which makes thing easier for those who doesn’t have Cambodian riel with them. Cambodian has two riel, where it first issued at 1953-1975 and the second riel since 1980, after the collapse of Khmer Rouge government that ruled from 1975 to 1980. The usage of Cambodian riel mostly in rural areas for all purchases while US dollar were widely used in urban Cambodian cities and tourist areas and in areas near the Thai border, Thai baht were also accepted as a form of payment for all purchases. The dollarization started in the 1980s and continued to early 1990s and when the refugees sending remittance home under UN humanitarian aid,inflation reach 177% per year totally eroded confidence in Cambodian riel which led to limited usage of Cambodian riel in the country. At current time, 1 Cambodian riel = 0.00024 US Dollar when Cambodian riel convert into US dollar, while in reverse 1 US dollar = 4083.33 Cambodian riel as of 6thMay 2017. The official currency of Cambodia, the Cambodian Riel
Official currency of United States, the US dollar, widely used in Cambodian cities and tourist areas.
The Cambodian currency is controlled by National Bank of Cambodia, Cambodia’s central bank where it based in Phnom Phenh, capital city of Cambodia and was established on 23rd December 1954. The bank is responsible in managing the country’s monetary and exchange policies, regulations of bank and financial institutions, and controlling the country’s currency, the riel. National Bank supervises the banking system and is regarded as chief banker for Cambodian government. The National Bank of Cambodia currently governed by Chea Chanto since 2013
H. E Chea Chanto, National bank of Cambodia Governor and its headquarters in Phnom Phenh.
Latest development inCambodian financial sector
On March 8th 2017, International Finance Corporation with Association of Banks Cambodia and Mongolia Banker’s Association signed a memorandum to jointly develop and promote a social risk-management system and sustainable financial principles for Cambodians financial institutions where IFC will facilitate knowledge-sharing, information exchange, providing practical guidance and support not only in Cambodia but also in Mongolia, a developing country in East Asia. Asian Development Bank has approved a $40 million loan and a $600,000 technical assistance grant to help strengthen Cambodia’s financial sector and promote financial inclusion within the country’s unbanked population. “Cambodia’s economy has been performing well but achieving inclusive growth has been a challenge, particularly among people who don’t have access to formal financial services,” said Hiroyuki Aoki, Senior Financial Sector Specialist at ADB’s Southeast Asia Department.
“The project will help the Cambodian government to develop its financial sector to reduce financial exclusion and promote inclusive growth.” Cambodia’s impressive economic growth over the past several years has pushed poverty levels from 47.8% in 2007 to 13.5% in 2014.The financial sector should be further developed, with only 59% of the population having access to formal finance, and about 30% of the adult population excluded from any form of financial services.The Inclusive Financial Sector Development Program will help to bring these people into formal financial services by supporting the development of an efficient and stable financial sector.The program will upgrade existing financial sector infrastructure to support the introduction of new services and products. DB’s loan and technical assistance grant is for the first of three subprograms under the IFSDP. When implemented, the program is expected to produce potential economic gains of up to $391.2 million a year, or 2.3% of the country’s GDP. ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration, according to the announcement released on 18th November 2016 on its own website.
All of this development in Cambodian financial sector hoped that it will repair the Cambodian financial sector to a better level and achieve vision 2030 as a middle-income country in Southeast Asia which will need cooperation between government and citizens and especially the banking industries itself to improve its financial sector and ensure that it doesn’t collapse and cause inflation, like what happened to Zimbabwe currently and Khmer Rouge in 1975-1980s.