Cambodia can regain sustained economic growth by increasing productivity among firms and workers, diversifying exports, and taking steps to boost domestic investment, according to the World Bank.
Its Cambodia Economic Memorandum, released on Monday, added that Cambodia’s growth rate plunged an estimated 10.1 percentage points to contract by 3.1 percent in 2020 before resuming modest growth of 2.2 percent by the end of 2021.
The dramatic slowdown in output can be attributed in large part to the Covid -19 pandemic. However, Cambodia’s dependence on a narrow range of products, markets, and financing sources left it poorly positioned to absorb the shocks, according to the report, ‘Resilient Development, a Strategy to Diversify Cambodia’s Growth Model’.
“Getting back to a sustainable growth path will require an ambitious reform agenda that focuses on improving the capabilities of Cambodia’s firms, workers, and households; strengthening regulations to address market distortions and improve the enabling environment for business; and investing in infrastructure that supports higher quality growth,” said World Bank Country Manager for Cambodia, Maryam Salim.
“A number of short- and medium-term policy actions can support an economic recovery strategy that will allow Cambodia to build back better after the COVID-19 crisis.”
Five products – garments, footwear, rice, cassava, and tourism – accounted for 80 percent of Cambodia’s total exports in recent years. Just two markets – the European Union and the United States – take 69 percent of merchandise exports, the bank said.
Labor productivity is low due to low levels of skills and training and low “total factor productivity,” a measure of how efficiently a country uses labor and capital in aggregate. In addition, the country’s low savings rate and domestic investment have led to a heavy reliance on external financing sources.
The World Bank noted Cambodia has many options to address the lack of diversification and build back stronger. Investing in human capital, supporting more efficient resource allocation through improved market institutions, and improving public investment management can help boost productivity.
Upgrading contributions to global value chains, creating added value in agriculture, and increasing competitiveness in the services sector could diversify exports. Promoting higher savings, encouraging foreign investment in the most productive sectors, and improving financial access could also support domestic investment.
The Cambodia-China trade volume exceeded $11.1 billion in 2021, the Chinese Embassy said on Sunday on its Facebook page.
Citing data from Cambodia’s Ministry of Commerce, the embassy said the trade volume between Cambodia and China increased 37.28 percent in 2021 compared to 2020.
The embassy said the volume of Cambodia's exports to China amounted to $1.51 billion, an increase of 39 percent compared to in the same period in 2020. The volume of imports from China to Cambodia amounted to $9.63 billion, an increase of 37 percent compared to the same period in 2020.