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Logo of Phnom Penh Post newspaper Phnom Penh Post - Economy booming, but still few jobs

Economy booming, but still few jobs

The World Bank said on November 14 that East Asian economies are likely to achieve

their fifth consecutive year of strong growth in 2006 -and that Cambodia's gross

domestic product (GDP) would slip slightly, but continue to grow at a robust 8.9


In a separate report, the World-Bank-supported Economic Institute of Cambodia (EIC)

predicted a similar 8.5 percent GDP boost. Although the GDP is expected to moderate

from last year's stunning 13.4 percent growth, Cambodia still posted one of the best

performing economies in Asia, behind only China's 10.4 percent.

"The estimated 8.9 percent growth for 2006 would be one of the highest growth

rates in the region and the third highest for Cambodia over the last seven years,"

said Robert Taliercio, World Bank country economist for Cambodia.

In fact, aside from sluggish 4 percent growth in the agricultural sector, most of

the figures forecast for Cambodia were welcoming.

For the second consecutive year, textiles and tourism were the fast movers, as garment

exports rose nearly 40 percent and visitors' arrivals increased about 20 percent.

Inflation dropped to 5.1 percent, due to a stable exchange rate of the riel versus

the US dollar, Thai baht and Vietnamese dong, and the EIC said external trade and

private investment "continued to increase significantly."

According to the EIC, the Council for the Development of Cambodia approved 74 investment

projects, worth roughly $1 billion in fixed assets, in the first nine months of 2006.

"For last year and this year, our economic growth has been strong compared to

previous years," said Sok Hach, director of EIC, on November 16. "This

year the economy is higher because of tourism, the garment industry and rainfall.

We've had enough rain to keep growth in the agriculture sector."

In the video teleconference broadcast simultaneously in Southeast Asian capitals

from Washington DC, Homi Kharas, World Bank chief economist for East Asia and the

Pacific, said that Asia's economic boom was corroborated by a substantial decline

in poverty.

"Current estimates suggest that the number of people in East Asia living on

or below $2 a day will fall to around 550 million (or 29.3 percent of the population)

in 2006," stated a World Bank report. "This 1.5 percentage point drop in

the past year means that around 25 million people in the region have emerged from

severe poverty since 2005."

But, according to current World Bank figures, 53.8 percent of Cambodia's population

- roughly 7.6 million people-will earn less than $2 a day in 2006. That is a decline

of 2.4 percent since 2005, and a drop of 10.1 percent since 2004, but economists

and analysts are still concerned about how a booming economy is not being harnessed

to eliminate poverty, reduce inequality and create jobs for young people.

"Not one hundred percent of Cambodians get the benefits of economic growth,"

Hach said. "We're seeing economic growth and lots of money coming into the country,

but most of the money goes to people who already have big capital. So, even though

we can see economic growth, we're not seeing employment growth-most citizens are

still poor and do not have jobs."

But Khieu Kanharith, Minister of Information, said on November 16 that the government

is pleased with Cambodia's GDP growth and will only start to worry if it dips below

6 percent.

"As we see in the government's rectangular strategy, we must have economic growth

of more than 5 percent for stability," he told the Post on November 16. "If

we have 5 percent it is just enough. What a family earns is just enough for food

and no money to repair their homes or buy a bicycle for their child to go to school.

Our principle is that if we have economic growth from 6 percent up, we are hopeful."

According to Hach, the tourism and garment industries are not the answer to eliminating

poverty or creating jobs for the 200,000 Cambodians entering the labor force each

year. He estimates that the two industries are absorbing only about 25 percent of

the new labor force each year.

"The two fields cannot get rid of poverty by offering income or employment,"

Hach said. "The garment sector can provide jobs, but only to about 20 percent

of the new workers each year. Tourism could reduce unemployment at about five percent

each year at the most. In total the two fields can only provide employment to a small

amount of new workers each year. So, what are the rest of the citizens supposed to


It may be a matter of defining "unemployment." In May the Ministry of Planning

released a figure of 4 percent unemployment. The International Labor Organization

in 2004 listed Cambodia's unemployment at 0.8 percent -the same number hailed by

the EIC as "possibly the lowest rate in the world."

The ILO defines unemployment as "those people who are without work and looked

for work the week before. If a person worked for just one hour the week before they

are considered "discouraged workers."

"Despite a very good unemployment rate, this does not suggest that everyone

- especially rural dwellers who rely heavily on subsistence agricultural farming

-has a productive and remunerative job that can ensure a decent standard of living,"

reads the EIC's publication Cambodia Economic Watch, released in October.

"It is, therefore, necessary to examine the underemployment rate which is defined

as employed persons who expressed desire to have additional hours of work or an additional


The most recent attempt to quantify underemployment was a Ministry of Planning labor

survey, conducted in 2001, that found that 38 percent of Cambodians were underemployed,

the EIC reported.

Government spokesman Kanharith, however, claims that the benefits of a healthy economy

are readily apparent in Cambodia.

"We've succeeded in reducing poverty at the rate of 1 percent each year, and

also right now we have a lot of traffic jams due to all the cars and motorbikes [people

have been able to buy]," he said.

"Even though I did not travel to all the provinces, statistics show that the

number of thatched houses decreased and brick houses increased. The poor now at least

have a bicycle to ride."



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