Cambodia Outlook Conference (COC)

Cambodia’s Vision 2030 and 2050: Engineering a Bright Future

សារគន្លឹះ / Key Messages:

  • ការអនុវត្តគោលនយោបាយយុទ្ធសាស្ត្រដែលរួមបញ្ចូលគ្នានូវការអភិវឌ្ឍជំនាញវិស្វកម្ម ការពង្រឹងខ្សែចង្វាក់ផ្គត់ផ្គង់ក្នុងស្រុក និងទាក់ទាញការវិនិយោគផ្ទាល់ពីបរទេស (FDI) យ៉ាងសកម្ម នឹងបង្កើតឱ្យមាននិរន្តរភាពប្រព័ន្ធអេកូសេដ្ឋកិច្ចឯករាជ្យនៅប្រទេសកម្ពុជា។
  • ការដាក់ឱ្យមានការកាត់បន្ថយពន្ធ និងការឧបត្ថម្ភប្រាក់ឈ្នួលសម្រាប់ក្រុមហ៊ុនក្នុងស្រុកដែលវិនិយោគលើការស្រាវជ្រាវប្រកបដោយនវានុវត្តន៍ និងការផ្តល់ឱកាសការងារដល់និស្សិតបញ្ចប់ការសិក្សាជំនាញបច្ចេកទេស នឹងគាំទ្រដល់ដំណាក់កាលដំបូងនៃការអភិវឌ្ឍឧស្សាហកម្មជឿនលឿននៅប្រទេសកម្ពុជា។
  • ផ្ដល់អាទិភាពដល់ការវិនិយោគ ដើម្បីធ្វើឱ្យប្រទេសកម្ពុជាក្លាយជាមជ្ឈមណ្ឌលកម្មន្ដសាលជឿនលឿនក្នុងអាស៊ាន ដោយផ្តោតលើហេដ្ឋារចនាសម្ព័ន្ធទំនើប និងការទទួលយកបដិវត្តន៍បច្ចេកវិទ្យាឧស្សាហកម្មទី ៤។
  • តម្រង់កំណែទម្រង់ការអប់រំឱ្យត្រូវតាមតម្រូវការឧស្សាហកម្ម ដោយសង្កត់ធ្ងន់លើការអប់រំផ្នែកវិទ្យាសាស្ត្រ បច្ចេកវិទ្យា វិស្វកម្ម និងគណិតវិទ្យា (STEM) និងការបណ្តុះបណ្តាលវិជ្ជាជីវៈ ដែលឆ្លើយតបនឹងតម្រូវការទីផ្សារការងារដែលកំពុងវិវត្តតាមបច្ចេកវិទ្យា និងគាំទ្រមហិច្ឆតាឧស្សាហកម្មរបស់​ប្រទេស​កម្ពុជា។
  • Implementing a strategic policy that synergises the development of engineering expertise, strengthens local supply chains and actively attracts foreign direct investment (FDI) would create a sustainable, interdependent economic ecosystem in Cambodia.
  • Introducing tax breaks and wage subsidies for local companies investing in innovative research and hiring technically skilled graduates would support the nascent stages of advanced industry development in Cambodia.
  • Prioritise investments to establish Cambodia as an advanced manufacturing hub within ASEAN, focusing on modern infrastructure and the adoption of Fourth Industrial Revolution technologies.
  • Align educational reforms with industry needs, emphasising science, technology, engineering and mathematics (STEM) education and vocational training that meets the demands of a technologically evolving job market and support Cambodia’s industrial ambitions.

Laying the Foundations for Cambodia’s Industrial Ascent

Cambodia is on the cusp of a major change as a result of the Fourth Industrial Revolution (4IR). The 4IR, which is made up of physical, digital and biological technologies coming together, gives Cambodia a unique chance to skip traditional industrial stages and move straight into a technology-driven economic future (Schwab, 2016). The 4IR’s potential to overhaul economies globally is great, offering not just enhanced technology integration but also fundamental socioeconomic and environmental changes. Cambodia has relied heavily on agriculture and textiles in the past, but the 4IR offers a chance to diversify the country’s economy. The adoption of new technology by the nation could help with issues like sustainable development, job creation and economic inequality (World Bank, 2020). The 4IR has the potential to upgrade Cambodia’s manufacturing sector with technologies like smart factories and automation, allowing the country to participate more in global supply chains.

Cambodia must also transition to a knowledge-based economy (where intellectual talent, rather than conventional industrial techniques, drives growth) in order to keep up with global advancements (Asian Development Bank, 2019). Given the importance of today’s youth to tomorrow’s labour force, it is imperative that we implement a comprehensive educational system that encourages creativity, critical thinking and technical proficiency.

While traditional industries continue to dominate the Cambodian economy, the technical sector is expanding, particularly in major cities like Phnom Penh (Ministry of Economy and Finance, 2021). However, obstacles such as a lack of financial resources, a restricted domestic market and a deficient infrastructure remain. There is still a large gap between urban and rural communities when it comes to accessing technology, which is slowing down an otherwise exciting field.

A notable concern in Cambodia’s economic landscape is the skills gap in STEM disciplines, which is particularly acute in areas critical for the 4IR, such as engineering and technology (UNESCO, 2020). Many graduates are unprepared for the demands of the present labour market because educational institutions prioritise general education over technical and vocational education that coincides with market needs. Cambodia’s education system, especially in the areas of science and engineering, needs a complete overhaul if it is to play a role in closing this gap. Access to education has improved, but challenges remain in terms of the system’s ability to provide students with a high-quality, up-to-date scientific and engineering education. Modernity and relevance in the curriculum, which are essential for learning advanced scientific and technical ideas, are often lacking.

Digital literacy and STEM education should be at the centre of any education reform in Cambodia. It’s crucial to get youth interested in and prepared for these subjects at a young age. College and university programmes should incorporate internships and other forms of hands-on experience to better prepare students for the workforce upon graduation. It is also important to invest in programmes that provide teachers with the training they need to properly teach complex topics. In addition to boosting Cambodia’s competitiveness in a technology-driven economy, these educational changes are crucial for ensuring the country’s progress is both inclusive and sustainable for all citizens.

Catalysing Cambodia’s Economic Transformation

For Cambodia to enhance its industrial capabilities and achieve its ambitious economic objectives, the formation of industrial clusters is essential. An industrial cluster is a geographic concentration of interconnected businesses, suppliers and associated institutions in a specific field. These clusters are not merely aggregations of enterprises, but represent complex networks of relationships and collaborations among various businesses, vendors, and other organisations. Their strategic geographical positioning is key to stimulating economic development and fostering innovation in targeted areas. The significance of these clusters lies in their ability to cultivate a cooperative environment that is conducive to business growth and expansion within Cambodia. This collaborative atmosphere, intrinsic to industrial clusters, can drive efficiencies, spur creativity and enhance the competitiveness of businesses within the cluster (Porter, 1998).

Cambodia may turn to successful global models like Silicon Valley and Shenzhen to adapt the industrial cluster idea to its particular socioeconomic setting. A strong infrastructure, including dependable transportation, steady utilities and cutting-edge communications, is essential to this kind of adaptability. To fully foster innovation and entrepreneurship, it is imperative to incorporate technology parks and business incubators within these clusters. When it comes to helping new businesses get off the ground, incubators are indispensable (Etzkowitz and Leydesdorff, 2000).

Key to industrial cluster development is the effective integration of human resources, evolving supply chains and strategic foreign direct investment (FDI). To foster an attractive investment climate, essential steps include streamlining administrative processes and offering incentives such as tax relief and intellectual property protection. Implementing policies that encourage partnerships, including joint ventures between local businesses and international enterprises, can enhance Cambodia’s appeal for FDI.

Another critical aspect necessary for attracting FDI is having a skilled workforce capable of enhancing the productivity and creativity of multinational corporations. Beyond merely having a labour force, Cambodia must invest in education and vocational training aligned with the demands of the 4IR to equip its future workforce with advanced technological skills and critical thinking abilities (World Economic Forum, 2020). This trained workforce is not only vital for attracting FDI, but also for ensuring its positive impact on the economy.

Supporting local businesses is crucial, as they form the cornerstone of Cambodia’s economy. For these businesses to remain competitive, they need to embrace new technologies and engage in research and development (R&D). Providing incentives for R&D and access to contemporary technology tools can elevate local industries in the global value chain. Furthermore, fostering collaborations between local industries and higher education institutions can lead to innovation, streamlined processes and a qualified workforce, all of which are essential for economic growth.

More importantly, the interaction between the public and private sectors is integral to advancing Industry 4.0. The public sector’s role in providing infrastructure, legislative frameworks and educational reform is indispensable. Public-private partnerships (PPPs) can effectively distribute the risks associated with investments in advanced technology and infrastructure. These partnerships facilitate information exchange and ensure that government policies are aligned with businesses’ needs.

Cambodian government officials must nurture PPPs by creating conducive legal and regulatory frameworks, establishing funding structures for long-term investments and offering technology transfer incentives. Incentives like tax credits, R&D subsidies and seed funding are critical in promoting growth in the information technology sector, demonstrating Cambodia’s commitment to a high-tech economy (ASEAN, 2019). Such incentives can attract long-term domestic and international investments.

Additionally, improving the educational system and business climate is essential for Cambodia to attract FDI. This includes enhancing regulatory clarity, strengthening intellectual property protections and simplifying new business start-up procedures.

To foster the growth of industrial clusters, Cambodia requires a comprehensive strategy that includes regional planning, the development of physical infrastructure and business support services. This strategy aims to boost Cambodia’s industrial capacity and global competitiveness by promoting collaboration and innovation within these clusters.

These goals and strategies are pivotal as Cambodia strives towards its Vision 2050 of becoming a high-income nation. Cambodia’s potential as a technological leader depends on dedicated efforts and strategic planning. With its young and increasingly tech-savvy population, Cambodia is poised for a significant economic transformation, offering numerous growth opportunities and the potential to redefine its position in the global economic landscape. To emerge as a formidable player in the technology sector, Cambodia must invest in education, infrastructure and an innovation-friendly ecosystem. Realising this ambition requires government policies that align with industry needs, foster human capital development and encourage an entrepreneurial spirit.

References

ASEAN. (2019). ASEAN Investment Report 2019.

Asian Development Bank. (2019). Asian Development Outlook 2019: Strengthening Disaster Resilience.

Etzkowitz, H., & Leydesdorff, L. (2000). The dynamics of innovation: from National Systems and “Mode 2” to a Triple Helix of university-industry-government relations.

Ministry of Economy and Finance of Cambodia. (2021). Cambodia Economic Update.

Porter, M. E. (1998). Clusters and the new economics of competition. Harvard Business Review.

Schwab, K. (2016). The Fourth Industrial Revolution. World Economic Forum.

UNESCO. (2020). Science, Technology and Innovation Policy Review: Cambodia.

World Bank. (2020). Cambodia Economic Update.

World Economic Forum. (2020). The Future of Jobs Report 2020.

Inclusion of Smallholder Farmers through Public-Private-Producer Partnerships for Cambodia’s 2030 Vision and Beyond

សារគន្លឹះ / KEY MESSAGES

  • ក្រសួងកសិកម្ម រុក្ខាប្រមាញ់ និងនេសាទ (MAFF) គួរលើកកម្ពស់ និងគាំទ្រភាពជាដៃគូរវាងវិស័យឯកជន ម្ចាស់ជំនួយ និងកសិករខ្នាតតូច តាមរយៈការសម្រួលលំហូរការងារ ជាពិសេសការដោះស្រាយបញ្ហាទាក់ទងនឹងដំណើរការចុះបញ្ជី កង្វះកម្លាំងពលកម្ម និងជំនួយបច្ចេកទេស។
  • ដើម្បីបង្កើនការចូលរួមរបស់កសិករខ្នាតតូចក្នុងភាពជាដៃគូរវាងផលិតកររដ្ឋនិងឯកជនក្នុងវិស័យកសិកម្ម (Agri-PPPPs) MAFF គួរតែពង្រឹងការអនុវត្តកសិកម្មតាមកិច្ចសន្យា សហករណ៍កសិកម្ម និងសេវាសិក្សាស្រាវជ្រាវកសិកម្ម។
  • ដើម្បីសម្រេចបានចក្ខុវិស័យឆ្នាំ២០៣០ ប្រទេសកម្ពុជាត្រូវការវិស័យកសិកម្មប្រកបដោយភាពធន់ និងវិបុលភាព ដែលនេះតម្រូវឱ្យមានវិធីសាស្ត្រគ្រប់ជ្រុងជ្រោយ និងចម្រុះមួយ ដែលត្រូវមានការចូលរួមពី រដ្ឋាភិបាល វិស័យឯកជន កសិករ អង្គការកសិករ និងភាគីពាក់ព័ន្ធផ្សេងទៀត។
  • The Ministry of Agriculture, Forestry and Fisheries (MAFF) should promote and support partnerships between the private sector, donors and smallholders by streamlining workflow, especially resolving issues with registration processes, labour shortages and technical support.
  • To increase the participation of smallholder farmers in agricultural public-private-producer (Agri-PPPPs), the MAFF should enhance the implementation of contract farming, agricultural cooperatives and agricultural extension services.
  • To achieve our 2030 vision, Cambodia needs a resilient and prosperous agricultural sector. This requires a holistic and integrated approach that involves the government, the private sector, farmers, farmers’ organisations and other stakeholders.

Cambodia has set an ambitious goal of becoming a higher middle-income country by 2030. This requires Cambodia to diversify its economy, improve its competitiveness and strengthen its human capital. The agriculture sector, which provides employment for more than 50 percent of the population and contributes to about 20 percent of the GDP, is crucial for this endeavour. However, the agriculture sector is facing many difficulties that limit its ability to support Cambodia’s 2030 vision. Cambodia’s agricultural sector had a remarkable growth rate of 5.3 percent per year from 2004 to 2012, one of the most accelerated in the world. This growth helped reduce poverty, raise incomes and enhance food security for millions of Cambodians. However, the sector’s growth dropped to one to two percent per year over the last decade. The World Bank estimates that if the agricultural sector can sustain a five percent growth rate, farm wages will triple from US$ 1,200 in 2015 to US$ 3,760 in 2030. Conversely, if the sector grows at only three percent, farm incomes will increase to US$ 2,500 by 2030.  To enhance the role of agriculture in the national economy, Cambodia needs to adopt new technologies and institutions that can overcome the challenges of small-scale and fragmented production.

One of the main challenges facing the agriculture sector is the predominance of smallholder farmers who lack access to markets, inputs, finance, technology, and extension services. According to the 2019 Cambodia Socio-Economic Survey, 82 percent of farmers are smallholder farmers who cultivate less than two hectares of land, and 61 percent are subsistence farmers who produce mainly for their own consumption (NIS 2020). One of the key challenges in this regard is the weak links between agricultural firms, smallholder farmers and agricultural cooperatives (ACs). According to a recent survey by the Cambodia Development Resource Institute (CDRI), only 10.78 percent of processing firms have connections with farmers and only 4.41 percent with ACs. This means that the inclusion of smallholder farmers in the agribusiness sector is very limited. The survey also reveals that firms rely mostly on their own plantations as the source of raw materials. Instead of sourcing from smallholder farmers, firms prefer to invest in their own production expansion to meet market demand. Furthermore, the support that firms provide to farmers is mainly technical, while loan and farm inputs are very scarce.

Encouraging the cooperation between small-scale farmers and large agribusiness (i.e., exporters or processors) could increase returns to small-scale farmers and income for rural farm households (Reardon et al. 2019). In other words, the government will have to adopt a coherent policy and interventions to integrate smallholders into value chains and maintain their competitiveness. This will minimise the urban-rural income gap, which is caused by inadequate agricultural systems (i.e., lack of technology, underdeveloped market infrastructure).

However, government commitment to addressing inclusive and sustainable agricultural development tends to be impeded by limited funding in the public sector in developing economies (FAO, 2016). For Cambodia, the share of government budget allocated to the MAFF is only 0.81 percent of the 2021 annual budget (Ministry of Economy and Finance [MEF], 2021). In this regard, the government also acknowledges important roles in promoting partnerships among key actors (i.e., public and private sectors and producers) who are potential contributors (RGC, 2021). A survey by CDRI found that more than 60 percent of firms collaborated with the Provincial Department of Agriculture, Forestry and Fisheries (PDAFF) and the MAFF in areas such as land provision or rental, extension services and connection with ACs, but not in investment.

One of the challenges that agricultural firms face in Cambodia is how to establish and maintain effective links with other actors in their value chain, such as input suppliers, smallholder farmers and public sector agencies. In a recent survey, some firms shared that their input suppliers could offer better services at a more reasonable price, and that the MAFF and the PDAFF would provide more extension services, better market access and a better workflow. These suggestions reflect the needs and expectations of agribusiness firms, as well as the gaps and opportunities for improvement in the value chain.

A practical approach to achieving sustainable agricultural development is through leverage financing, especially with the inclusion of smallholder farmers is Agri-PPPPs (FAO, 2016). Agri-PPPPs can also encourage private sector involvement in agricultural business activities that would be otherwise considered high risk. They are also expected to promote innovation, market access and inclusion of smallholder farmers in low and middle-income countries (Poulton and Macartney, 2012). A suitable Agri-PPPPs framework can enhance the inclusion of smallholders, but the Agri-PPPPs framework may not fit in our context, because it requires more active and long-term public sector engagement in the partnership, rather than a temporary or regulatory role. The main challenges of the relationship are the low quality of smallholder production, the scarcity and weakness of ACs and limited interaction between firms and ACs. These challenges affect the market access and competitiveness of smallholder farmers. ACs can play a key role in addressing these challenges by organising, training and supporting smallholder farmers, as well as reducing transaction costs and risks for both farmers and firms. ACs can also ensure that farmers comply with the quality standards demanded by the market. However, ACs need government support to establish, operate and grow. ACs have a comparative advantage over government institutions in providing these services, as they have more direct and frequent contact with farmers and can leverage social capital among them.

Furthermore, foster links between smallholder farmers and other actors in the value chain, such as processors, traders, wholesalers, retailers and consumers can create mutual benefits for both parties. These can include reducing transaction costs, improving quality and traceability, ensuring supply and demand and sharing risks and rewards. For example, contract farming arrangements can provide smallholder farmers with guaranteed markets and inputs, while processors can secure a stable supply of raw materials. Similarly, direct sales to consumers or retailers can increase the income of smallholder farmers and reduce intermediaries. A report by the Food and Agriculture Organization shows that contract farming can improve the income of smallholder farmers by 50-100 percent. An example of contract farming in Thailand is the sugar cane production for Mitr Phol Sugar Corporation, which is one of the largest sugar producers in Asia. Mitr Phol provides inputs, technical assistance, harvesting services, transportation and guaranteed prices to more than 100,000 contracted farmers who supply about 70 percent of its raw material needs.

In conclusion, agriculture is a vital sector for Cambodia’s economic development and society. The sector has made significant progress in reducing poverty, improving food security and increasing exports. However, there are still many challenges to overcome in order to achieve sustainable and inclusive growth. These challenges require a holistic and integrated approach that involves the government, private sector, farmers, farmers’ organisations and other stakeholders. By working together, we can create a more resilient and prosperous agricultural sector for Cambodia. By pursuing these strategic directions, Cambodia can harness the power of agriculture to achieve its vision of becoming an upper middle-income country by 2030 and a high-income country by 2050.

References

Avendano, Belem, Narrod Clare and Tiongco Marites. 2013. “The Role of Public-Private Partnerships on the Access of Smallholder Producers of Mexican Cantaloupe to Fresh Produce Export Market.” Improving Import Food Safety First Edition

Bruce, Kisitu, and Costa, Hofisi 2019. “Enabling environment for PPPs in agricultural extension projects: Policy imperatives for impact” Journal of Rural Studies 70 (2019) 87-95

Hermans, Frans, Geerling-Eiff Floor, Potters Jorieke, and Klerkx Laurens. 2019. “Public-private partnerships as systemic agricultural innovation policy instruments – Assessing their contribution to innovation system function dynamics.” NJAS – Wageningen Journal of Life Sciences 88 (2019) 76-95

FAO (Food and Agriculture Organization of the United Nations). 2016. Public-private partnerships for agribusiness development – A review of international experiences. Rome: FAO

MEF (Ministry of Economy and Finance). “Budget in brief fiscal year 2021”. https://mef.gov.kh/assets/uploads/2021/01/BUDGET_IN_BRIEF_Fiscal_Year_2021.pdf, accessed 27 Jan 2022

NIS (The National Institute of Statistics). 2020. Cambodia Inter-Censual Agricultural Survey

Poulton, Colin, and Jon Machartney. 2012. “Can Public-Private Partnerships Leverage Private Investment in Agricultural Value Chains in Africa? A Preliminary Review.” World Development no. 40 (1):96-109.

Reardon, Thomas, Ruben Echeverria, Julio Berdegué, Bart Minten, Saweda Liverpool-Tasie, David Tschirley, and David Zilberman 2019. “Rapid transformation of food systems in developing regions: Highlighting the role of agricultural research & innovations.” Agricultural Systems 172: 47-59

RGC (Royal Government of Cambodia). 2021. Strategic Framework of Agriculture Sector Development (2021-2030). Phnom Penh: RGC.

WB  (The World Bank). 2015. Cambodian agriculture in transition : opportunities and risks

Priorities for Sustainable Development and Social Programmes

សារគន្លឹះ / Key Messages:

  • ដោយសារការគាំពារសង្គមភាគច្រើនសម្រាប់ជនពិការក្នុងប្រទេសកម្ពុជានៅមានកម្រិតនៅឡើយ ការលើកកម្ពស់គុណភាពមូលធនមនុស្ស និងការផ្លាស់ប្តូរការយកចិត្តទុកដាក់លើកម្មវិធីសង្គមជាតម្រូវការដ៏ចាំបាច់។
  • ក្នុងការបង្កើនសមត្ថភាព និងការយល់ដឹងពីបរិយាបន្នពិការភាព មានសារៈសំខាន់ណាស់។ ការជូនដំណឹងដល់សាធារណជនអំពីតម្រូវការពិតប្រាកដរបស់ជនដែលមានពិការភាព និងតួនាទីរបស់អង្គការជនពិការ OPDs នៅថ្នាក់ក្រោមជាតិ ក៏ជាការចាំបាច់មួយដែរ។
  • ការកែលម្អឱ្យកាន់តែប្រសើរឡើងនូវកម្រិតនៃការយល់ដឹងអំពីពិការភាពប្រកបដោយបរិយាបន្ន នៅក្នុងប្រទេសកម្ពុជា គឺមានសារៈសំខាន់សម្រាប់អ្នកផ្តល់សេវាដែលអាចឆ្លើយតបទៅនឹងតម្រូវការផ្លាស់ប្តូរយ៉ាងឆាប់រហ័សរបស់ជនដែលមានពិការភាព។
  • ថ្វីបើរាជរដ្ឋាភិបាលកម្ពុជាបានកែលម្អ និងកំពុងអនុវត្តគម្រោងជាច្រើនដើម្បីផ្តល់នូវប្រព័ន្ធសុវត្ថិភាពសង្គមជូនជនងាយរងគ្រោះបំផុតរួមទាំងជនពិការផង ក៏នៅតែមានមធ្យោបាយមួយចំនួនដើម្បីកែលម្អការគាំពារសង្គម។
  • ការបង្កើតនិងអនុវត្តប័ណ្ណសម្គាល់អត្តសញ្ញាណជនពិការ និងកម្មវិធីបង្ការនៅទូទាំងប្រទេសកម្ពុជាដូចជា៖ការថែទាំភ្នែក ជំងឺមិនឆ្លង និងការចាក់វ៉ាក់សាំងបង្ការ គឺជារឿងដ៏សំខាន់ដើម្បីធានាថាជនមានពិការភាពត្រូវបានដាក់បញ្ចូលក្នុងគោលការណ៍ណែនាំសុខភាពជាតិក្នុងរយៈពេល​បួនឆ្នាំ។
  • អ្នកតាក់តែងគោលនយោបាយគួរតែបង្កើនថវិកាជាតិដើម្បីឱ្យក្របខណ្ឌគោលនយោបាយជាតិគាំពារសង្គមឆ្នាំ២០១៦–២០២៥ ទទួលបានមូលនិធិពេញលេញក្នុងរយៈពេលប្រាំពីរឆ្នាំ។
  • Given that the majority of social protection for people with disabilities in Cambodia are still limited, there is an urgent need to enhance the quality of human resources and to shift focus in social programmes.
  • It is important to increase the capacity and knowledge on disability inclusion. It is imperative to inform the public about the real needs of persons with disability ​and the role of OPDs on a subnational level.
  • Improving the level of awareness raising of disability inclusion in Cambodia is crucial for service providers who can respond to the rapidly changing needs of people with disabilities.
  • Although the Royal Government of Cambodia has developed and is implementing several schemes to provide a safety net for the most vulnerable, including persons with disabilities, there are still ways to improve social protection.
  • Developing and implementing disability identification cards and prevention programmes across all of Cambodia, such as eye care, non-communicable diseases and vaccinations, is important to ensure persons with disabilities are integrated in the national health guideline in four years.
  • Policymakers should increase the national budget in order for the National Social Protection Policy Framework 2016 – 2025 to be fully funded within seven years.

On November 14, 2023, the Prime Minister of the Kingdom of Cambodia, His Excellency Hun Manet, presided over the official implementation of the “Voluntary Contribution to Social Security Program,” “Vocational Training Program” and “Technology for Young People from Poor and Vulnerable Families.”

In his commitment to elevate Cambodia in 2024, budgeting prioritises social policy, Cambodia has outlined plans to earmark over 38 trillion riel (over $9 billion) for the fiscal year 2024, prioritising the education, vocational training, health and social work sectors. The draft Law on Financial Management 2024 was ratified during an October 27 Cabinet meeting, chaired by Prime Minister Hun Manet.

The law, structured in five chapters with 14 articles, emerges at a time when the Cambodian People’s Party (CPP)-led government continues to enjoy significant trust from the populace for its projected leadership over the coming five years, said the Government Spokesperson Unit in a press release.

For 2024, the government anticipates an expenditure of 38.829 trillion riel ($9.376 billion), with 34.497 trillion riel ($8.33 billion), or roughly 24.13% of the Kingdom’s gross domestic product (GDP), marked for national-level expenditures. This is a decrease of 5.8% in comparison to the 2023 budget. “Sub-national expenses are estimated at 4.332 trillion riel ($1.046 billion), about 11.7% of the government’s total outlay and 3.03% of the GDP, marking a 6.6% rise from the 2023 figures,” added the press release. The budget plan identifies education, vocational training, health and social affairs as core areas of focus.

The release added that the budget serves as an important mechanism for the government to navigate domestic and international challenges. It aims to optimise the efficiency of budget utilisation, with a strong emphasis on enhancing public administration reform, core governance reform, institutional capacity and people-centric initiatives. Prime Minister Hun Manet stated that the efficacy of the budget execution would significantly determine the government’s success. He urged all institutions to enhance its implementation, viewing 2024 as a crucial year for refining expenditure to achieve set objectives efficiently.

Some of the priorities of Sustainable Development and Social Programme for people with disabilities such as:

Increase capacity building and knowledge on Disability Inclusion and Public Service for PwDs (Physical Rehabilitation Center, Health, Education, small business, climate change, access to justice and access to information)

  • Consider the needs of persons with disability and modify the environmental code to take account of those needs in the coming 2 years.
  • Develop and implement an early warning system in response to natural disasters whereby persons with disabilities are included in all phases of disaster management in the coming 2 years.
  • Ensure all existing health staff are trained in the area of disability and that disability is included as part of the curriculum of training for all new health staff within 4 years.
  • Develop and implement gender specific health programs for all women and girls with different types of disability including sexual and reproductive health rights (SRHR) in the coming 4 years.
  • Develop and implement disability specific training for at least 50% of all officials in justice system (courts, police and prisons) in the coming 3 years.
  • Develop and adopt national justice system guidelines to ensure equitable services for persons with disabilities (inclusive of all types of disability) in 2 years.
  • Establish a central centre to train sign language interpreters to accommodate the needs of deaf people in all areas in the coming 3 years.
  • Support mainstream family violence services to include women with disabilities in 4 years.
  • Support the enrolment of children with disabilities at primary schools utilizing integrated and inclusion approaches through a system of financial incentives to teachers/schools in the coming 2 years.
  • Ensure inclusive education for higher education, such as high school and university level within the coming 3 years and disability awareness training in teachers training curriculum nationally within 2 years.
  • Create official Khmer text-to-speech that can be installed on any operating systems for PC/laptop to support daily work, education, and access to timely information for the visually impaired persons in the coming 2 years.
  • Support the government to modify the law on intellectual property following the ratification of the Marrakesh Convention 2013 in the coming 2 years.

Social Protection – Disability Pension Scheme (IDPoor/NSSF and disability card)

  • Although the RGC has developed and is implementing several schemes to provide a safety net for the most vulnerable including persons with disabilities, there are still ways to improve social protection.
  • Develop and implement disability identification (ID Card) and prevention programs across all of Cambodia such as eye care, non-communicable diseases (NCD) and vaccinations, and ensure its integration in the national health guideline in 4 years.
  • Ensure persons with disabilities receive the national standard minimum wage in 2 years’ time.
  • Increase the national budget in order that the National Social Protection Policy Framework 2016 – 2025 is fully funded within 7 years.
  • Ensure all persons with disabilities, including those working in the informal sector, have access to the National Social Security Fund (NSSF) in the coming 4 years.

In summary, a range of important issues concerning improved outcomes for person with disability were discussed. These are highlighted below and are elaborated on in this report, along with recommendations. These recommendations are linked to the Sustainable Development Goals (SDG’s). the UN Convention on the Rights of Persons with Disabilities (UNCRPD), National Disability Strategic Plan (NDSP) 2019 – 2013, Incheon Strategy to “Make to Right Real” for Persons with Disabilities in Asia and the Pacific, ASEAN Enabling Masterplan 2025, and The Law on the Protection and the Promotion of the Rights of Persons with Disabilities.

References

  • 4th UPR submitted by CDPO on Disability issue
  • Sustainable Development Goals
  • UN Convention on the Rights of Persons with Disabilities (UNCRPD)
  • National Disability Strategic Plan (NDSP) 2019 – 2013, Incheon Strategy to “Make to Right Real” for Persons with Disabilities in Asia and the Pacific,
  • ASEAN Enabling Masterplan 2025
  • The Law on the Protection and the Promotion of the Rights of Persons with Disabilities.
  • Sub-degree 349 the Implementation of the National Social Assistance Program for Vocational and Technical Training for Youth from Poor and Vulnerable Families by Ministry of Economic and Finance

Strategic Pathways to Cambodia’s 2030 Vision: Three Key Sectors and Four Concrete Measures from Japanese Corporate Insights

សារជាគន្លឹះ / Key Messages:

  • ដើម្បីក្លាយជាប្រទេសដែលមានចំណូលមធ្យមកម្រិតខ្ពស់នៅឆ្នាំ២០៣០ វិស័យកម្មន្ដសាល និងសមត្ថភាពភស្តុភាររបស់កម្ពុជាត្រូវធ្វើការកែលម្អឱ្យប្រសើរឡើង ដើម្បីផ្គត់ផ្គង់ដល់សេដ្ឋកិច្ចដ៏ទូលំទូលាយក្នុងតំបន់ ដែលបច្ចុប្បន្នផ្តោតលើប្រទេសថៃនិងវៀតណាម។ នវានុវត្តន៍ក៏ជាគន្លឹះសំខាន់មួយដើម្បីលើកកម្ពស់គម្រោងឧស្សាហកម្មថ្មី ។
  • ព្រឹត្តិការណ៍ពិភពលោកនាពេលថ្មីៗនេះ និងការធ្លាក់ចុះបរិយាកាសធុរកិច្ចរបស់ប្រទេសជិតខាង ធ្វើការអោយមានការរំពឹងទុកខ្ពស់សម្រាប់ប្រទេសកម្ពុជាក្នុងការបំពេញតម្រូវការរបស់ក្រុមហ៊ុននានាដែលមានបំណងអនុវត្តតាមយុទ្ធសាស្រ្ត “បូកមួយ[1]”។ ទោះយ៉ាងណា កិច្ចការបន្ទាន់បំផុតនៅក្នុងដៃដែលនៅតែបន្តរបស់កម្ពុជានោះ គឺការពង្រឹងការតភ្ជាប់ក្នុងតំបន់។
  • ការលើកកម្ពស់វិស័យថ្មីៗ ដូចជានវានុវត្តន៍នឹងមិនត្រឹមតែបង្កើនឱកាសសម្រាប់អាជីវកម្មដែលមានស្រាប់ប៉ុណ្ណោះទេ ប៉ុន្តែថែមទាំងអនុញ្ញាតឱ្យកម្ពុជាបង្កើតគម្រោងដែលអាចផ្តល់នូវតម្លៃនិងកំណើនថ្មីនៅក្នុងប្រទេស និងទូទាំងសកលលោក។
  • ការចូលរួម​របស់​កម្ពុជាទៅក្នុង​សេដ្ឋកិច្ចតំបន់​ឱ្យមានលក្ខណៈទូលំទូលាយ និង​ការ​លើក​កម្ពស់នវានុវត្តន៍ ​អាច​ជា​ប្រភព​​កំណើនទ្វេរដងសម្រាប់កម្ពុជា។ សកម្មភាពជាក់លាក់ ដូចជាការសរសេររៀបរាប់ក្នុងចំណុចទី៣ គឺតម្រូវឱ្យកំណត់គំនិតផ្តួចផ្តើមទាំងនេះលេចចេញជារូបរាង។
  • In order to become an upper-middle income country by 2030, it is important that Cambodia’s manufacturing and logistics capabilities are improved so that it can cater to the broader economic region that is currently centred around Thailand and Vietnam. To promote new industrial projects, innovation is key.
  • In light of recent global events and the relative decline in neighbouring countries’ business environments, there are heightened expectations for Cambodia to meet the needs of companies wishing to follow the “Plus One”[1] However, the most urgent task at hand continues to be strengthening connectivity within the region.
  • Promoting new fields such as innovation will not only enhance opportunities for existing businesses, but will also allow Cambodia to create projects that can offer new value and growth in the country and globally.
  • The establishment of Cambodia’s role in the wider economic region and the promotion of innovation can be dual sources of growth. Specific actions, such as those written in [III.] are required to set these initiatives in motion.

I. Exploring the Requirements of the Plus One Strategy and Transforming into a Manufacturing and Logistics Hub

  • Current Situation in Neighbouring Countries

Cambodia has a strong geographic advantage due to its location between Bangkok and Ho Chi Minh City, which are the two major manufacturing centres in Southeast Asia. However, these neighbouring countries are experiencing difficulties in their respective business environments due to a rise in labour costs, the tightening of the labour supply and limited industrial space. These factors are making business expansion in those two major manufacturing centres more challenging. The global call for resilient supply chains, which has been amplified by the Covid-19 pandemic and US-China trade frictions, is also providing a useful tailwind for Cambodia. For example, in Thailand in particular, banks and governmental organisations have begun supporting companies that are currently operating in Thailand in expanding their operations into neighbouring countries, including Cambodia. There is a pressing need for Cambodia to prepare for this expansion in investment, particularly in relation to the manufacturing sector.

  • Cambodia’s Current Situation

As of October 2023, 250 Japanese companies have joined the Japanese Business Association of Cambodia (JBAC). Most of the existing manufacturing companies in Cambodia have been operating for more than a decade. Green-field investment by Japanese companies in Cambodia reached its peak in 2015 due to the rapid rise in the minimum wage, which nearly doubled between 2012 and 2015. Since then, labour-intensive industries have avoided investment in Cambodia.

In recent years, the majority of new investment has been targeted at the service industry. Several large-scale investments in the manufacturing sector are being made by existing companies that have been approved as Qualified Investment Projects (QIP).

These companies, which have made the decision to expand existing factories, consider Cambodia to be an important manufacturing site as they focus on the “Plus One” strategy. Their expectations are not only limited to cost benefits, though. The disruption of the global supply chain has been regarded as one of the most critical risks in recent years and some Japanese manufacturers have decided to upgrade their existing factories in order to secure supply chain resilience[2]. These companies have made great efforts to develop their human resources so as to ensure their factories have become more sophisticated since their operations commenced. With the progress they have made in developing human resources through employee training programmes, the factories have gradually transformed labour-intensive operations into higher-value operations, such as product design and product development.

An additional positive for Cambodia is that Japanese companies with factories in both Thailand and Vietnam are starting to seek opportunities to control inventory in one location and are attempting to supply parts and materials from there too. Cambodia not only offers potential for “Plus One” company expansion, but it can also serve as a pivotal logistics hub for inventory storage and management.

Conversely, Cambodia’s rate of local parts and materials procurement is the lowest in ASEAN at 5 to 8 percent, according to a Japan External Trade Organization (JETRO) survey of Japanese companies. This indicates a reliance on imports. Despite incentives like the duty-free import measures that are provided under the QIP scheme, the relatively high logistical costs have led some companies to reconsider their entry into Cambodia. In addition, the JETRO survey also showed how Japanese companies view the risks and merits of the business environment in Cambodia (see the tables below). With regard to risks, administrative and tax procedures are the top issues that companies identified as needing to be solved.

 

  • Preparation Requirements

Securing connectivity with neighbouring countries is one of the most significant challenges in turning Cambodia into the region’s “Plus One” manufacturing base and logistics hub. This issue has been discussed at length and in many forums, predominantly during the dialogue between the Federation of Japanese Chambers of Commerce and Industry in ASEAN (FJCCIA) and the ASEAN Secretary-General[3], as well as at the Cambodia-Japan Government-Private Sector Dialogue[4].

The simplification of customs procedures through the digitisation of customs documents and the reduction of logistical costs also needs to be addressed as a priority issue.

Developments in logistics infrastructure, such as the opening of National Road No. 5, which was made possible through support from the Japan International Cooperation Agency (JICA), and the expansion of border

facilities, including new customs checkpoints at the borders of neighbouring countries, are expected to facilitate smoother physical logistics. By 2027, the expressway from Phnom Penh to Bavet is scheduled to be completed, and this is expected to deliver further improvements in accessibility and connectivity.

This year marked the launch of Cambodia’s first multifunctional bonded logistics warehouse, which allows overseas suppliers to store parts and materials in a warehouse for up to two years without transferring ownership to domestic buyers. This is part of a pilot project being undertaken jointly by the Japanese and Cambodian governments and operated by AEON MALL (CAMBODIA) LOGI PLUS Co., Ltd. This facility allows businesses, such as manufacturing, retailing and cross-border e-commerce businesses to shorten the lead time for procurement and shipment. In addition, cargo can be transported to other countries without customs clearance, so companies with bases in multiple countries can implement their supply networks from Cambodia.

II. New Fields as New Growth Engines

  • Cambodia’s Current Situation

In order to become an upper-middle income country by 2030, Cambodia is required to accelerate economic growth by revitalising its existing industries, as well as developing new industries. This development should be driven by digitalisation and innovation.

A recent example of this kind of development is the harnessing of Japan’s technological expertise to develop Cambodia’s central bank’s new digital currency, Bakong. QR payment systems using the Bakong system have spread rapidly to markets and street vendors, providing improved convenience to the Cambodian people.

The manufacturing sector is also beginning to use state-of-the-art technology to make changes. The Cambodia-Japan Digitalized Manufacturing Centre (CJDM), which opened in 2023, has been equipped with a machine tool that can, when accurate instructions are input into the machine, produce customised products at the push of a single button. Depending on the application, this technology has the potential to reduce a production period of two weeks to two hours. It can also reduce the production cost to one-sixth of the previous amount. Trainers are currently starting to train the engineers who will operate those cutting-edge machine tools, and in a few years, the manufacturing sector in Cambodia may be significantly altered by these advanced technologies from Japan.

The year 2023 marks the 70th Anniversary of the Establishment of Diplomatic Relations between Japan and Cambodia and the 50th anniversary of ASEAN-Japan friendship and cooperation[5] and JETRO is implementing a new initiative that matches Japanese technologies with Cambodian companies. Under this initiative, Japanese companies have proposed solutions to industry problems using a range of technologies that observe the earth’s surface from satellites. One solution, which attracted a significant amount of attention, was the measuring of greenhouse gas emissions from agricultural land with support from farmers to help identify ways to reduce emissions. The reduced portion of emissions would then be sold as carbon credits in Japan and other markets. Several projects have been launched through this initiative and are already in progress.

As mentioned above, we have introduced these projects as examples of initiatives being undertaken in new fields, such as innovation. However, innovation and technology cannot be established on their own. If Cambodia makes good use of Japanese technology and increases the number of projects it is undertaking, the country’s industrial and economic development will become much more prominent.

  • Preparation Requirements

In order to form co-creations with companies that have advanced technologies and knowledge, it is necessary to create matching opportunities. JETRO would like to continue collaborating with both the public and the private sectors to hold reverse pitching and business networking events in the field of innovation.

III. The Future of Cambodia

Looking towards the future, Cambodia is on an important path to establishing itself as a key hub, not only for manufacturing, but also as a logistics sector in the wider economic region, including Thailand and Vietnam. To achieve this goal, it is necessary to improve connectivity with neighbouring countries and stimulate the flow of people, goods and capital within the region. Furthermore, in addition to developing the manufacturing and logistics sectors, it is also critical to promote new fields, such as innovation. These two areas are important dual sources of growth for Cambodia. In this context, the following four concrete measures are proposed:

  1. recognizing issues in the current business environment in Cambodia at dialogue sessions, such as the Cambodia-Japan Government-Private Sector Dialogue
  2. resolving any identified issues
  3. disseminating information about the improvements in Cambodia’s business environment to investors in surrounding countries and Japan
  4. creating business opportunities by holding networking and business matching events in cooperation with private companies and government agencies across various sectors, including areas relating to innovation

JETRO has been involved in all of these processes so far and would like to continue to contribute to the promotion of the creation and expansion of business opportunities between Cambodia and Japan.


[1] “Plus One” is a term used mainly for manufacturing companies operating outside of Japan, which is expanding or extending their business operation to the third country instead of expanding within their existing country. Currently, there are companies seeking for a “Plus One” destination from countries like Thailand, China, and Vietnam, which will be mentioned as “Thai Plus One”, “China Plus One”, and “Vietnam Plus One”.

[2] It is necessary to take into account that the sophistication of manufacturing is largely due to a company’s efforts in developing human resources. Taking a sample manufacturing company as an example, many of the company’s workers previously had difficulty reading and writing. Around 10 years ago, production efficiency was less than half that of other branches. However, because of the company’s continuous efforts to educate and train their workers, their factory in Phnom Penh is now ranked as the fourth most efficient production site out of more than 100 branches worldwide.

[3] The dialogue between FJCCIA and the Secretary-General of ASEAN is a framework for discussing issues and initiatives for regional revitalisation. At the dialogue, the delegation from Cambodia has consistently highlighted the importance of enhancing connectivity in the Mekong region.

[4] The Cambodia-Japan Government-Private Sector Dialogue is a bilateral cooperation framework established following the conclusion of the Japan-Cambodia Investment Agreement for the Liberalisation, Promotion and Protection of Investment. It was signed by Japan’s former Prime Minister, Shinzo Abe, and Cambodia’s former Prime Minister, Hun Sen, on June 14, 2007. The committees formed under the agreement have made recommendations about issues faced by Japanese companies in Cambodia. The Cambodian party was led mainly by government officials, and the Japanese party was made up of representatives from the Japanese embassy in Cambodia, JBAC, JICA and JETRO.

[5] In commemoration of the 50th anniversary of ASEAN-Japan friendship and cooperation in 2023, the Ministry of Economy, Trade and Industry, JETRO and other industry players, including JCCI, released the “ASEAN-Japan Economic Co-Creation Vision” which aims to grow economies and business sectors in both ASEAN and Japan for generations to come.

 

20 Years of FDI in Cambodia: Towards Upper Middle-income Status and Beyond

សារគន្លឹះ / Key Messages

  • អន្តរជាតូបនីយកម្មរបស់កម្ពុជាតាមរយៈការវិនិយោគផ្ទាល់ពីបរទេស (FDI) បានកើនឡើងជាលំដាប់ក្នុងរយៈពេលពីរទសវត្សរ៍កន្លងមកនេះ។ ការធ្វើសមាហរណកម្មរបស់កម្ពុជាទៅក្នុងសេដ្ឋកិច្ចពិភពលោក កំពុងរួមចំណែកយ៉ាងសំខាន់ក្នុងការសម្រេចបាននូវឋានៈជាប្រទេសដែលមានប្រាក់ចំណូលមធ្យមកម្រិតខ្ពស់នៅឆ្នាំ២០៣០ និងប្រាក់ចំណូលខ្ពស់នៅឆ្នាំ២០៥០។
  • ធាតុផ្សំនៃ FDI របស់កម្ពុជា បានផ្លាស់ប្តូរឆ្ពោះទៅរកសេវាកម្ម ស្របតាមការផ្លាស់ប្តូររចនាសម្ព័ន្ធក្នុងស្រុក និងនិន្នាការពិភពលោក។ សំខាន់ជាងនេះទៅទៀត វិស័យមួយក្នុងចំណោមវិស័យដែលកំពុងកើនឡើង គឺថាមពលជំនួស ឬថាមពលកកើតឡើងវិញ ដែលជាសញ្ញាបង្ហាញពីការប្តេជ្ញាចិត្តរបស់កម្ពុជាក្នុងការរួមបញ្ចូលថាមពលកកើតឡើងវិញ និងថាមពលប្រកបដោយប្រសិទ្ធភាព ទៅក្នុងយុទ្ធសាស្ត្រជាតិ។ ការបន្តការប្រើប្រាស់ឌីជីថលទ្វេ និងសេដ្ឋកិច្ចបៃតង តាមរយៈអន្តរជាតូបនីយកម្ម គឺស្របទៅនឹងការបន្ថែមផ្នែកបច្ចេកវិទ្យា ដែលជាអាទិភាពទីប្រាំនៅក្នុងយុទ្ធសាស្ត្ររបស់រដ្ឋាភិបាល (បន្ទាប់ពីមនុស្ស ផ្លូវ ទឹក និងអគ្គិសនី) ហើយមានសារៈសំខាន់ សម្រាប់ការទទួលបានឋានៈជាប្រទេសដែលមានប្រាក់ចំណូលខ្ពស់នៅឆ្នាំ២០៥០។
  • ម៉្យាងវិញទៀត ជំនាញតាមផ្នែកមុខងារក្នុងដំណាក់កាលផលិតកម្មកាន់តែមានភាពរឹងមាំ ជាមួយនឹងការវិនិយោគតិចតួចហើយថយចុះ ទៅលើមុខងារនវានុវត្តន៍ និងស្រាវជ្រាវ និងអភិវឌ្ឍន៍ (R&D)។ គុណភាពនៃលំហូរ FDI នៅតែជាអាទិភាពមួយសម្រាប់យុទ្ធសាស្ត្របញ្ចកោណថ្មីរបស់រដ្ឋាភិបាល។
  • និន្នាការចេញខាងក្រៅនៃ FDI នាពេលថ្មីៗនេះ បង្ហាញពីការលេចឡើងនៃយុទ្ធសាស្ត្រអន្តរជាតូបនីយកម្មយ៉ាងសកម្មពីក្រុមហ៊ុនធំៗនៅកម្ពុជា។ ការធានានូវការតភ្ជាប់ប្រកបដោយតុល្យភាព និងការជំរុញ​
    ការវិនិយោគនៅបរទេសដោយសហគ្រាសក្នុងស្រុក បានលេចចេញជាយុទ្ធសាស្ត្រអភិវឌ្ឍន៍ដ៏សំខាន់មួយ នៅក្នុងសេដ្ឋកិច្ចជឿនលឿន និងកំពុងរីកចម្រើន។
  • ផលជះនៃសាកលភាវូបនីយកម្ម អាស្រ័យយ៉ាងសំខាន់ទៅលើសមត្ថភាពគ្រប់គ្រងសមាហរណកម្មជាប្រព័ន្ធ និងអនុវត្តការឆ្លើយតបគោលនយោបាយប្រកបដោយប្រសិទ្ធភាព ដើម្បីដោះស្រាយការបែងចែកអត្ថប្រយោជន៍ និងការចំណាយដែលមិនសមាមាត្រគ្នា។ ការអនុវត្តគោលដៅផ្សេងៗគ្នាក្នុងពេលដំណាលគ្នា ការទាក់ទាញ FDI ដែលមានតម្លៃបន្ថែមខ្ពស់ អន្តរជាតូបនីយកម្មនៃក្រុមហ៊ុនកម្ពុជា និងការគាំទ្រចំពោះ
    អាទិភាពទាំងប្រាំរបស់រដ្ឋាភិបាល ចាំបាច់តម្រូវឱ្យមានការសម្របសម្រួល ការរៀបចំ និងអភិបាលកិច្ចដែនដីច្បាស់លាស់។
  • Cambodia’s internationalisation through foreign direct investment (FDI) has steadily grown in the past two decades. Cambodia’s integration into the global economy is substantially contributing to the forthcoming achievement of its upper middle-income status by 2030 and high income by 2050.
  • Cambodia’s FDI composition has shifted towards services, in line with domestic structural change and global trends. Importantly, one of the growingly receiving sectors is alternative/renewable energy, signalling Cambodia’s commitment to integrating renewable energy and energy efficiency into national strategies. Pursuing the dual digital and green transition through internationalisation is consistent with the addition of technology as a fifth priority in the government’s strategy (after people, road, water, and electricity) and is crucial for gaining the high-income status by 2050.
  • On the other hand, functional specialisation in production stages has become even stronger, with negligible and decreasing investment in innovation and research and development (R&D) functions. The quality of FDI inflows remains a priority for the government’s new Pentagonal Strategy.
  • Recent outward FDI trends indicate the emergence of active internationalisation strategies from large Cambodian companies. Ensuring balanced connectivity and promoting investments abroad by domestic enterprises has emerged as a major development strategy in both advanced and emerging economies.
  • The impacts of globalisation crucially depend on the capacity to govern systemic integration and implement effective policy responses to tackle the uneven distribution of benefits and costs. Undertaking simultaneously different goals – attraction of high value-added FDI, internationalisation of Cambodian firms, and support to the government’s five priorities – necessarily entails coordination, alignment, and clear territorial governance.

Since the beginning of the 2000s, Cambodia has undergone a process of rapid industrialisation, growing internationalisation, and moderate diversification. Cambodia’s export structure has gradually upgraded and diversified, strengthening its integration in Southeast Asian and Asian global value chains (GVCs). Both export-oriented garment manufacturing and tourism services have been key industries to Cambodia’s economic transformation, attracting major FDI. The sustained growth and diversification of domestic services have been behind the attraction of large inflows of FDI, particularly in retail and finance (Hing, 2023; Iammarino, 2022). In 2022, Cambodia was one of the top five recipients of global greenfield FDI to developing economies, with some of these investments in sectors highly relevant to the Sustainable Development Goals (SDGs) (UNCTAD, 2023).

On the other hand, little evidence exists about the recent active internationalisation strategies of Cambodian firms. This blog provides a snapshot of greenfield FDI trends into and from Cambodia based on fDiMarkets by Financial Times for the two decades from 2003 to 2022. The international connectivity of Cambodia – i.e., its exposure to the assets, knowledge and expertise flows coming from and going towards the rest of the world – is of paramount importance for understanding the economic development trajectories of the country and its regions towards the achievement of the upper middle-income status by 2030, and that of high-income country by 2050.

Inward FDI in Cambodia

Cambodia has been attracting considerable inward FDI (IFDI) over the two decades 2003-2022: the trends reported in Figure 1 in terms of both investment value and number of jobs created also illustrate – despite the usual volatility of such indicators, particularly in correspondence to major global crises – the start of the recovery after the COVID-19 pandemic.

Figure 1: IFDI value and number of jobs, 2003-2022

Change between the two decades 2003-2012 and 2013-2022 shows a major shift toward services (Figure 2), in line with global trends. The “winner” sector has been real estate, becoming by far the most attractive to foreign investors in the second period, followed by financial services. The other main recipient sectors registering substantial growth are alternative/renewable energy and transportation and warehousing, both witnessing doubled IFDI values between the two decades. Interestingly, although the textiles sector shows relatively modest greenfield IFDI values, its labour-intensive nature emerges in terms of the estimated number of jobs, for which it is the first IFDI recipient in Cambodia in both decades, growing fivefold in the most recent period with over 26,400 jobs generated between 2013 and 2022. On the contrary, the largest recipient sector in value terms in the 2003-2012 decade – coal, oil and natural gas – lost its appeal over time, reflecting internal reforms to move away from fossil fuels.

Figure 2: IFDI value by sector between 2003-2012 and 2013-2022

In terms of the five FDI functions/GVC stages (headquarter, R&D, sales, production, logistic & distribution), the ranking remains the same across the two observed periods, with production consistently displaying the highest and growing shares of total FDI value as well as a number of jobs. Unsurprisingly for a developing economy like Cambodia, R&D is the GVC stage with the lowest level of IFDI in both periods. Worryingly, however, both investment value and job creation have become even more marginal in the most recent years.

Looking at the geography of FDI sources, Figure 3 shows the countries of origin by value of total investment over the whole 2003-2022 period. The rising integration of Cambodia in the wider Asian macro-region is evident: Japan, China and Singapore record the biggest increases in investment inflows in the second decade, all overtaking Malaysia – the largest source during the whole 20 years observed – both in terms of FDI values and job creation. To be noted, France, playing no role as an investor in the 2003-2012 period, emerged as a source of FDI in Cambodia in the second decade. Conversely, sizeable reductions in both FDI values and jobs are recorded in the most recent years for South Korea and Vietnam, whilst USA investors register a modest decline in the amount invested but stability in jobs generated over time.

Figure 3: IFDI value by source country between 2003-2012 and 2013-2022

Although the dynamics of the subnational distribution of IFDI across Cambodia’s provinces confirm the strong geographical concentration in Phnom Penh (Iammarino, 2022), some changes are worth noting. Whilst Preah Seihanu (ranked second on the overall period) shows a moderate decline in IFDI in the most recent decade, Kampong Speu, Siem Reap and Banteay Meanchey all register remarkable increases in their attractiveness to foreign investors. Interestingly, some provinces such as Preah Vihear, Kep and Kandal emerge as brand-new locations for IFDI in most recent years, possibly indicating a relative spread of the geography of inward FDI and some territorial spillover effects over time.

Outward FDI from Cambodia

Considering outward FDI (OFDI) from Cambodia, some key tendencies can be identified:

  • OFDI started only from 2008 onward, with no investment recorded in the fDiMarkets dataset before then. All investments are classified as new greenfield investments abroad, with one exception categorised as an expansion (in 2014, to Myanmar).
  • 31 OFDI projects from Cambodia, equivalent to 917.6 million USD and associated with an estimate of 1,659 jobs generated abroad, are reported over the 2008-2022 period.
  • OFDI from Cambodia occurred across three of the five GVC stages. Headquarters overwhelmingly dominates, accounting for 84% of all OFDI in the years 2008-2022 and being the only stage of outward investment until 2012. This likely reflects the emergence of active internationalisation strategies from large Cambodian companies. More recently, OFDI occurred only in production and sales suggesting the consolidation of firms’ efficiency- and market-seeking strategies.
  • All OFDI originates from the capital Phnom Penh.
  • Financial services are the dominant sector of origin of OFDI, representing around three quarters of total OFDI value over 2008-2022.

In conclusion, internationalisation will possibly continue to grow, also as a result of the market expansion of large Cambodian companies, the economic integration processes in the Asian macro-region, and the re-configuration of GVCs. The critical nexus sector-function in FDI and GVCs indicates that understanding the detailed structure and evolution of local-global networks should be a central reflection for creating opportunities for upgrading Cambodian production and technological capabilities.


References

  • Hing, V. (2023). The Impacts of the COVID-19 Pandemic on Cambodia’s Trade, Global Value Chains and Export Competitiveness, CDRI Working Papers on COVID-19 no.  2.
  • Iammarino, S. (14 Sept. 2022). FDI trends and policies in Cambodia: a preliminary note, CDRI: https://coc2022.cdri.org.kh/fdi-trends-and-policies-in-cambodia-a-preliminary-note/
  • Royal Government of Cambodia (RGC). 2023. “Pentagonal Strategy Phase I for Growth, Employment, Equity, Efficiency, and Sustainability: Building the Foundation towards Realizing the Cambodia Vision 2050” Phnom Penh: RGC.
  • UNCTAD (2018, 2023).  World Investment Report, UNCTAD, Geneva.
  • UN-ESCAP (2020). Promoting inward and outward foreign direct investment in the post-coronavirus-disease era. Economic and Social Commission for Asia and the Pacific, Nov. 2020.