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What does the G7 meeting in France have to do with Cambodia?

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Front left to right: Canada’s Prime Minister Justin Trudeau, US First Lady Melania Trump, US President Donald Trump, wife of the French President Brigitte Macron, France’s President Emmanuel Macron and Germany’s Chancellor Angela Merkel pose for a family picture with G7 leaders and guests on the second day of the annual G7 summit in Biarritz, southwest France, on Sunday. AFP

What does the G7 meeting in France have to do with Cambodia?

The Group of Seven (G7) met in the small Atlantic coastal town of Biarritz in France from Saturday to Monday for this year’s edition.

Considering the significant rift between its members – which counts only one Asian representative, Japan, in its ranks – over topics such as Iran sanctions, climate change, refugees and trade agreements, a communique may or may not have been issued, but what lingers is a sense of deep fractures, in an increasingly fragile and troubled world.

You may ask, quite justifiably – what does it have to do with Cambodia?

The G7 has been seen by many as an obsolete entity, falling short of acknowledging the real share and political weight of emerging economies, such as China, or even India, reinforcing the perception that a small number of Western countries decide on the world’s fate behind closed doors.

While there could be much to be said on global governance structure and diplomacy, the discussions that happened in Biarritz will undoubtedly find an echo in the Kingdom.

France has put tackling inequalities high on this year’s agenda.

According to the 2018 Global Multidimensional Poverty Report, 35 per cent of Cambodians were considered poor as part of a composite index, with a total of 10 indicators, that takes into account income as well as health, education, a reality touching rural provinces – particularly Preah Vihear and Stung Treng – and young Cambodians the most.

While economic growth in the Kingdom has been remarkable, in the range of seven per cent and higher for the past two decades, and among the most robust worldwide, how this translates in bridging the gap between the richest and poorest through economic opportunities for all, investments in basic services and the enforcement of risk-proof and inclusive policies which foster equal chances and equity is a consideration at the heart of the social contract.

Cambodia’s Gini coefficient – a common statistical measure of inequality – remains below the .30 mark and has gradually decreased since 2010.

At the aggregate level, this is very encouraging.

Under the UN 2030 Agenda, and Cambodia’s Sustainable Development Goals Framework, the Kingdom has committed to an ambitious target – to increase the income or expenditure share of the lowest 40 per cent of the population from an annual growth rate of 5.2 per cent in 2016 to 19.2 per cent in 2030.

There are two main opportunities for the Cambodian government to seize to transform this ambition into a viable national trajectory.

It must first increase and localise its investment in basic services such as infrastructure, health and education to combat spatial and age inequality, often acquired by birth.

The introduction of social protection mechanisms such as health insurance and upgrading facilities have been well documented as proven strategies to target the ultra-poor and child and rural poverty.

It should also provide specific attention to the working poor and the estimated 21 per cent of Cambodians who are slightly above the poverty line but could fall back below it.

These concerns call for a widening of the fiscal space to expand the tax base from being consumption driven to having a greater proportional weight on income and capital revenues.

The G7 discussions recalled significant short to medium-term global risks which could directly exacerbate Cambodia’s existing vulnerabilities and slow down the progress towards the reduction of inequalities – a global recession and accelerated climate change.

Many scientists argue that the world is on a worst-scenario track, on par or exceeding the target of a global 1.5 degree Celsius rise.

The Kingdom has been acknowledged as being highly vulnerable to climate change, and any global acceleration through imperfect modelling, the non-application of provisions under the Paris Agreement and unpredicted catastrophes such as the fires in the Arctic or Amazon rainforest will have national consequences and demand far greater adaptive efforts.

Markets and analysts have warned of an imminent and rising global recession risk, fuelled by reduced productive output from the US, China and Germany, rising personal debt in industrialised countries and trade tensions.

Any economic slowdown may jeopardise Cambodia’s macro-economic stability and reduce both official development assistance (ODA) and foreign direct investment (FDI) inflows.

This could impact one of Cambodia’s main investors and economic partners, China, as well vulnerable workers in the manufacturing, tourism and construction sectors and limit the government’s capacity to realise investments through a narrowing revenue base.

Widening inequalities are as much about human rights as decisive factors of political, social and economic discontent.

While Biarritz may have been all about storms to come, this should prompt Cambodian policy-makers to incorporate risks today to ensure the Kingdom can better withstand shocks and sustain its progress towards shared prosperity.

Farah Abdessamad has been working in the international development field for more than 10 years as an economist, based in Cambodia and other developing countries, with the UN.

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