PM gauges private sector development, status as ‘key economic growth engine’
CAMBODIA continues to create investment opportunities in a full range of areas for the vital economic growth engine that is the private sector, fine-tuning market economy regulations since far before its accession into the World Trade Organisation (WTO) in 2004, although the underlying legal and regulatory infrastructure still falls short of international standards, according to Prime Minister Hun Sen.
The premier was speaking at an October 3 graduation ceremony for 3,866 students from Phnom Penh’s Vanda Institute, of whom local media reports said a whopping 87.48 per cent were women.
Hun Sen reflected on the large portion of graduates from higher education institutions that go on to work in the private sector, which he suggested may account for nearly four-fifths of job opportunities. He commented that, as they grow, private companies in general provide more jobs to former students and pay more taxes.
However, he posited that the overall position and scale of the ever-expanding private sector requires a step-up in human resource capacity building and training development, adding that growth in this economic segment can be harnessed through careful consideration of its broader relationships with society to boost employment and taxation as well as address other macroeconomic issues.
“The more the private sector flourishes, the more taxes are paid – money which can then be invested in roads, canals, schools and hospitals, as well as raising the salaries of our civil servants,” he said.
“We should congratulate ourselves on the division of employment which sees just 4.75 per cent of graduates
enter state employment. It is enough – we cannot accept every single person who finishes university.
“What should also be a source of pride is the penetration of graduates into private sector employment. Up to 78.79 per cent of them go on to work for large companies and enterprises, a clear sign that the private sector is growing stronger. We consider the private sector the engine that drives economic growth,” Hun Sen said.
The premier conceded that Cambodia still lacks the associated legal standards and official regulations as per WTO rules, but underscored that the Kingdom has been working to perfect its market economy regulations over the past 30 years. Hun Sen also mentioned that Cambodia joined the WTO before Vietnam and Russia – in 2007 and 2012, respectively.
He contended that empowering the local private sector is a precondition to meaningful improvements in economic growth.
“We still have to consider some points on which to improve upon when it comes to managing our economy … the private sector is very important for us – if it’s not thriving, it means we’re in dire straits.”
The premier shared some encouraging figures from the General Department of Taxation (GDT) to provide a bright outlook for tax collection post-Covid-19. The department collected “at least $250 million” each of the past nine months, achieving 95 per cent of the nearly $3-billion full-year target, he said.
Cambodia Chamber of Commerce director-general Nguon Meng Tech thought the remarks would be a great source of motivation to businesses, which he described as one of the pillars that supports the government.
He said the government had helped the private sector by regulating investment and establishing good business practices. In turn, the taxes paid by businesses allowed the government to develop the Kingdom.
“Because the government has prepared excellent laws and regulations, we are able to conduct business easily. This gives us the momentum to succeed, which means we can meet our tax obligations,” he said, cautioning the world’s governments about the costs associated with neglecting the private sector.
“This is why Prime Minister Hun Sen prepares efficient laws and regulations. This makes it easier for businesses to do well and contribute to shoring up the national economy. We make sure the government is strong enough to head the nation,” Meng Tech added.
He recalled that the private sector had historically been slow in asking for regulation from the state, but that this had improved. He also praised Hun Sen for never failing to seek foreign investment whenever he led a delegation abroad.
Meng Tech asked that the government strengthen its partnership with the private sector by renewing an annual forum, when circumstances allowed.
“We have mechanisms in place between the government and the private sector for the prime minister to lead a forum once a year. Due to Covid-19 concerns, we failed to hold the most recent events, but I believe that Hun Sen will announce that next year’s event will be held. The forums are an effective way of bringing the two sides together, which is crucial to growing the national economy,” he added.
Speaking to The Post on October 3, Hong Vanak, director of International Economics at the Royal Academy of Cambodia, highlighted the private sector’s close links to the Kingdom’s production chains. As a rule, strong supply spurs economic growth and development, and leads to increased tax revenues, he said.
“When the domestic private sector’s production capacity is strong, it helps reduce imports and increase exports. The more prosperous the private sector becomes, the more tax revenues the state collects,” Vanak said, positing that a more influential private sector breeds greater foreign direct investment (FDI).
Cambodia has consolidated its market position through strong diplomatic and trade relations with many countries and international organisations, as well as bilateral and multilateral trade pacts with key partners – especially the free trade agreements (FTA) with China and South Korea, and the Regional Comprehensive Economic Partnership Agreement (RCEP).
Cambodia’s international trade reached $37.406 billion in the first eight months of 2022, up 21.48 per cent year-on-year, with exports totalling $15.642 billion, up 26.26 per cent, and imports $21.764 billion, up 18.26 per cent, according to the General Department of Customs and Excise of Cambodia.
On the other hand, the Kingdom’s trade deficit for the January-August period expanded by 1.78 per cent to $6.122 billion.