Logo of Phnom Penh Post newspaper Phnom Penh Post - Cambodia’s loss of LDC status will bring challenges: World Bank

Cambodia’s loss of LDC status will bring challenges: World Bank

Employees leave a garment factory in Phnom Penh’s Meanchey district after work.
Employees leave a garment factory in Phnom Penh’s Meanchey district after work. Pha Lina

Cambodia’s loss of LDC status will bring challenges: World Bank

As Cambodia continues its upward trajectory towards becoming a lower-middle-income country, it will face even greater challenges in reducing high levels of poverty as the Kingdom loses its preferential trade privileges and donor funding dries up, according to a new World Bank report.

The World Bank’s Systematic Country Diagnostic, presented yesterday in Phnom Penh, stated that while Cambodia has made large strides in reducing poverty over the last two decades, it cannot rely on the same agricultural and low-cost labour base to assist its reduction of poverty rates in the future.

“Cambodia’s eventual graduation from being a least-developed country (LDC) will bring a progressive decline in donor financing and an erosion of preferential trade treatment,” the report said. “At the same time, salaries are rising, and it will be increasingly difficult for Cambodia to keep exporting unprocessed rice and low-end garments.”

The report added that with commodity prices showing negative indicators, the scope of future agricultural gains will become further limited. Additionally, reliance on tourism and garment industries will be challenged as Cambodia’s competiveness weakens.

Miguel Eduardo Sanchez, senior country economist for the World Bank in Cambodia, said that the report was meant to look at the sweeping long-term challenges facing the Kingdom in the near-future and to help the government craft policies for sustainable and inclusive growth.

“Cambodia is one of the fastest growing economies in the world, and poverty reduction has been caused by the growth of services and exports in the tourism sector and garment sector,” he said, adding that the poverty rate declined from 47.8 percent in 2007 to 13.5 percent in 2014.

However, he added that nearly half of the population is still extremely vulnerable to negative economic shocks that could easily force it back into poverty.

“In that respect, Cambodia needs to set up social protections because Cambodians are susceptible to health shocks and climate shocks,” he said. “Cambodia has some of the highest out-of-pocket health care costs with people having to go to Thailand or Vietnam for treatment.”

The World Bank issued guidelines that could further reduce poverty which included reducing costs associated with starting a business, investing in education, and implementing a robust urban planning agenda. This year, the World Bank gave Cambodia a low ranking of 180 out of 189 countries in terms of ease of starting a business.

World Bank Country Manager for Cambodia Inguna Dobraja said that while the institution was committed to reducing poverty, the World Bank was looking where its investments would have the highest impact.

“At this point we are starting to design our medium-term partnership with Cambodia,” she said. “We are looking at a framework strategy for how either our investment, lending, or further analytical work can help.”

But, she said, it would be up to the government and other multilateral agencies to assist in implementing poverty-reducing policies.

Mey Kalyan, senior adviser to the Supreme National Economic Council, said that the country needs to be adequately prepared for higher competition and a lack of foreign aid as the country becomes wealthier. He added that while economic growth has reduced poverty, levels of income inequality have grown.

“Economic growth so far has reduced the poverty rate,” he said. “But at this speed of development, the fact is that lower income earners benefit more slowly while the rich benefit at a faster speed.”

MOST VIEWED

  • Hong Kong firm done buying Coke Cambodia

    Swire Coca-Cola Ltd, a wholly-owned subsidiary of Hong Kong-listed Swire Pacific Ltd, on November 25 announced that it had completed the acquisition of The Coca-Cola Co’s bottling business in Cambodia, as part of its ambitions to expand into the Southeast Asian market. Swire Coca-Cola affirmed

  • Cambodia's Bokator now officially in World Heritage List

    UNESCO has officially inscribed Cambodia’s “Kun Lbokator”, commonly known as Bokator, on the World Heritage List, according to Minister of Culture and Fine Arts Phoeurng Sackona in her brief report to Prime Minister Hun Sen on the night of November 29. Her report, which was

  • NagaWorld union leader arrested at airport after Australia trip

    Chhim Sithar, head of the Labour Rights Supported Union of Khmer Employees at NagaWorld integrated casino resort, was arrested on November 26 at Phnom Penh International Airport and placed in pre-trial detention after returning from a 12-day trip to Australia. Phnom Penh Municipal Court Investigating Judge

  • Sub-Decree approves $30M for mine clearance

    The Cambodian government established the ‘Mine-Free Cambodia 2025 Foundation’, and released an initial budget of $30 million. Based on the progress of the foundation in 2023, 2024 and 2025, more funds will be added from the national budget and other sources. In a sub-decree signed by Prime Minister Hun Sen

  • Two senior GDP officials defect to CPP

    Two senior officials of the Grassroots Democratic Party (GDP) have asked to join the Cambodian People’s Party (CPP), after apparently failing to forge a political alliance in the run-up to the 2023 general election. Yang Saing Koma, chairman of the GDP board, and Lek Sothear,

  • Cambodia's poverty cut in half from 2009 to 2019: World Bank report

    A report published by the World Bank on November 28 states that Cambodia’s national poverty rate fell by almost half between 2009 and 2019, but the Covid-19 pandemic recently reversed some of the poverty reduction progress. Cambodia’s poverty rate dropped from 33.8 to 17.8 per cent over the 10