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Economic outlook positive, ease of doing business still lagging: ADB

Workers prepare clothing for export at a garment factory in Phnom Penh in 2013.
Workers prepare clothing for export at a garment factory in Phnom Penh in 2013. Pha Lina

Economic outlook positive, ease of doing business still lagging: ADB

Cambodia’s economic outlook remains positive and the economy is forecast to grow at a robust 7 percent this year and next year, according to a report released by the Asian Development Bank (ADB) on Wednesday.

Growth in exports, strong foreign direct investment, growing tourist arrivals and increasing domestic demand should promote strong growth for the next two years, according to the bank’s Asian Development Outlook report.

Potential risks to the Kingdom’s growth remain, however, including the upcoming national elections in July, as well as the persistent difficulty of doing business in the country.

“Rising wages require that other costs of doing business be cut to maintain competitiveness with peer economies,” the report says. “Great potential exists in simplifying cumbersome business procedures.”

The report also calls for an improvement to the judicial system, which “is not seen as effective in resolving commercial disputes”.

Seang Thay, a spokesman at the Commerce Ministry, said yesterday the ADB’s outlook reflected the positive improvement of Cambodia’s economy. He also agreed with the need for further reforms to maintain competitiveness.

“We acknowledge that we need to try more to improve the procedure to provide easiness for business to do business in our country,” he said.

He encouraged patience, noting that the government would get better over time and keep improving.

Jan Hansen, the ADB’s senior country economist, reiterated the call for judicial reforms during the report’s presentation yesterday.

“What I think would be important is the establishing of commercial court,” he said. “The capacity building of judges and the commercial court would also help a lot to improve.”

Asked about a commercial court on Wednesday, Thay said that while it was an important step, further discussion with “relevant stakeholders” needed to take place. He also said that the National Commercial Arbitration Centre already existed for commercial disputes.

The spokesman declined to release any timeframe for possible implementation of a commercial court.

The ADB’s report also noted that garment and footwear exports were likely to slow in the future, but predicted that would be offset by strong growth in emerging industries, such as electrical parts and automobile components.

Higher demand for imports is set to increase the country’s trade deficit, however the bank expects increased tourism to bring in enough revenue to cushion the rise.

Meanwhile, higher foreign direct investments and official concessionary loans from abroad should be more than adequate to finance the current account deficit, even building up foreign reserves to about $10 billion by the end of the year.

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