Prime Minister Hun Sen speaks in Phnom Penh, Wednesday, Feb. 20, 2013. The government has revised the economic outlook for 2012. Photograph: Heng Chivoan/Phnom Penh Post

The government yesterday revised its economic growth figures for 2012 upwards from 7 per cent to 7.3 per cent and said that strong government policy was required to help sustain the current growth rate and move Cambodia from a low to a medium-income country.

Prime Minister Hun Sen addressed an audience of government officials, representatives from the private sector and NGO and aid workers at the seventh Cambodia Outlook Conference.

Despite the uncertainty of the global economy and sluggish growth in both Europe and the US, Cambodia’s macroeconomic management has effectively responded by maintaining market confidence and pursuing clear policies guiding Cambodia’s growth, the prime minister said.

“Cambodia is steadily moving from a low-income to a lower-middle income country by 2015-2016,” he said, adding that the poverty rate dropped to 20 per cent in 2012 and is expected to hit 19 per cent this year.

Experts too were generally positive about Cambodia’s growth, but warned that government reforms would be needed to prevent overheating and encourage greater equality.

IMF Resident Representative Dr Faisal Ahmed said while risks to global shocks have receded, Cambodia needed to maintain a consistent level of growth.

“Given [current levels of] infrastructure and inflation, Cambodia can grow at 7 to 8 per cent per cent without overheating,” he said.

“In times of boom when things are good, financial stability is important. The better you manage inequality, the longer the growth phase.”

Secretary of State at the Ministry of Economy and Finance Dr Hang Chuon Naron said a range of policy responses were required from improving education to increasing economic competitiveness and diversification to addressing issues of energy and land rights.

“To make sure that growth is inclusive [and] is contributing to housing production and the protection of property rights is very important for the future,” he said.

“The government should focus on higher education reforms so that the quality is assured. Land issues continue to be important and the ability to diversify the economy to move up the value chain is very important for the future.”

Acknowledging that there was still a great deal of work to be done, director of research at the Cambodia Development Resource Institute Dr Srinivasa Madhur said that given the historical context, Cambodia’s development was nothing short of a “miracle”.

He was quick to note, however, that the next stage of development for Cambodia may be more demanding than the previous one.

 “For the next part of the journey for Cambodia, it could be even more challenging; once you reach the middle income levels, somehow or other more impediments will come in the way of countries,” Madhur said.

Laying out a roadmap for growth, Mudhur maintained that it is not just economic but social progress which Cambodia must address in the next 20 to 25 years, with a focus on stronger sustainable growth, greater inclusion through poverty reduction, resolving income and gender inequalities, closing gaps in health such as undernourishment and child mortality, and improving the quality of education.

“Anything more than eight and a half per cent growth will also put pressure on inclusiveness because generally speaking, while the dynamics between income inequality and growth is not very well understood, some evidence shows that countries during their super growth have also seen large inequalities increase.”

ANZ CEO Mike Smith said Cambodia will benefit from manufacturers looking to take advantage of low-cost production in the Mekong region.

“In creating new export sectors, there will be an increase in employment, and the process will spur investment and knowledge transfer as well as raise labour productivity.”

To contact the reporters on this story: Daniel de Carteret at [email protected]

May Kunmakara at [email protected]