Cambodia’s challenges in regional integration

The Khmer Times, 19 April 2018

The liberal world economic order is under stress due to economic protectionism and populist politics being practiced in different parts of the world, especially in the US. However, open regional integration in Southeast Asia prevails.

As a less developed country in the region, Cambodia has a strong interest in promoting and realising a more inclusive, fair, and just process of regional community building that narrows the development gap by giving the less developed economies opportunities to develop and catch up with the more developed nations.

To enhance Cambodia’s competitiveness, and thereby to improve the depth and quality of its participation in regional economic integration, Prime Minister Hun Sen said at the Greater Mekong Subregion Business Summit in Hanoi last month that it was necessary to strengthen efforts in regional economic integration and connectivity through prioritised areas of finance, economy, e-commerce and cross-border trade.

Linking regional integration with national economic policies is critical to sustaining dynamic economic development. Key tasks include improving regulatory harmonisation and harnessing and synergising various regional integration initiatives.

The Cambodian government perceives regional economic integration as a means to further advance its national development interests, which in turn strengthens state legitimacy. Economic performance is perceived as the main source of legitimacy and sustainability of the functions of the state.

In the 2013 Rectangular Strategy Phase III – a five-year strategic development plan – the Cambodian government set out a vision asserting “full ownership of its own destiny” while being “a real partner in regional and global affairs” and playing “a dynamic role in all regional and global affairs on equal footing and with equal rights as other nations.”

Although there have been remarkable achievements in forging regional cooperation, integration, and connectivity, there are several challenges that Cambodia needs to overcome. Those challenges include socio-economic inequality within the country and the region, and the lack of policy coordination and national capacity in implementing regional projects. Income disparity within the regions and localities is the structural causes of social tensions and political instability.

Public institution building based on good governance remains a key challenge to the effective implementation of national and regional policies. Strong political will and leadership, and deep reforms are still needed to overcome institutional weaknesses.

The national capacity in transforming and integrating the regional agenda into a national development action plan is limited. The lack of resources and ownership in realising regional development projects requires more investment and participation from the local government and the private sector. As it is, local government plays a significant role in regional cooperation and integration.

Although Cambodia has adopted measures aiming at decentralising power and creating a sub-national governance system, the local governments still face both structural and agency constraints in implementing a decentralisation strategy. A complex political network largely based on a patronage system and entrenched interests explain some of the causes.

Delegating power and resources to local governments at the commune, district and provincial levels not only contributes to national development but also connects governments with neighboring countries, especially in the border areas.

A major challenge is that both the central government and local governments in Cambodia lack sufficient institutional capacity and resources to effectively implement the country’s regional projects, especially in infrastructure development and connectivity projects and cross-border trade. Hence it is necessary to forge a closer partnership between the public and private sectors.

Cambodia’s Ministry of Economy and Finance crafted a policy paper on public-private partnership for public investment project management, 2016-2020, which aims to “create an enabling environment for promoting the participation of the private sector and financial institutions in public investments”. Yet implementation is an issue, particularly how to promote private investment in physical infrastructure.

Concerning logistics development, Prime Minister Hun Sen said in 2016 that Cambodia needed to expand and improve transport networks, reduce the cost of electricity supply and improve its coverage and reliability, and reduce logistics costs and cross-border transaction costs. However, informal cost associated with transport and logistics remains high, and deep customs reforms are required.

Cambodia is focusing on four pillars to seize the opportunities arising from the fourth industrial revolution and digital economic integration in Asean. According to a speech by Mr Hun Sen at the 2018 Cambodia Outlook Conference early this year, firstly, human capital needs to be developed by promoting education in science, technology, engineering, and mathematics, and strengthening university-industry partnership.

Secondly, there is a need to promote a research and development network by facilitating public-private partnership and knowledge sharing and technology transfer. Thirdly, institutional, policy and regulatory frameworks need to be strengthened to promote innovation. And finally, there needs to be a concerted effort to create public awareness and a positive social attitude towards science and technology.

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