World Bank touts economic upswing while highlighting concerns

People work at a garment factory on the outskirts of Phnom Penh. Hong Menea
People work at a garment factory on the outskirts of Phnom Penh. Hong Menea

World Bank touts economic upswing while highlighting concerns

According to the World Bank, the Cambodian economy is on the upswing, save for a few potential hiccups in the coming year.

In their economic update to end 2017, the World Bank said Cambodia has successfully increased exports of footwear, electrical machinery, equipment and auto parts, but growth is expected to fall to 6.8% for 2017 due to a variety of factors including the worsening political situation.

Cambodia has been able to offset downturns in the market for textiles and clothing with diversified exports and healthy inflows of foreign direct investment. While they forecast that growth will rise to 6.9% in 2018, they also say that the regional economy, led by China, may experience a downturn and political uncertainties may affect the country’s markets in the EU and US.

Inguna Dobraja, World Bank country manager for Cambodia, said the country needed to address certain logistical and human resource issues before it could fully take advantage of its place in the manufacturing market.

“Cambodia appears to be on the verge of climbing up the manufacturing value chains – from garments to electronics and auto parts – and that is a very encouraging development,” she said. “With deeper structural reforms that address high electricity and logistics costs as well as skills gaps, Cambodia can boost investment, export diversification, and move closer to its development goals.”

The report also calls on Cambodia to maximise its “tourism potential by diversifying tourist destinations and products, and by linking rural households to tourism supply chains”, as well as increase access to markets and better prices for rural farmers.
World Bank Country Senior Economist Sodeth Ly said raising agricultural prices was key to improving the economic wellbeing of the country’s farmers.

“Improving farmers’ access to markets, while cutting transportation and storage [and export] costs will address this. This likely will help reduce the large differences between low farm gate prices and high retail prices of agricultural products, and benefit local farmers more,” he said. “International agricultural commodity prices are expected to slowly recover.”

A woman feeds her chickens at a farm in Kandal province. Hong Menea
A woman feeds her chickens at a farm in Kandal province. Hong Menea

In the “policy options” section of the report, they highlight the need for lower electricity costs, high-quality graduates, less regulatory impediments and lower logistics costs.

“While poverty reduction continued, driven mainly by income diversification of rural households earnings from remittances, non-agricultural wages, and household businesses, the potential negative impacts of the slowdown of textile and construction sectors will need to be closely monitored,” they wrote.

While analysts agree that the economy is progressing in the right direction, some have reservations about how far exactly Cambodia has come. Last month, the Organisation for Economic Cooperation Development released a review of the country’s development, calling many of the country’s gains “fragile”.

They added that while the poverty rate had dropped from 60 percent in 2000 to 13.5 percent in 2015, a significant part of the country’s population was still on the edge of poverty and only one seismic economic event could send people’s finances into freefall.

“Moreover, Cambodia’s long-term prospects are uncertain: its demographics will become much less favourable and climate change threatens to have a major effect,” the review reads.

“The economy needs to diversify if current growth rates are to continue.”

MOST VIEWED

  • Government denies claims former Thai PM Yingluck issued Cambodian passport

    Government officials on Thursday denied claims that a Cambodian passport was issued to former Thai Prime Minister Yingluck Shinawatra, who reportedly used it to register a company in Hong Kong. The Hong Kong-based English language South China Morning Post (SCMP) on Wednesday reported Hong Kong

  • Diplomatic passports issued to foreigners to be annulled

    The Ministry of Foreign Affairs and International Cooperation will move to annul diplomatic passports issued to those not born in Cambodia. Analysts say the move may be in relation to reports that former Thai prime minister Yingluck Shinawatra used a Cambodian passport to register as

  • Hun Sen warns Irish MP of EBA ‘mistake’

    Prime Minister Hun Sen on Saturday told former Irish premier Enda Kenny, still a member of the EU nation’s parliament, that the 28-nation bloc should not make a “third mistake” regarding Cambodia by using the preferential Everything But Arms (EBA) agreement to “take 16 million

  • US senators call for GSP trade privilege cut

    Two US senators on Wednesday introduced the Cambodian Trade Act of 2019 bill, requiring the administration to re-examine Cambodia’s eligibility to access the preferential trade treatment granted by the US under the General System of Preferences (GSP). A Cambodian government spokesman said the move was