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Kingdom set to diversify economy as Covid bites

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A young man operates his own innovative electronic-device at the Air & Tech Show in Phnom Penh in 2018. Heng Chivoan

Kingdom set to diversify economy as Covid bites

Cambodia is moving towards developing non-textile industries with a policy calling for sustainable growth and economic diversification.

To ensure progress, the government will continue implementation of the Cambodia Industrial Development Policy 2015-2025, said a press release on the results of a Cabinet meeting chaired by Prime Minister Hun Sen last month.

“This policy is a strategy to promote Cambodia’s new economic growth, focusing on economic diversification, strengthening competitiveness and enhancing productivity in line with the changing context of the local economic structure and the geopolitical and economic situation in the region and the world”, it said.

“Since 2017-2018, the government has already implemented the industrial development policy with positive results. The industrial sector ratio as part of GDP rose from 27.7 per cent in 2015 to 32.6 per cent in 2018 before the target of 30 per cent by 2025.

“It is a reflection of the fact that Cambodia is continuing to reform and strengthen its industrial structure, which has gradually shifted from reliance on agriculture to industry which will accelerate development.

“Through this policy, the government’s goal is to increase and diversify non-textile manufacturing exports to 15 per cent and boost agricultural processed goods exports to 12 per cent of total exports by 2025.”

Cambodia has been continuously diversifying its exports and continuing to boost the export growth of processed agricultural products to become more diversified and less reliant on garment and footwear exports, it said.

Royal Academy of Cambodia economic researcher Ky Sereyvath told The Post on Tuesday that the government will continue to pursue the policy for another five years, shifting from the textile sector to investment opportunities, particularly from China.

“The shift away from the textile sector is not due to the EBA withdrawal, but to seize new investment opportunities flowing out from China due to the effects of the Sino-US trade war,” he said, referring to the EU’s Everything But Arms trade scheme.

He said the development of this new industry means a focus on the electronics, electricity, and auto parts industries, encouraging more foreign investments.

“I believe investing in this sector will help increase prices because the industry will use less labour. It is more lucrative than the garment sector and this industry is suitable for Cambodians because of their skills training.

“Our industry has entered the second round. We previously only developed the textile sector. For the second round, there is a strategy for processing agricultural products to the food processing industry to cope with the overproduction of agricultural products and promote value-added growth in the economy, rather than farmers picking only fruits to sell,” he said.

He said as part of its industrial development policy, the government will continue to reform taxation, the armed forces, transportation system, educational and vocational training systems, and encourage workers to promote rapid industrial growth.

The policy also aims to register between 80 per cent and 95 per cent of small- and medium-sized enterprises (SMEs). The government also wants 50-70 per cent of SMEs to have proper accounting records and balance sheets by 2025.

“Today, more small- and medium-sized enterprises are aware of the importance of formal registration to strengthen business governance, increase access to finance and as a basis for assessment for technical support and other government incentives,” the press release said.

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