Logo of Phnom Penh Post newspaper Phnom Penh Post - Tackle issues early to ensure growth: IMF official

Tackle issues early to ensure growth: IMF official

Tackle issues early to ensure growth: IMF official

Cambodia stands to benefit from an uptick in global and regional economic growth but will need to diversify its economy, improve infrastructure and reduce obstacles to doing business if it is to continue on its impressive growth track, a visiting International Monetary Fund (IMF) official said yesterday.

Speaking at the Royal University of Law and Economics in Phnom Penh, IMF Deputy Managing Director Mitsuhiro Furusawa said the global economy was gaining momentum after nearly a decade of sluggish growth. Higher growth in the US and stronger indicators in Europe, as well as continued rapid growth in Asia, have prompted the IMF to revise upward its regional and global forecasts, he said.

Accordingly, the IMF expects world economic growth, which stood at 3.4 percent last year, to accelerate to 3.5 percent this year and 3.6 percent in 2018. Growth in Asia is expected to reach 5.5 percent this year on improved outlooks in China and Japan.

Furusawa said the improved growth prospects present both an opportunity and a challenge for Cambodia. He said to capitalise on them, the Kingdom must diversify its economy and wean its reliance on low value-added garments. Failing to do so could see its GDP growth slow to 6.25 percent in the medium term, from the projected 7 percent this year.

He said Cambodia had positioned itself as a low-cost destination for garments manufacturers, but the footloose industry was highly susceptible to rising wage and production costs.

“Cambodia’s recent success as a clothing maker has benefited from China’s rising labour costs, and its transformation towards higher value-added production,” he said. “However, as your wages and other costs rise, there will be countries happy to lure your garment factories away. Competition in this market is tough.”

Furusawa said the Kingdom faced several challenges to its medium-term growth, namely shortcomings in infrastructure, “sometimes burdensome” government procedures that complicate doing business, and a need to improve governance. However, he said the government’s Industrial Development Policy, which aims to upgrade Cambodia’s industrial structure from a labour-intensive production base to a skills-driven one by 2025, could tackle many of these issues.

“If implemented in timely and effective fashion, this policy could promote diversification and sustained growth,” he said.

The senior IMF official also saw challenges in Cambodia’s “underdeveloped” financial system, where rapid credit growth has exposed vulnerabilities in the banking industry. He expressed concern over industry’s heavy exposure to the real estate sector, over-reliance on foreign borrowing and the rapid growth of microfinance institutions.

Moreover, he said the high level of dollarisation limits the government’s policy actions to respond to the situation.

Furusawa stressed that it was important that the government addresses these issues now rather than wait until an economic slowdown or external shock.

“These issues may appear to pose less risk at this moment of strong growth, but they can become more critical if circumstances change – here in Cambodia or in the outside world,” he said.

MOST VIEWED

  • Cambodia armed with money laundering laws

    Money laundering will now carry a penalty of up to five years in prison while those convicted of financing terrorists will be jailed for up to 20 years, according to new laws promulgated by King Norodom Sihamoni and seen by The Post on Thursday. Comprising nine

  • Schools to be reopened in ‘three stages’

    With guidance from Prime Minister Hun Sen, the Ministry of Education, Youth and Sport, is in the process of reopening schools in three stages. But no timeline has been set, ministry spokesperson Ros Soveacha said on Thursday. Soveacha said the first stage will be to

  • Thai border crossings eased

    The Cambodian Embassy in Thailand said in an announcement on Wednesday that Thailand’s government has allowed certain passengers from several countries to enter its borders. The visitors must go back to their country immediately after their duties in Thailand are fulfilled, the embassy said.

  • Gov’t says tourism recovers slightly despite pandemic

    The Ministry of Tourism and the Phnom Penh municipal administration have recognised 33 tourism businesses in the capital which have consistently implemented safety measures for tourists and adhered to the code of conduct issued by the ministry. Recently, the ministry announced that tourism businesses had to

  • Mull ASEAN border opening, PM urges

    Prime Minister Hun Sen has requested that ASEAN launch a scenario for gradually reopening cross-border travel and trade between countries in the region. He said ASEAN has had more success combating Covid-19 compared to other regions. The prime minister’s request was made at the

  • Ministry reports 11 new Covid-19 cases, reiterates vigilance

    Minister of Health Mam Bun Heng has urged people to continue practising virus prevention techniques after 11 people tested positive for Covid-19 within two days after arriving in the Kingdom. Speaking on Sunday, Bun Heng stressed the importance of washing hands, wearing masks or scarves when

  • Koh Rong land ‘belongs to firm’

    Preah Sihanouk Provincial Administration spokesperson Kheang Phearum told The Post on Sunday that the 35ha being bulldozed by Royal Group Co Ltd in Koh Rong belongs to it after it was leased to it for 99 years by the government in 2008. Phearum said the land does

  • Nine on Indonesia flight Covid-19 positive

    The Ministry of Health on Saturday confirmed nine more imported cases of Covid-19. The nine ‒ eight Cambodians and one Indonesian, aged 22 to 26 ‒ arrived in Cambodia on Thursday via a direct flight from Indonesia and are receiving treatment at the Khmer-Soviet Friendship Hostipal in Phnom Penh.

  • Kingdom’s financial sector healthy

    Cambodia's financial sector remains on a sustainable growth path despite the Covid-19 pandemic squeezing crucial industries, National Bank of Cambodia (NBC) governor Chea Chanto said. Tourism, garments and footwear have borne the brunt of the Covid-19 impact, he said, whereas the financial and agriculture sectors

  • Vietnam told to remove border tents

    Kandal provincial governor Kong Sophoan has ordered local authorities to prohibit the construction of buildings in areas bordering Cambodia and to report any irregularities immediately. Recently, Vietnamese officials removed another seven tents from the border area with Cambodia. His remarks were made on Wednesday afternoon