Growth and Development Profile: Cambodia

In this growth and development profile, we look at Cambodia - one of the fastest-growing economies in the world and the South East Asian region.

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Overview

Cambodia is located in Southeast Asia, bordering Laos, Thailand, and Vietnam. It has a young population of around 16 million people, which is expected to increase by more than one million by 2020.

Cambodia has undergone a significant transition, reaching lower middle-income status in 2015 and aspiring to attain upper middle-income status by 2030. Globally, in the period 1990 to 2017 Cambodia has the 8th fastest rate of HDI growth which suggests that it is turning some of the benefits of growth into extreme poverty reduction and improved education and health outcomes.

Two major achievements are a reduction in poverty (47.8% in 2007 to 13.5% in 2014) and a fall in measured inequality (Gini from 40 in 1997 to 28 in 2012 before rising again to 32 in 2017).

Some key development indicators for Cambodia

Cambodia is an excellent example to use of a country with strong export-led growth especially in sectors such as garments and tourism. But both of these industries may not see the same pace of growth in years to come.

Key growth drivers for Cambodia

• High investment in the garments industry
• Increased revenues from tourism
• Construction / real estate boom
• Achieving low-middle income status – drives consumer demand

Key growth constraints and risks for Cambodia

1. Environmental threats (e.g. plastic pollution crisis affecting cities and coastal areas in particular)
2. Unregulated lending by developers – a real estate boom could collapse causing a slump
3. Export base is too narrow, exposed to external shocks such as loss of preferential market access
4. Endemic corruption (ranked 161/180 in 2018)
5. Levels of stunting and wasting among children under five remain high
6. FDI into garment sector may suffer if Cambodia does not address issues of “safe sourcing”
7. Dependence on uncertain remittance inflows
8. Huge rural-urban divide in disposable incomes

Applying Cambodian context in your economics exams

• Building a comparative advantage in garments
• Threats to natural resources from rapid growth
• Impact of robotics in low value-added manufacturing
• Membership of ASEAN – what benefits and drawbacks?
• Turning fast growth into significantly better HDI outcomes
• Is Cambodia too reliant on FDI from China?