Cambodia’s economy: does high growth rate mean sustainable development?

A diversity of ecosystems and natural resources has provided the input for production and supported the high economic growth for Cambodia in the last decade. However, this growth has neither lifted the majority out of poverty nor protected the environment from degradation.

First, let’s take a look at some of the economic indicators of this kingdom:
01

Annual growth rate of Cambodia’s economy was 7.7% on average from 1994 to 2011. The national income of Cambodia quadrupled during this period, standing at $909 in 2011. 4 main sectors contributing to the Cambodian economy include agriculture, industry (garments), tourism, and construction.

02

One of the essential Cambodia’s objectives is  to create youth employment to improve agricultural economy and upgrade environmental management. A weak governance with corruption, abuse of power, and lack of transparency is one of the main reasons.

(Need to add: Table 1: Real GDP Per Capita Growth comparison)

Among developing countries, Cambodia’s growth rate is high but it contains potential unsustainable progress. This country has depended on large aid inflows. One of the main economic challenges that a developing country with a low starting base like Cambodia is upgrade human and physical capital base and institutional infrastructure. Cambodia has to keep up with other countries in labor skills, market institutions, and governance.

Following are critical issues of economic development in Cambodia:

  • This small economy is highly susceptible to external economic changes as it relies much on aid inflows.
  • Production is gained by a narrow group of industries.
  • Lack of high-skilled labor for industry sector is another significant constraint
  • It is ironic that while the majority of this kingdom survive thanks to agriculture, the productivity is extremely low because of underdeveloped irrigation systems.
  • Trade deficit is raising an inquiry for the production of valued products and improve productivity.
  • The steady growth rates in the last ten years has come at environmental and social costs such as high deforestation rate, land degradation, and increasing inequality.

References:

Ek, G. (2013). Cambodia Environmental and Climate Change Policy Brief.Sida’s Helpdesk for Environment and Climate Change, Swedish International Development Cooperation Agency.

National Report for Rio+20 United Nations Conference on Sustainable Development. (2012). Retrieved from https://sustainabledevelopment.un.org/content/documents/1022cambodia.pdf

IMF. (2014). Cambodia: Selected Issues. Retrieved from https://www.imf.org/external/pubs/ft/scr/2004/cr04331.pdf

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