World Bank chief says Cambodia needs broader-based economy

PHNOM PENH (Thomson Financial) - Cambodia's economy is too narrowly focussed on its garment sector, World Bank chief Robert Zoellick said Sunday, suggesting it needs to build on its successes to draw investors to other industries.

"Cambodia has a particular opportunity and need to develop a global brand," Zoellick said at the end of a two-day visit to the country, which has carved out a lucrative niche by selling itself to buyers as a labor-friendly textile producer.

"It's been able to stay in the game and grow, in part because for some buyers there is special value to the social responsibility that it's included in that industry," he said.

Cambodia's garment sector continues to expand, employing some 330,000 people in more than 200 factories and accounting for 80 percent of the country's export earnings.

But Zoellick said that this is "too narrow a base on which to develop" and that to attract other businesses, it was essential for Cambodia to create the right investment climate.

"Cambodia is a small country. It needs to be distinctive to get on the map and I believe it can be distinctive by emphasising its heritage, better labor practices, better transparency, fighting corruption," he said.

"This is all important if Cambodia is going to draw foreign investment and create jobs."

Economic growth has been projected at 9.0 percent this year by the International Monetary Fund.

While it continues to expand at a healthy rate, the economy has shrunk from a growth high of 13.5 percent two years ago and relies almost solely on garments and tourism to drive it.

During his visit Zoellick met Prime Minister Hun Sen and held lengthy discussions with other top officials.

His talks here were focussed largely on the bank's continued role in Cambodia, a relationship that has not always been easy.

The government is still paying back millions of dollars that were found to have been stolen from three bank-supported projects last year, forcing their temporary suspension.

"As we tried to make clear from the recent past, we can't be in a position where the money that we are ... devoting to Cambodia gets stolen," he said.

Cambodia, which also fell foul of the World Bank in 2003, when graft was uncovered in a project to demobilize soldiers, remains one of the world's poorest countries, and last year was ranked 151 out of 163 in Transparency International's corruption perceptions Index.

Zoellick said the government acknowledged its problems with corruption.

"Governance and corruption issues are at the front and center of people's agendas," Zoellick said.

"Cambodia draws about 690 million dollars a year from international donors, which is no small sum in the world of competitive aid," he said.

"To be able to continue and strengthen that support it will need to build a positive record and counter the challenge of corruption," he said.

"This is not just a question of pleasing the external world. It's a question of being fair to the Cambodian people ... and that means making sure that, whether it be foreign aid or government revenue, [money] is spent appropriately."