IMPLEMENTING THE INTEGRATED FRAMEWORK
“IF”  IN CAMBODIA

Presented by the Ministry of Commerce, Royal Government of Cambodia to the 6^th Consultative Group (CG) Meeting,
Government Palace, Phnom Penh, 19-21 June 2002

Early Concrete Results from the Recommendations of the Trade Diagnostic Studies.

• Further streamlining of export licensing procedures

• Reviewing of port charges and port procedures.

• Lifting of border trade restrictions for rice and paddy.

• Proposal to have MoC plays a key role in the Governance Action Plan.

The Tokyo Road Map and the Integration and Competitiveness Study are available both in Khmer and English version at the Ministry of Commerce or can be downloaded from the Ministry of Commerce website: http://www.moc.gov.kh

Experiences from the implementation of the pilot scheme in Cambodia

Bearing in mind the intention of the six core IF agencies to extend the benefits of the IF to as many LDCs as possible by the time of the conclusion of the new Doha Trade round, and to support as appropriate the IF concept to several non-LDC low-income economies, a few lessons can be learned from the implementation of the IF Pilot Scheme in Cambodia.

Country Ownership:

            First: Government as owner of the process: While the initial TOR was drafted by the Bank Task Manager and the IF Team Leader, the Government believed that the success of the IF initiative lies to a great extent on it being able to provide the right leadership both at the formulation and the implementation stages. Government ownership of the process is a sine qua non condition for the success of the pilot scheme in Cambodia. The Cambodian Commerce Minister Cham Prasidh has been on the forefront, both on the domestic front and the international front, to earn the respect and support of the key stakeholders and to assert his leadership on this vital initiative. This leadership was in fact one of the key determinants of Cambodia being selected in the pilot scheme.

            Second: Government as partner: With the rigid time constraint imposed by factors beyond it and the IF agencies control (i.e. the Doha meeting in November and to a lesser extent the PRSP timetable), the Government believes that substantive outputs can still be achieved provided it and the IF team mission can develop an efficient, collaborative and synergistic partnership drawing on each other strengths and making up for each other’s shortcomings. The mission was comprised of highly qualified international consultants, most of whom regrettably had never been in Cambodia and thus lacked insight of the local realities. Nonetheless this deficiency was compensated by extensive exchanges with the Cambodian local consultants and official counterparts. Research materials and other policy documents were conveniently made available to the team, thus saving enormous research time and resources.

            Third: Government as Policy maker: The Government believes that technical assistance can be a potent tool for assisting in policy formulation and implementation. For this reason, Minister Cham Prasidh has appointed a senior policy maker, the Secretary of State for Commerce, to act as the focal point for the entire exercise. The IF permanent secretariat was established and operated in close collaboration thus providing instant access for mission team members to discuss policy issues and operational matters requiring quick decisions. Access to other key policy makers within the Government was also secured expediently through the focal point.

Coordination: During field missions, coordination amongst various government agencies, donors and key stakeholders was made by both the Government and the mission team leader. Both bilateral and multilateral consultations and debriefing were held on numerous occasions during the mission.

Over the long term there is a need to develop and consolidate mutually supportive policies, and to connect the trade, development, and finance communities. Financing is indeed critical in mainstreaming efforts, in the absence of which efforts to mainstream will dissipate. This will require effective coordination across government institutions, and development partners (donors and agencies), as well as partnership between the government and private sector participants in the economy, a common view shared by developed and developing countries at the Conference on Financing for Development. (See Box 2 for Cambodia’s viewpoints).

Emphasis on Securing the Continuous Support of Stakeholders: The Government believes that the IF exercise will not be complete  if the key stakeholders or beneficiaries are not fully on board with the process, to share and experience the challenges and ultimately the success of the initiative. The fact remains that the IF is an evolving undertaking which will require constant nurturing from all stakeholders concerned, and in particular the Cambodians, be it public sector, private sector, and the civil society. Recommendations for actions under the IF study will have to concretely reflect this need.

Ensuring Policy Coherence: Mainstreaming needs a coherent policy framework. Ultimately, mainstreaming trade means giving greater visibility to the linkages between trade and all other related economic policy areas. The Government believes that the mainstreaming process needs to reconcile two distinct cultures namely, trade culture (which is legalistic and highly centralized - negotiation and implementation of the WTO Agreements) and development culture (which is decentralized, demand driven, and based on a country-owned process).⁶ The latter involves a host of complementary policy reforms in areas outside the purview of the WTO, and costly investments in trade-related institutions, infrastructure, and human resources. For that purpose, the Government took bold measures to restructure and rationalize key ministerial functions under the Minister of Commerce, i.e. investment, bilateral, regional and global economic integration, intellectual property protection.

Political Commitment: Had it not for the strong political will of the Government the accelerated pace of the mainstreaming process would not have been achieved, from the preparation for accession to the WTO, to the successful completion of the diagnostic study, to the integration of pro-poor trade policies and programs into the PRSP. As in the vision of Prime Minister HUN SEN “… for the next ten years Cambodia will fully reclaim its destiny, to be a genuine partner in regional and global affairs and to be well on its way to becoming a truly free nation, free from want and poverty above all….” Throughout the entire process, this political commitment, support and participation of the Cambodian leadership, so needed to materialize this ambitious long-term vision, were visibly felt. On numerous occasions Prime Minister Samdech HUN SEN has reiterated his commitment to accelerate the various reforms and render them more effective.

Views of Cambodia’s Development Partners on Trade Sector

The IF study team met with a wide range of donors and found that a significant number among them would be prepared to support more pointed efforts for business sector development provided that a solid framework exists to ensure overall coherence of individual donors’ interventions. 

Generally, the donor community in Cambodia would agree that trade sector development has not been at the top of its agenda until now.  For the most part, the emphasis since 1993 has been on governance and government institution building, macro-economic structural and legal reform, the end of internal strife, removal of mines and other ordinance, and food security. To a large extent, the business community has been left to fend for itself.

There is also a shared recognition that the size of the Cambodian market, the experiences of neighboring countries and other factors all suggest that trade sector development has to be an important element of that framework. A more focused effort at poverty reduction in Cambodia requires more direct interventions at the meso- and micro-level to insure quick and effective development of new investments and businesses that will be the source of much needed job and income creation.

In general, the IF sponsored diagnostic study was well received by development partners, donors and co-operating agencies alike. They have expressed a strong interest in the IF as a promising platform that, if implemented well as a shared responsibility among donors, recipients and multilateral agencies alike, can promote mainstreaming of trade and improved donor coordination within a country-owned poverty reduction  framework. We need to maintain on the momentum generated so far, and to consolidate earlier achievements.

WHAT IS TRADE MAINSTREAMING?

Mainstreaming trade involves the process and methods of identifying and integrating trade priority areas of action into the overall framework of country development plans. Thus trade priority areas of action need to be reflected in poverty reduction and national development plans and strategies.⁷ In other words undertaking trade reforms and developing trade policies in isolation without the presence of mutually supportive policies will not bring about the full benefits resulting from trade reform and liberalization.

Key elements of trade mainstreaming:

• Trade reform under a pro-poor agenda

• Strengthening the capacity to trade

• Market access issues, and

• Impediments and benefits of the WTO global rule-making

Cambodia’s trade agenda was quite modest at the start of the implementation of IF in Cambodia. An ITC/UNDP mission assisted the MoC to prepare the basic elements of a trade sector strategy to incorporate into the draft Second Socio-Economic Development Plan (SEPD-II) and in the country’s 10 Years Plan of Action, which was tabled at the UN LDC-III Conference in Brussels in May 2001. The formulation of the IPRSP which highlighted the government's policy framework, comprehensive strategies and commitment to pull Cambodia and Cambodians out of the shackles of poverty, did not identify trade as a policy priority. The main concept behind the IPRSP was that the Government has responded to poverty by taking various measures to accelerate economic growth, improve the distribution of income and wealth and promote social development. Nonetheless trade was only sporadically mentioned as a sub component of other measures.

As the IF consultation process with key stakeholders evolved there was an emerging recognition of the need to embed the trade agenda into the country’s overall development strategy, in this case the full PRSP, which is due to be completed toward the end of 2002. It is expected that the full PRSP process which will form the basis for the World Bank's Country Assistance Strategies will assist Cambodia as an IDA/PRGF country to formulate a poverty reduction strategy that includes efforts to benefit from integration into the global economy. Another vehicle was also to embed it in the United Nations Development Assistance Framework (UNDAF 2001-2005) process and the UNDP Country Co-operation Framework (2001-2005). Both documents outlined a clear strategy of support to the national poverty reduction initiative, through upstream poverty-focused policy advisory support to the Government and strengthening Government’s ownership of the development agenda and leadership of the development process.

Currently, mainstreaming efforts into the PRSP front are centering on developing through a participatory process a trade chapter including a trade policy matrix which identifies poverty reduction objectives, strategies to achieve these objectives and measures to monitor outcomes, evaluate impacts and adjust the process as needed.

The trade chapter in the PRSP analyzed the link between trade and poverty reduction, the likely impact of trade reforms on different sectors and segments of society, constraints to trade development including market access and capacity constraints on trade development including institutional, manpower and physical constraints such as transport, telecommunications and port facilities. The chapter and related issues were discussed recently with all the stakeholders at a National PRSP workshop and will be slated for discussion in a special session of the upcoming CG meeting.

Beyond the CG the MoC as focal point will facilitate a widely consultative policy development process and program implementation to ensure that the poverty reduction objectives of the trade strategy are achieved. Much more is needed. The trade policy matrix included in the PRSP lays out the requirements. See Table 7 for the trade policy matrix.

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