Cambodia is one of the most successful countries in achieving high and rapid economic growth in Asia and the world. The average 7 per cent of annual GDP growth in the past two decades has lifted millions of people out of poverty. In 2015, Cambodia graduated from low-income country status and became a member of the lower-middle-income group. The Royal Government of Cambodia aspires to become an upper-middle-income country by 2030 and a high-income country by 2050.
This growth miracle is attributed to many factors. First and foremost, peace is the pre-condition for development for any country. Without peace, the government is forced to divert some of its limited resources (both financial and human) to battlefields and thus cannot use it for productive purposes. In peace time, a country can use these resources to build necessary infrastructure such as roads, bridges, schools or hospitals to support economic activities and benefit the livelihood of the people.
Cambodia achieved full peace in 1998, after the death of Pol Pot and complete dissolution of Khmer Rouge soldiers. The living standard of people has increased dramatically since then.
Nonetheless, there remains many challenges. Politically, Cambodian society is still very divided. Economically, so far growth has been concentrated in Phnom Penh and the gap between rural and urban areas is still huge, requiring policy intervention. Some people come to the city to look for jobs, while others come to pursue higher education. It reflects the situation of the job market in the countryside and the quality and quantity of higher education institutions in the provinces. Rapid rural-urban migration can be considered a sign of development in one hand but at the same time it also makes urban planning more difficult to manage.
Secondly, good governance makes policy more effective and growth more sustainable. As private sector is key to economic development in Cambodia, effective governance structure supporting business activities is critical for the next level of growth. Despite some improvement in administrative procedure using online services, corruption still remains a big obstacle on the ground. It increases the costs and therefore makes business less competitive. If this can be reduced, if not eliminated, Cambodia’s international competitiveness can be significantly improved.
Last but not least, we all know that the improvement of governance, especially fighting corruption, is not an easy task and it takes time. Many existing studies, including the World Bank and Economic Research Institute for Asean and East Asia (ERIA), suggest that improving governance requires a “top-down” approach accompanied by strong political will. Public servants must also change their mindsets. Appropriate mechanism and budget must be in place and politics should be put aside when enforcing the rule.
The writer has a PhD in Economics and is designated Associate Professor at Nagoya University