VZCZCXRO6187
RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHPF #0287/01 1250858
ZNR UUUUU ZZH
R 050858Z MAY 09
FM AMEMBASSY PHNOM PENH
TO RUEHC/SECSTATE WASHDC 0674
RUCNASE/ASEAN MEMBER COLLECTIVE

UNCLAS SECTION 01 OF 02 PHNOM PENH 000287 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/MLS 
 
E.O. 12958: N/A 
TAGS: PGOV ECON EAID CB
SUBJECT: GOVERNMENT-DONOR QUARTERLY MEETING: ECONOMIC CRISIS TAKES 
CENTER STAGE 
 
¶1.  (SBU) Summary:  The Royal Government of Cambodia (RGC) April 28 
hosted the 14th Meeting of the Government-Donor Coordination 
Committee (GDCC) to review progress made toward their national 
development strategy and discuss policy impediments.  The RGC 
presented thoughtful economic analyses and serious policy responses 
to mitigate the impact of the global economic crisis.  The 
Ambassador led the session on the joint indicators  -- measures of 
progress.  In a departure from the past, the response from the RGC 
was complete and the dialogue engaging.  Some of the policy 
responses offered by the RGC indicated a greater awareness of a 
sense of urgency to take action.  The GDCC continues to get negative 
English-language press as a "talk fest" without regard for some of 
the commitments made behind closed doors.  While the RGC's 
painstakingly slow Asian consensus model irritates critics, we 
believe some positive change is afoot, though it remains to be seen 
how much.  End Summary. 
 
¶2.  (SBU) The Government-Donor Coordination Committee (GDCC) is a 
quarterly meeting designed to review jointly progress made in 
implementing the RGC's National Strategic Development Plan, as 
measured by the joint monitoring indicators (JMI).  The meeting was 
attended by seven Ambassadors and eight representatives of bilateral 
missions providing assistance to Cambodia, multilateral bank 
representatives, a few Ministers, secretaries of state from 15 
ministries and co-facilitators of the 19 established donor technical 
working groups (TWG).  This meeting focused on the economic crisis, 
conducted a review of indicators, and discussed aid effectiveness. 
 
¶3.  (SBU) The RGC presented a thoughtful analysis of the macro 
economic trends, the garment sector, and the strength of the 
Government's social safety net.  In a departure from the past, the 
RGC also presented a number of economic policies and other measures 
to retain investment and mitigate the growing negative consequences 
of the global economic crises.  Some of the measures included 
strengthening tax administration; shifting treasury funds to invest 
in infrastructure, transportation and agriculture; decreasing 
reserves to 12%;  increasing the minimum capital requirements [once 
again];  providing a three-year tax holiday for agriculture 
investments; adding incentives for agriculture processing and 
vocational skills training investments; suspending  the one-percent 
pre-payment tax on profits.  The Chair of the GDCC, Deputy Prime 
Minister and Minister of Economy and Finance Keat Chhon, remarked 
that the economic crisis could be viewed as an opportunity to not 
only mitigate negative consequences but also to make needed 
improvements to enhance Cambodia's competitiveness.  The policy 
responses offered by the RGC is an indicator of the seriousness of 
the situation and the sense of urgency with which they are taking 
action. 
 
¶4.  (SBU) The Ambassador presented the donor consensus statement on 
the joint indicators where a dozen issues covering governance, 
corruption, justice and land were raised to the RGC as well as areas 
of substantial progress most notably in health, public 
administration reform, and trade.  Unlike previous years' meetings, 
the RGC engaged in an hour of dialogue responding to each of the 
issues raised.  While the actions offered in response were not as 
concrete as those in response to the economic crisis, the RGC agreed 
to certain key items:  to revive the public administration reform 
working group that had lapsed due to inactivity; to allow the donors 
to review the anti-corruption law (as had been requested); and to 
stop the sale of forest or protected flood lands, among others. 
Progress in administration reform was made in a number of 
activities; however, it was insufficient to meet the established 
target.  For example, judicial professionals have been trained but 
neither JMI, the penal code or the statute on judges, has been 
passed.  This session was marked by a greater degree of dialogue on 
these issues than previous years, though the progress was minimal. 
 
¶5.  (SBU) Coverage in the English press was critical of the lack of 
progress on the JMI and based those statements largely on the 
government written presentations and donor consensus statements. 
The Khmer-language press was divided, with the pro-government press 
more accurately reflecting the meeting and capturing the Chair's 
message to view the crisis as an opportunity to enhance 
competitiveness but warning of difficulty in maintaining the 
improved standard of living achieved over the last decade.  The 
opposition press criticized the government for the lack of political 
will to make needed reforms and pointed to the delayed passage of 
the anti-corruption law as an example.  The press was not privy to 
the government responses to the issues raised by donors nor were 
post-GDCC statements from Embassies carried in the local press. 
 
¶6.  (SBU) Comment:  The RGC appeared seized with the growing 
negative impact of the economic crisis.  The participants noted a 
sense of urgency both in the RGC's presentations and responses to 
issues raised.  The economic crisis seems to have spurred a renewed 
effort for some needed reforms; time will tell if the RGC follows 
through on policy remedies and commitments it offered. 
 
 
PHNOM PENH 00000287  002 OF 002 
 
 
ALLEGRA