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Inclusive and Accountable Institutions for Cambodia’s 2030 Vision and Beyond

Posted on by piseysorn

សារគន្លឹះ / Key Messages:

  • ប្រទេសកម្ពុជាទទួលបានជោគជ័យយ៉ាងរឹងមាំក្នុងការអភិវឌ្ឍជាតិ ហើយជោគជ័យនេះត្រូវបានទទួលស្គាល់យ៉ាងទូលំទូលាយ។
  • ចំពោះការរៀបចំផែនការនាពេលអនាគតវិញ យុទ្ធសាស្ដ្របញ្ចកោណរបស់រាជរដ្ឋាភិបាលនឹងធានាផ្តល់កំណើនសេដ្ឋកិច្ចប្រកបដោយគុណភាពខ្ពស់ ជាមួយនឹងវិបុលភាពរួមនិងសុខុមាលភាពសង្គមសម្រាប់គ្រប់គ្នា។
  • ការធានាយ៉ាងម៉ឺងម៉ាត់នេះតម្រូវឱ្យមានការរៀបចំស្ថាប័នតាមបែបថ្មីមួយ ដែលនឹងផ្តល់កំណើនប្រកបដោយគុណភាព និងស្ថិរភាព ព្រមទាំងលើកកម្ពស់ភាពធន់ និងបរិយាបន្នផងដែរ។
  • ស្ថាប័នប្រកបដោយគណនេយ្យភាព និងបរិយាបន្ន ទាមទារឱ្យមានការកែលម្អសមត្ថភាពរបស់ទីភ្នាក់ងារផ្សេងៗ ក្នុងការធ្វើការរួមគ្នា ដោយផ្ដោតលើលទ្ធផលជាចម្បង។ នេះរួមបញ្ចូលទាំងការកែលម្អសមត្ថភាពរបស់រដ្ឋាភិបាល ក្នុងការប្រើប្រាស់ទិន្នន័យ និងមធ្យោបាយវាយតម្លៃ ដើម្បីវាស់វែងលទ្ធផល និងការកែលម្អគណនេយ្យភាពរបស់រដ្ឋាភិបាល ដើម្បីធានាដល់ការសម្រេចបានគោលដៅដែលឆ្លើយតបទៅនឹងតម្រូវការរបស់ក្រុមប្រជាពលរដ្ឋផ្សេងៗ។
  • មធ្យោបាយសំខាន់មួយដែលអាចប្រើប្រាស់ក្នុងការជំរុញកំណែទម្រង់ប្រកបដោយបរិយាបន្ន គឺជាការប្រើប្រាស់ភស្តុតាង និងទិន្នន័យប្រកបដោយប្រសិទ្ធភាព។
  • យុទ្ធសាស្ត្រគ្រប់ជ្រុងជ្រោយក្នុងការប្រើប្រាស់ទិន្នន័យ និងភស្តុតាងអំពីគោលនយោបាយ និងការអនុវត្តរបស់រដ្ឋាភិបាល គឺមានសារៈសំខាន់ក្នុងការសម្រេចបាននូវគោលដៅសំខាន់ៗនៃយុទ្ធសាស្ត្របញ្ចកោណ និងចក្ខុវិស័យប្រទេសកម្ពុជាឆ្នាំ២០៣០។
  • Cambodia’s development success story is firmly secured and widely acknowledged.
  • Charting a forward-looking future, the Pentagonal Strategy promises to deliver high-quality economic growth together with shared prosperity and social well-being for everyone.
  • This bold promise requires a new type of institutional arrangement that will deliver quality growth and stability, but also will promote inclusion and resilience.
  • Inclusive and accountable institutions require improving the ability of different agencies to work together in a results-oriented way. This includes improving the capacity of the government to use data and assessment tools to measure results and improving the accountability of the government to ensure the results achieved are relevant to the needs of different groups of citizens.
  • A key tool that can be used to drive inclusive reform is the effective use of evidence and data.
  • A comprehensive strategy for data and evidence about government policies and performance is critical to achieving the key objectives of the Pentagonal Strategy and Cambodia’s 2030 vision.

 

This year Cambodia’s Outlook Conference and its theme, Assessing the 2030 Vision and Beyond, are highly relevant for the recently adopted Pentagonal Strategy Phase 1.[1] The examination of the 2030 ambition and 2050 vision is also timely as the new government is navigating complex post-pandemic global and regional changes, as well as its own process of transformation. To name a few of the internal changes, Cambodia has successfully transitioned from violent conflict to peace, from an ageing war-time generation to a younger ‘peace-dividend’ generation of leaders, from a very narrow economy to more diverse sources for growth and from a weak resource base for governance to more capable and progressive institutions.

One of the key aspects of the Pentagonal Strategy is the government’s renewed focus on strengthening governance and modernising institutions for maintaining peace and stability, propelling high economic growth and delivering shared prosperity for all. Achieving such a comprehensive ambition calls for the capacity to align visions and implement them, to respond to complex challenges and to ensure a strong level of policy coherence. For this reason, the government calls for an evidence-based monitoring and evaluation framework to ensure effectiveness and efficiency in the implementation of the Pentagonal Strategy. This blog discusses some approaches to promote more inclusive institutions for the enhanced policy performance that is necessary to deliver the Cambodia 2030 vision and beyond.

Cambodia at a Critical Juncture for Inclusive and Accountable Institutional Reforms

Ambitious reforms, rapid growth and peace, consistently pursued and maintained over the past twenty years, have been widely praised by international and local observers alike. A positive record of achievement is clearly analysed and documented in development reports and scholarly publications. This is by no means a small or neglected outcome of Cambodia’s development success story – a story that for most Cambodians who experienced the Khmer Rouge regime was almost unimaginable three decades ago.

The contextual factors enabling Cambodia’s development success so far are rapidly changing and unpredictable. At worst, they no longer work to support Cambodia’s 2030 vision of becoming an upper middle-income country. The international and regional economy is changing and the challenges and opportunities this presents risk undermining global and regional growth and development. Cambodia is also exposed to geopolitical risks, especially given its physical and economic proximity to China. Digital technology, climate change and environmental pressures, social inequality and geopolitical tension are threatening global and local prospects.

Cambodia’s internal factors are also undergoing structural changes that will require a new model of development to meet the increasingly high public expectations and achieve its development aspirations. On the economic front, Cambodia’s growth has slowly recovered from the pandemic but at a rate much lower than some countries in the region who had more diversified economies. On the environmental front, climate change, deforestation and agricultural water resource governance in the Mekong basin threaten the agriculture-dependent rural population. Notably, switching to agriculture and livestock occupations were some of the primary coping mechanisms used by Cambodians who lost their jobs to COVID-19, emphasising the sector’s importance for livelihood and resilience. Finally, livelihoods are determined not just by income, but also by food security, access to basic infrastructure, opportunities for education and more. Cambodia’s large youth demographic are often the breadwinners supporting their rural households, but they are still susceptible to occupation insecurity, gender discrimination and a lack of skills training.

Both uncertainty and the permanently changed context described above provide fertile ground for deep institutional reform. This is not only urgently needed, but also necessary to maintain Cambodia’s legacy and to build a prosperous and resilient future. An opportune moment like the present one is what the literature describes as a “critical juncture”. At this critical juncture, unprecedented political space is torn open, and the cleavages created are claimed and perhaps occupied by new actors with new ways of thinking and operating. This opening facilitates dyadic feedback cycles of either ‘positive returns’, which result in the introduction and expansion of the new arrangements and ideas to permeate into the system, or ‘negative reaction’, in which previous arrangements are realigned and restored.

In Cambodia, the Royal Government’s Pentagonal Strategy recognises that in the current moment, there are opportunities to “resolve the issues related to the effectiveness of governance, institutions and social justice, as well as enhancing integrity and quality of public services.” The rapidly changing socioeconomic situation implies a “need to continue the reforms of institutions and governance to realise a public administration with high competency, strengths, intelligence, and integrity.” With such an opening following a critical juncture, the key is to preserve the best achievements of the past 30 years, while noting weaknesses that have been exposed by the current turbulence. Then, we can open these weaker areas up to new approaches and ideas.  The question is, how can we nurture new ideas and new arrangements in a way that will empower them with capacities to improve and change existing arrangements?

The Effective Use of Evidence and Data

Inclusive institutions require three main things, including improving the ability of different government agencies and departments to work together in a results-oriented way. Another is improving the capacity of government officials to use data and assessment tools to measure results and manage performance. Lastly, they require improving the accountability of the government to a variety of non-governmental actors in order to ensure that the results achieved are relevant to the needs of different groups of citizens.

Better use of data and evidence can inform two key aspects of the Pentagonal Strategy. First, data and evidence can be used to assess the efficiency and effectiveness of policies and strategies. Second, data and evidence can be used to strengthen governance capacity and improve the quality of governance institutions. This can be done through data and evidence about institutional needs and the skills and expertise of different individuals and departments, and can thus inform actors about recruitment, promotion and reward of civil servants.

Evidence as a Driver of Increased Efficiency and Effectiveness

The shift towards the use of data and evidence to assess the efficiency and effectiveness of policy and strategies can drive better governance in several ways.  It can improve coordination within the government. Inclusive growth requires paying attention to many different dimensions of growth, beyond basic economic indicators of productivity or GDP. It requires addressing complex problems, such as the relationship between ecosystem health, agricultural productivity, land distribution, rural livelihoods and migration, all of which are issues that are central to the goal of ‘leaving no Cambodian behind’. Such complex problems require the coordination of different levels of government in order to be adequately resolved. Sharing a common base of trustworthy and relevant data can help to coordinate a large number of different government agencies around particular policy goals, and to strengthen the ability of the central government to oversee various other levels and agencies of the state.

Data is also essential for informing implementation strategies for complex and multi-dimensional policy initiatives. Data can inform decisions about how much it will cost to fund different policy innovations, how to sequence them and what to prioritise, how to monitor their impact and how to revise policies as they are being implemented to reduce the risk of unintended adverse outcomes. Data can also show whether policies are disproportionately benefiting groups at the expense of others. It can also show if they are contributing to the goals of equity and social justice and helping to predict where policies might meet approval or resistance from different societal groups. Data needs to be gathered both before and after a policy implementation to design the best intervention and then to learn from its effects.

Evidence as a Driver of Increased Institutional Capacity

Data is essential to strengthen the capacity of government agencies to tackle complex problems by providing evidence that can inform efforts to improve the performance of individuals and offices within government. The collection and verification of data about qualifications, performance and achievements is essential to the goal of achieving a “merit-based, transparent, fair, inclusive and efficient” recruitment system for the public service. Practices of cronyism and nepotism in hiring are antithetical to the goal of hiring the most capable individual, but these practices persist in a situation where job descriptions and the skills required to perform effectively are poorly documented, and where the achievements of public servants are not tracked. The Pentagonal Strategy sets out a key goal for public administration: the development of a “consistent, equitable, effective and sustainable” incentive structure. Rewarding public servants for good work implies keeping detailed records of their actions, objectives and achievements, and ensuring that this data is integrated as evidence into hiring and promotion recommendations. Evidence-based performance management can improve the morale of the most capable public servants and ensure they ascend to management and leadership roles.

Technical and Participatory Approaches to Evidence

While there are many possible strategies for evidence and data collection, they can be broadly divided into two main categories: technical and participatory. Technical strategies for data collection are usually performed by experts and are conducted with minimal participation from ordinary people. Examples might include collecting data about infant mortality from hospital or local government records; collecting data about the effectiveness of irrigation from water engineers; or collecting data about traffic congestion by counting vehicles at intersections. Technical strategies have a vital role to play in developing a detailed understanding of problems and assessing potential solutions.

However, technical data collection strategies need to be supplemented by participatory collection strategies. These are strategies which seek to discover how ordinary people understand particular problems, how they feel about them and what they think the best solutions might be. Participatory strategies can be arranged on a spectrum from least to most participatory. Examples of less participatory strategies include opinion polls or surveys in which ordinary people are asked to choose from a limited range of answers to predefined questions. This can give insight into attitudes, but the agenda is pre-determined by the design of the survey.

More participatory strategies might include community meetings to discuss policy issues, in which ordinary people are given opportunities both to put forward problems and to offer their own suggestions for solutions. An important aspect of the quality of participation is the extent to which participants feel empowered within the setting. More participatory settings will encourage ordinary people to feel that they can criticise decisions made by officials without fear of reprisals. This is essential for generating reliable data about arising problems, or the effects of policies implemented. Useful measures for empowering ordinary people include anonymous feedback opportunities such as citizens’ report cards, but these need to be combined with discussion of the results so that the voices of citizens can be heard.

In situations of rapid change, addressing complex problems efficiently and effectively requires the mobilisation of useful data, both about the objective nature of problems arising, the possible ways of addressing these and the ways that people feel about them. Both of these types of data are essential for informing solutions to socioeconomic problems. Furthermore, the issue of institutional strengthening itself can be informed by data about the capacities of public servants. This can be done both in terms of evidence regarding their skills, experience and achievement, and in terms of feedback from the public about their competence and performance. Therefore, a comprehensive strategy for collecting, maintaining and sharing data about government policies and performance is critical to achieving the key objectives of the Pentagonal Strategy and to securing the upper middle-income vision in 2030 and beyond.

Cambodia’s Leading Research Institute and Its Role

The establishment of CDRI as an independent and evidence-based research institute thirty years ago was a visionary and bold initiative of the Cambodian government. CDRI has a dual goal of developing research and policy analysis capacity for future generations of Cambodian leaders and providing credible sources of data and analysis about policy implementation and its impact to inform policy debates and formulations. CDRI, as a policy knowledge producer, is a key stakeholder and plays an important role in providing independent and objective data for the development policy ecosystem.

Over the past 30 years, CDRI has initiated and managed major research programmes on a wide range of issues relevant to socio-economic development, public and institutional reforms, as well as overarching topics on climate change, gender and inclusive development. The institute has applied rigorous research methodology as well as participatory and consultative approaches in the methodology of our research. The research results are widely shared and disseminated to a wide range of relevant policymaker stakeholders at national and subnational level and at regional and international forums. The annual Cambodia Outlook

Conference is a key platform which generates policy debates among Cambodian researchers, policymakers in government, development partners and the wider community of development practice.

With Cambodia moving forward toward upper-middle and high-income status, the role of a vibrant and credible Cambodian research institute like CDRI as a partner to government and development institutes to evaluate and support the policy implementation and formulation is necessary and critical. A recent initiative on the Cambodia 2030 vision assessment that CDRI is working on with the key relevant government ministries and partners is an example of CDRI role and contribution to the policy contestability. Through this analytical work on 2030 vision and beyond, we identify both opportunities and challenges, as well as the policy reform priorities that Cambodia needs to work on in order to reach the target of upper middle-income in 2030. However, equally important is laying out a sustained foundation for the target of a high-income country in 2050. This is an example of the participatory and objective policy collaboration that CDRI wants to foster further moving forward so that broad social and institutional modernisation of the country is enhanced for Cambodia’s successful long-term aspiration and development.

Diversifying Cambodia Towards 2030 and Beyond: Addressing Constraints to more Inclusive, Resilient and Sustainable Growth

Posted on by piseysorn

Introduction 

In many ways, Cambodia is Asia’s true miracle economy. It was only three decades ago when the Paris Peace Agreements were signed, ending the civil war that ensued following the ouster of the genocidal Khmer Rouge regime in 1979. In just over a generation, Cambodia has built up its economy and institutions, almost from scratch, and transformed itself into a modern, thriving economy.  Although many challenges remain, these achievements must be recognized and bodes well for the future, given Cambodia’s proven ability to overcome seemingly insurmountable odds. 

Despite its tragic history, Cambodia has great aspirations.  It aims to become an upper middle-income country by 2030 and a high-income country by 2050. To realize these aspirations, Cambodia has to pursue inclusive growth that is also sustainable and resilient. This type of growth should be driven by and generate decent and sustainable jobs in the manufacturing and services sectors, and fair and sustainable returns for the self-employed, either in agriculture or in the MSMEs across sectors, formal or informal. To do this, it has to address a number of constraints.

Inter- and Intra-sectoral Diversification 

A key constraint, which is highlighted in the Rectangular Strategy (Phase IV) and the Pentagon Strategy (Phase I), is the lack of diversification of the economy.  The continued lack of diversification has not affected the rapid pace of economic growth but only its quality and inclusiveness. Cambodia’s growth exceeded an average of 7% in the decade prior to the pandemic, driven by trade preferences, tourism centered around Angkor Wat, and large capital and aid inflows from China and other regional partners into infrastructure and real estate. With LDC graduation expected this decade, Cambodia will become a victim of its own success and trade preferences and aid flows are likely to diminish. It will need to pursue new drivers of growth, which will require new and greater diversification. 

The early phase of diversification or structural transformation, involving rural-urban migration from the agricultural sector into the industrial and services sector, has been ongoing but may be reaching its limit. This inter-sectoral transfer of factors of production is the easy phase of diversification, requiring minimal government intervention or policy reform, and takes place somewhat naturally with minimal disruption to factor markets.  The horizontal shift across sectors into higher value products and activities produces a one-off increase in the level of productivity, which raises incomes and living standards, but this increase may not be sustainable. 

Future increases in productivity will have to come from intra-sectoral diversification. This involves the vertical shift into higher value-added products and activities within the industrial, services and agricultural sectors.  This type of diversification is sometimes referred to as moving up the value-chain by engaging in higher value-added activities and in manufacturing, is associated with greater participation in global value or supply chains. Unlike the early phase of industrialization, this process of upgrading is unlikely to happen naturally and will require government intervention and/or policy reforms.  

Addressing Three Key Constraints 

There are three major constraints that need to be addressed through policy reforms and government support to enable greater intra-sectoral diversification. The first is limited human capital and skills mismatches.  Second is the high cost of doing business, which limits development of the private sector and domestic and foreign investment. Last is the lack of resilience and sustainability, which threatens current and future growth. 

Human Capital 

There is an urgent need to improve the quality of education at all levels, and not just TVET or tertiary education. TVET and tertiary education can only succeed if students have had a strong educational foundation in primary and secondary schooling. Quality improvements also need to be accompanied by measures to improve access and retention rates, which are currently low.  

Cambodia needs to invest in skills development and training in close collaboration with the private sector to avoid skills mismatches. TVET and tertiary education institutions need to align their curricula more closely with the needs of the private sector.  

Business Costs 

Second is the high cost of doing business in Cambodia, which stems from limited physical and logistics-related infrastructure, high energy cost, and the high cost of finance. There is a need to prioritise investments both within the transport sector, as well as economy-wide.   

The high cost of electricity is limiting vertical upgrading within electronics and automotive supply chains, from labour-intensive assembly activities to higher value added, energy intensive production of parts and components. Greater investment in renewable energy and energy efficiency is required to reduce costs and the reliance on diesel and heavy fuel oil in electricity generation.  

The high cost of finance, especially to small scale farmers and MSMEs, perpetuates poverty.  Limited access to formal avenues of finance is closely related to its high cost. The potential for digital innovation, including fintech and blockchain, presents significant opportunities for Cambodia’s financial sector to enhance financial inclusion.  

There are also a host of long-term development challenges that need to be addressed that will affect trust in the system, and therefore both the access to and the cost of finance. These include issues relating to governance and corruption, the quality of institutions including the legal and regulatory system, and the development of the finance sector and capital markets.  

Resilience and Sustainability 

Finally, there is a need to increase versatility in managing and responding to disruptions and ensuring the sustainability of growth and its drivers.  Increasing resilience include addressing the impacts of: (i) climate change and other environmental pressures; (ii) financial, health and other shocks or crises; and (iii) technological change, especially the acceleration towards a digital economy. Improving the sustainability of growth and its drivers involve diversifying trade and investment flows. That is, diversifying export products and markets and import sources will reduce risk and increase the sustainability of economic growth. Policies and interventions to address each of these are discussed in turn, below. 

Climate change threatens the livelihoods of millions as well as long-term aspirations such as reaching high-income status by 2050. A recent ADB study suggests that Cambodia’s GDP could be up to 10% lower than otherwise in 2050 due to lost labor productivity. 

Economic growth and environmental protection are often considered trade-offs but there can be complementarity. The intersection between the two is green growth, where ecologically sustainable economic growth that fosters low carbon but socially inclusive development is the outcome.  

Transitioning away from the heavy reliance on fossil fuels, reducing the rate of deforestation and adopting more sustainable agricultural and fishing practices will be critical in protecting the environment and ensuring the future prospects of these industries.  

As green and sustainability aspects of production become increasingly important in business and investment decisions of international firms, reducing its carbon footprint would present Cambodia with new growth opportunities that arise from increasing global demand for environmentally sustainable products and services. 

Cambodia will need to strengthen its financial sector resilience by enhancing regulatory and supervisory frameworks, improving asset quality and risk management practices, and addressing weaknesses in the banking system.  There is a need to implement regulations to deal with bank restructuring, corporate insolvency, and debt restructuring.  

Although Cambodia did remarkably well in managing the COVID-19 pandemic, it highlighted a number of vulnerabilities in the healthcare system that need to be addressed before the next health emergency occurs. Government spending on healthcare needs to be significantly increased in preparation for the next pandemic or major public health outbreak. There are currently only 0.7 hospital beds per 1,000 people, compared to 2.6 in Vietnam and an average 4.7 amongst the OECD countries.  This was a major limitation in managing the COVID-19 pandemic, requiring more stringent controls than in countries with more robust healthcare systems.  

The acceleration towards a digital economy will produce many benefits, but it will also create new challenges. Many low- and medium-skilled jobs may be lost initially, although Artificial Intelligence threatens even highly skilled ones. It will not be easy to redeploy low-skilled workers and reskilling and retraining will be required.  

Cambodia’s trade patterns – both the commodity and country composition of its exports and imports- are highly concentrated, raising its vulnerability to country- or commodity-specific shocks. As the major constraints to structural diversification such as limited human capital and high business costs are addressed, trade and investment flows will also diversify. For instance, if the price of electricity could be reduced, this could attract new types of FDI from different source countries, which would result in new types of output such as electronic parts and components. This alters both the commodity and country composition of exports and imports, helping diversify trade and investment patterns.  

Cambodia at a Critical Juncture in Its Development Journey

Posted on by piseysorn

សារគន្លឹះ / Key messages: 

  • ការអភិវឌ្ឍរបស់ប្រទេសកម្ពុជា គឺជារឿងជោគជ័យដ៏អស្ចារ្យមួយ ប៉ុន្តែបន្ទាប់ពីមានវិបត្តិក្នុងប៉ុន្មានឆ្នាំចុងក្រោយនេះ ការស្តារឡើងវិញ និងការបន្តដើរលើមាគ៌ាមួយនេះ គឺមិនត្រឹមតែទាមទារឱ្យកម្ពុជាសម្រេចឱ្យបាននូវកំណើនដ៏លឿនប៉ុណ្ណោះទេ ប៉ុន្តែថែមទាំងធានាឱ្យបាននូវភាពធន់ និរន្តរភាព និងបរិយាបន្នផងដែរ។
  • កម្មន្ដសាល ​គួរនៅតែជាវិស័យអាទិភាពដែលជាចលករចម្បងសម្រាប់ធ្វើឱ្យមានកំណើនសេដ្ឋកិច្ចពេញលេញ និងការបង្កើតការងារ តែទោះជាយ៉ាងនេះក្តីកសិកម្ម ការគាំពារសង្គម ពន្ធដារ ឌីជីថលនីយកម្ម និងការបន្ស៊ាំអាកាសធាតុ គឺជាគន្លឹះក្នុងការធានាឱ្យមានការអភិវឌ្ឍប្រកបដោយគុណភាពខ្ពស់។
  • ទន្ទឹមនឹងនោះ រដ្ឋាភិបាលត្រូវផ្តល់អាទិភាពដល់ការពង្រឹងការអប់រំ និងគុណភាពស្ថាប័នសាធារណៈ ដែលជាមូលដ្ឋានគ្រឹះដ៏សំខាន់សម្រាប់ទ្រទ្រង់ការអភិវឌ្ឍរយៈពេលវែងរបស់ប្រទេស ប៉ុន្តែវឌ្ឍនភាពនៃការអប់រំ និងស្ថាប័នសាធារណៈរហូតមកដល់ពេលបច្ចុប្បន្ននេះ នៅមិនទាន់សមស្របទៅនឹងតម្រូវការរីកចម្រើទៅមុខរបស់សេដ្ឋកិច្ចទេ។
  • Cambodia is a great development success story but, after the shocks of recent years, restoring and continuing along this path will require achieving not only faster growth but also ensuring this is more inclusive, sustainable, and resilient.  
  • Manufacturing should remain the priority as the primary engine for generating sufficient growth and job creation however agriculture, social protection, taxation, digitalisation, and climate adaptation are key to ensuring higher quality development.  
  • At the same time, the government must prioritise strengthening education and institutional quality as the key foundations for sustaining the country’s long-term development but where progress to date has not kept pace with the economy’s advancing needs. 

Cambodia is a development success story but one that is incomplete and now at a critical juncture. Politically, there is the ushering in of a new generation of leaders that aim to re-energise and sustain Cambodia’s impressive long term developmental progress. This agenda is manifest in the government’s ambition to reach upper middle-income country (UMIC) status by 2030. Yet, the economy has also been heavily damaged by the international economic shocks of recent years including the Covid-19 pandemic, Ukraine crisis, and economic problems in China. Cambodia’s economic and development progress has been substantially set back as a result. Meanwhile, climate change and rising geostrategic tensions in the region also pose significant challenges.  

Cambodia reaching UMIC status would represent a truly enormous achievement, seeing the country transformed from a poor, post-conflict society to a reasonably prosperous one in just several decades. Whether, when, and how Cambodia can reach UMIC status is the subject of a detailed study being prepared by CDRI and expected to be published next year. For now, the prospect of reaching the UMIC ambition by 2030 is unclear, in part as Cambodia’s GDP numbers are undergoing rebasing and are yet to be released. But there can be no question that delivering on this ambition by 2030 is a very challenging task given the international shocks that Cambodia’s economy has endured and a global economic environment that remains difficult. Economic recovery will likely continue to proceed slower than desirable. The IMF for instance projects Cambodia’s economic growth at 5.3% this year and picking up towards 6% in future years – all well below the 7% pre-Covid pace. Notably, recent international shocks have imposed considerable costs on Cambodia’s economic trajectory, with its economy for instance likely to be around 14% smaller in 2023 than what was previously projected by the IMF just before the onset of the pandemic.

More fundamentally, Cambodia’s aspirations for national development should not solely be about narrowly reaching the gross national income target that is the basis for determining whether a country is classified as upper middle income. Two additional factors are equally relevant, if not more so as to whether Cambodia can truly lift its living standards in a comprehensive manner. First, Cambodia must go beyond merely generating fast growth and also ensure that this is inclusive, sustainable, and resilient. There is little point in pursuing rapid but low–quality growth for example involving inadequate job creation, rising inequality, damaging deforestation, or speculative real estate booms (and busts). The quality of growth matters. Second, despite the focus on the 2030 ambition, it is critical to also focus on building the foundations for continued progress towards the longer-term goal of becoming a high-income country by 2050. Again, there is little point in racing towards UMIC status only to find that the ability to sustain continued progress at a satisfactory rate is not possible. That will in turn require particular attention to strengthening the country’s resilience to climate change and improving the quality of its human capital and institutions. These take longer to deliver dividends but are necessary to ultimately underpin long term national development.  

Ambitious goals such as reaching UMIC status provide useful guideposts and imperatives for more ambitious reform. Regardless of when exactly UMIC status can realistically be reached, what is clear is that the priority should be on well-designed policies and reforms that align with the desire for faster growth that is also more inclusive, sustainable, and resilient while simultaneously building the foundations for longer-term development. Crucially, although Cambodia has made much progress in many key policy domains, whether this is keeping up with the needs of a rapidly advancing economy  and therefore sufficient to sustain one of the most rapid rates of economic progress in the world is more debatable.

In terms of driving future growth and job creation, manufacturing should continue to be prioritised as the central engine of Cambodia’s rapid growth and development, as it was during previous decades. Despite the trend towards increasingly premature deindustrialisation observed globally and concerns about automation and deglobalisation, manufacturing still offers the best opportunity for Cambodia to generate fast and progressively better–quality jobs for its people. Indeed, deepening Cambodia’s position in global manufacturing, diversifying its product and export markets, and upgrading into higher value-added activities would all help to protect and insulate Cambodia’s economy from these future threats. By comparison, other economic sectors generally either struggle to generate strong productivity gains or sufficient jobs, though international tourism is also an important growth sector. 

Currently there is an important opportunity to take advantage of the reorientation of global supply chains as these are likely to increasingly move out of China given rising labour costs there and as countries and firms actively seek to diversify their supply chains. Doing so will require addressing a host of well-known issues affecting Cambodia’s manufacturing competitiveness, including improving the business regulatory environment, strengthening market access through more and higher-quality trade agreements, improving physical and logistic infrastructure, and strengthening the health, skills, and education of the workforce.  

In the immediate term, to attract greater manufacturing FDI and relocating supply chains, Cambodia can prioritise quick wins, such as reducing trade and other regulatory barriers and cracking down on informal payments, while credibly signalling its commitment to pursuing ongoing reform. Success however will also require increasingly addressing new challenges. For instance, the US and European Union, which remain critical export markets, now put greater emphasis on their trading partners meeting higher environmental and labour standards. Although Cambodia remains a developing country, it will be key that it is able to signal and make credible progress towards meeting higher standards in this area over time. That would also be in line with the social aspirations that should accompany Cambodia’s 2030 and 2050 visions. 

While manufacturing should continue to be seen as the main engine for driving fast and inclusive growth, this will need to be accompanied by broader progress on a range of other policy priorities that are key to ensuring that this also leads to higher quality development.  

In terms of productive sectors, agriculture cannot be overlooked by policymakers as it plays an important role in determining whether growth is inclusive, sustainable, and resilient. First, as primary agricultural production provides an important basis for growth and diversification in the manufacturing industry through agro–processing. Second, most of the poor are still engaged in agriculture. Achieving agricultural growth therefore remains critical to ensuring progress towards UMIC status is inclusive of the poor and leads to continued strong poverty reduction. Agriculture, however, faces very significant headwinds, notably from environmental limits and degradation and the increasing impacts of climate change. Addressing these and ensuring equitable land governance will therefore be central to ensuring inclusive and sustainable growth.  

Equitable progress towards UMIC status will in any case require going beyond inclusive growth alone and towards more active redistribution. This will require building on the solid progress the country has already made in developing its social protection system and greatly expanding its reach and generosity. Doing so will in turn necessitate mobilizing higher tax revenue, through both policy changes and better administration which can broaden the tax base and raise additional revenue. All of this is also in line with the broader institutional progress Cambodia must make to comprehensively move towards a higher standard of living for its people. Notably, as countries become richer, the demand for a modern welfare safety net tends to rise. In the immediate term, channelling more support to households through the social protection system is also key to reducing the economic and social scarring effects of the pandemic, which has pushed more Cambodians into poverty.

Digitalisation should be a key focus in assisting across the above priorities. Enhancing digitalization can support higher productivity and innovation across all productive sectors, from manufacturing to agriculture to services. There is much for the government to do around improving digital infrastructure, skills and literacy, and closing the digital divide between poorer and better off households to not only ensure an inclusive process but to maximise the economic benefits to the nation. Digitalisation can also provide the foundation for smarter and more effective government in numerous ways, through e-services, digitizing government-to-person programs (including social protection), enhancing transparency, and enabling faster policy learning through rapid data generation and analytics.  

Responding to climate change is another cross-cutting policy issue. Cambodia is a minor emitter of greenhouse gases. Hence, rather than emissions reductions, the main priority is on increasing the country’s resilience to escalating climate change impacts. Cambodia is heavily exposed on this front including through flooding, drought, cyclones, landslides, and extreme heat. From a narrow economic perspective, these impacts will undermine key productive sectors, including agriculture, tourism, and manufacturing. With the poor and less wealthy regions more exposed and less able to cope, the impact of climate change also threatens to undermine inclusive development. Strong adaptation efforts will be critical, particularly to invest in climate-proof infrastructure, effective risk management, and better land-use planning along with programs to support climate vulnerable populations. 

Turning to the foundations for longer term development, there is a well-recognised need to improve the quality of early and basic education as both a social objective and to support industrial upgrading and ensure that future Cambodian workers can compete in an age of increasing automation and digitalisation. Meeting Cambodia’s educational needs is a generational challenge. But policymakers must move urgently now. An especially urgent priority is reversing the learning losses induced by school closures during the pandemic that have imposed high social costs and will otherwise damage the country’s future economic potential and competitiveness. Specific strategies will be required to reverse this situation beginning for instance with assessments to fully understand the degree and forms of learning losses incurred and adjusting teaching approaches accordingly while instituting programs to encourage students that have may dropped out of schooling to return.  

The other key long-term agenda should be strengthening the quality of the country’s institutions, which is perhaps the most important factor for sustaining high quality development over the long term. This is a challenging task for all countries, including Cambodia. For the purposes of thinking about Cambodia’s vision to reach upper middle income, and eventually high income, status, the basic reality is that Cambodia currently scores poorly in key measures of economic governance – including government effectiveness, regulatory quality, rule of law, and control of corruption – while the rate of improvement in these areas is not keeping pace with the continued advancement of its economy. A decade ago, Cambodia’s performance was low but about in line with its level of income. Today, while the quality of economic governance has improved, it now compares unfavourably to other countries at a similar level of income. In other words, Cambodia has been outgrowing the quality of its institutions which may now no longer be good enough to continue underpinning rapid economic growth into the future. Indeed, inadequate progress in improving governance is thought to be a key factor why many countries find themselves caught in the so-called ‘middle income trap’ and ultimately unable to break through to high income status. Cambodia needs to avoid that fate. 

 

Navigating Digital Technology for Cambodia’s Trade and Productivity Enhancement

Posted on by piseysorn

សារគន្លឹះ / Key Messages:

  • ប្រទេសកម្ពុជាស្ថិតនៅក្នុងដំណាក់កាលដ៏សំខាន់មួយដែលការទទួលយកបច្ចេកវិទ្យាឌីជីថល គឺពិតជាមានសារៈសំខាន់ក្នុងការលើកកម្ពស់ពាណិជ្ជកម្ម ផលិតភាព និងកំណើនសេដ្ឋកិច្ច ដែលស្របតាមចក្ខុវិស័យឆ្នាំ២០៣០ និងឆ្នាំបន្តបន្ទាប់ទៀត។
  • កំណើនពាណិជ្ជកម្ម និងផលិតភាពរបស់កម្ពុជា បានរួមចំណែកយ៉ាងខ្លាំងដល់វឌ្ឍនភាពសេដ្ឋកិច្ចរបស់ប្រទេស ជាពិសេសក្នុងវិស័យសំខាន់ៗនានា ដូចជា វាយនភ័ណ្ឌ កសិកម្ម ទេសចរណ៍ និងការផលិតគ្រឿងអេឡិចត្រូនិក។
  • ការសិក្សាជាក់ស្តែងនានាបានគូសបញ្ជាក់ពីតួនាទីដ៏សំខាន់របស់ឌីជីថលនីយកម្ម ក្នុងការកាត់បន្ថយថ្លៃដើម​ពាណិជ្ជកម្ម ការពង្រីកពាណិជ្ជកម្ម និងការបង្កើនផលិតភាព។ បរិវត្តកម្មនេះបាននិងកំពុងមានឥទ្ធិពលក្នុងការបង្កើនប្រសិទ្ធភាព និងភាពប្រកួតប្រជែង។
  • ដើម្បីរីកចម្រើនក្នុងយុគសម័យឌីជីថល ប្រទេសកម្ពុជាត្រូវអនុវត្តគោលនយោបាយយុទ្ធសាស្ត្រដែលផ្តោតលើការពង្រឹងហេដ្ឋារចនាសម្ព័ន្ធឌីជីថល ពង្រឹងចំណេះដឹងផ្នែកឌីជីថល បង្កើតក្របខ័ណ្ឌបទប្បញ្ញត្តិរឹងមាំ និងការគាំទ្រដល់សហគ្រាសធុនតូចនិងមធ្យម។
  • Cambodia is at a pivotal stage where embracing digital technology is crucial for enhancing trade, productivity and economic growth consistent with its 2030 vision and beyond.
  • Cambodia’s significant growth in trade and productivity has robustly contributed to its economic progress, particularly in key sectors such as garment and footwear, agriculture, tourism and electronics manufacturing.
  • Empirical studies underscore digitalisation’s critical role in lowering trade costs, expanding trade and boosting productivity. This shift has been particularly influential in enhancing efficiency and competitiveness.
  • To thrive in the digital age, Cambodia needs to implement strategic policies aimed at bolstering digital infrastructure, enhancing digital literacy, establishing a robust regulatory framework and supporting small and medium-sized enterprises.

A Vision for a Digitally Empowered Cambodia

Imagine a Cambodia where digital technology is not just a facet of daily life, but the driving force behind a thriving economy and significantly contributing to the 2030 vision and beyond. In this vision, farmers in rural Battambang use smartphones to check market prices, local artisans in Siem Reap sell their crafts globally through e-commerce platforms and start-ups in Phnom Penh innovate cutting-edge software. This isn’t a distant dream, but an emerging reality. As we step into an era marked by digital transformation, Cambodia stands at the cusp of a significant evolution. Digital technology, once a luxury, is now a necessity, shaping the way nations trade, innovate and grow. This blog discusses how Cambodia can navigate this digital revolution to enhance trade and boost productivity for sustained and resilient growth. In this blog, we will explore the crucial role digital technology plays in the global arena and why it is imperative for Cambodia to embrace this change.

A Closer Look at Cambodia’s Trade and Productivity Growth

Before we delve into how digital technologies affect the economy, it’s crucial to understand how trade and productivity have shaped Cambodia’s economic progress. Trade has been a pivotal force in driving Cambodia’s economic progress.  World Development Indicators show a significant increase in Cambodia’s trade-to-GDP ratio, climbing from 75.6 percent in 1998 to 123.5 percent in 2019. This significant rise highlights the role of trade as a catalyst for Cambodia’s economic progress. Throughout this interval, merchandise trade experienced an average annual growth rate of 14 percent, rising from US$ 1.97 billion in 1998 to US$ 35.1 billion in 2019.  Trade in services grew by an average of 15 percent annually, expanding from US$ 0.39 billion to US$ 9.4 billion.

This remarkable growth in the trade sector is the result of deliberate strategic choices, notably a shift in policy towards trade liberalisation. This policy shift has been complemented by increased global integration, as evidenced by Cambodia’s active participation in free trade agreements, which has further integrated its economy with the rest of the world. Additionally, foreign direct investment has played a significant role bringing in not just capital, but also technological and managerial expertise. This has been essential for modernizing and expanding trade-related industries. Investment in infrastructure has also been a cornerstone of trade development, improving the efficiency of transportation and logistics systems for seamless international trade.

These trade dynamics have bolstered Cambodia’s exports and integrated its economy into global value chains, further fuelling economic growth. The garment industry has notably thrived under these conditions, becoming a major export sector and a significant source of employment.  Other sectors like agriculture, tourism and electronics manufacturing have also seen significant growth. Agriculture, with commodities like rice and rubber, has become a substantial source of revenue through exportation. Tourism, boosted by the allure of Cambodia’s historical sites and natural beauty, has attracted increasing numbers of international visitors. The electronics manufacturing sector has attracted multinational companies, leveraging Cambodia’s competitive labour costs and strategic Southeast Asian location.

Productivity growth in Cambodia has also been noteworthy, with an average annual increase of 3.6 percent from 1998 to 2018[1]. This growth indicates significant improvements in economic output per person engaged , outperforming key ASEAN counterparts like Vietnam, Thailand, Malaysia and Singapore. This rapid productivity growth reflects effective labour utilisation and a significant rise from a lower economic base. The robust improvement in productivity has been the major driving force behind Cambodia’s sustained economic growth over the past two decades. Our growth accounting framework analysis[2] provides insightful revelations into Cambodia’s economic expansion from 1998 to 2018. It highlights that 35 percent of the GDP per capita growth can be attributed to deepening physical capital, reflecting a significant escalation in investments towards modernising machinery, equipment and infrastructure. Furthermore, productivity growth has played a pivotal role, contributing 30 percent to the GDP per capita increase. Equally important is the human capital factor, accounting for the other 35 percent of GDP growth. This is attributed to enhanced educational standards and skillsets, alongside a growing labour force buoyed by demographic shifts.

The Imperative of Digital Transformation in Cambodia’s Future Economy

In today’s world where digital technology is reshaping global economies, Cambodia’s commitment to digital transformation is not only beneficial, but essential. This necessity stems from two primary factors.  The first is alignment with global trends. Globally, the integration of digital technologies into economic frameworks marks a significant shift, altering how nations engage in trade, enhance productivity and achieve economic growth.  Several countries have emerged as success stories in harnessing digitalisation for economic development. South Korea’s focus on innovation and technology has made it a powerhouse in electronics and telecommunications, driving economic growth and global competitiveness. Singapore’s Smart Nation initiative demonstrates how digitalisation can enhance urban living and governance with integrated digital infrastructure and services. China’s digital marketplace is reshaping its economy. E-commerce giants like Alibaba and Tencent have transformed business practices through digital payments and online retail, generating significant economic value and establishing China as a leader in technological advancement. The Vietnamese government’s focus on developing the digital economy, coupled with investments in tech education and infrastructure, has positioned the country as an emerging hub for technology and innovation in Southeast Asia. These examples highlight the importance of government support, investment

in infrastructure, fostering innovation and building digital skills within the workforce.   By adopting digital tools, Cambodian businesses can access global markets more easily, leveraging e-commerce and digital marketing to expand their reach. Additionally, digitalisation fosters economic diversification, such as opening new sectors like fintech and digital entrepreneurship, which are crucial for sustainable growth. It also boosts productivity through automation and data analytics. Moreover, Cambodia’s commitment to digital transformation attracts foreign investment, as investors seek innovative and adaptable markets. Aligning with global digital trends, Cambodia can position itself as an attractive technology-driven hub.

The second rationale for Cambodia’s need to navigate digital technology is grounded in empirical evidence demonstrating digitalisation’s growing significance in trade and productivity enhancement. Studies have shown that digitalisation significantly lowers both domestic and international trade costs and is emerging as a key driver of trade in goods and services (World Trade Organization, 2018). A mere one percent increase in bilateral digital connectivity can boost domestic trade by 2.1 percent and international trade by 1.5 percent (González, Sorescu, and Kaynak, 2023). Hing and Thangavelu (forthcoming) present similar findings within the ASEAN context, where even a marginal one percent rise in digital connectivity correlates with a 0.129 percent expansion in merchandise exports and a 0.08 percent increase in digital trade. Furthermore, they found a positive link between digital trade facilitation and merchandise exports in ASEAN countries, with a one percent enhancement in digital trade measures corresponding with a notable 0.24 percent surge in exports. A combined improvement in digital connectivity and trade facilitation measures could potentially lead to a significant 4.49 percent growth in merchandise trade. This underlines the need for a holistic approach encompassing both  aspects in order to amplify trade expansion (Hing and Thangavelu, forthcoming).

Beyond trade, digital technologies offer extensive opportunities to enhance productivity across various sectors. Research shows that they not only boost productivity and efficiency, but also provide competitive advantages, increase organizational flexibility and resilience and reduce market entry barriers (Cirillo, Fanti, Mina, and Ricci, 2022; Deloitte, 2019; ERIA, 2019; Tan and Chian, 2019). In Cambodia, innovation and technological capabilities are increasingly vital to productivity improvements. Firms with advanced and information and communications technology (ICT) infrastructures tend to exhibit higher productivity levels (Hing, Thangavelu, and Kong, 2023). The study on Cambodia’s micro, small and medium-sized enterprises (MSMEs) in the tourism sector demonstrates a significant productivity increase among MSMEs that adopt digital technology, especially during challenging economic times

Setting the Digital Agenda: Policy Priorities for Cambodia’s 2030 Vision and Beyond

In the digital era, Cambodia has a unique opportunity to harness the potential of digital technology. To maximize these benefits, a strategic approach to policy-making is essential. Firstly, the government should prioritise substantial investments in high-speed broadband connectivity, particularly in rural and underserved areas, to bridge the digital divide. This effort should be in tandem with upgrading national ICT infrastructure to support advanced digital technologies like cloud computing and the Internet of Things. Equally important is the integration of digital literacy into the national education curriculum, ensuring that future generations are adept in digital skills. Additionally, providing ongoing professional development programmes to enhance the digital competencies of the current workforce is essential.

For businesses, especially SMEs, establishing a robust support mechanism is vital. These should be subsidies for digital tools, specialised training in e-commerce and digital marketing and access to digital finance solutions. Furthermore, fostering a culture of innovation and entrepreneurship within the digital sector through incentives like tax breaks, grants and incubator programmes for tech start-ups is crucial. On the regulatory front, enacting comprehensive data protection and cybersecurity laws will build trust in digital systems and safeguard the nation’s businesses against cyber threats. Additionally, developing digital trade policies that facilitate online commerce and standardise digital products and services will bolster digital trade.

Finally, Cambodia must actively engage in international partnerships to gain access to advanced digital technologies and adopt best practices. Participation in global digital initiatives is also crucial to keep pace with the rapidly evolving digital landscape. By implementing these policy measures, Cambodia can create a conducive environment for digital technology adoption, spurring economic growth and enhancing its position in the global digital economy.

Concluding Remarks: Embracing the Digital Future

As Cambodia stands on the brink of a digital revolution, the journey ahead is filled with challenges and immense potential. The journey requires collaborative efforts from policymakers, businesses and the public to create a robust digital ecosystem and foster a digitally-savvy population. As we look to Cambodia’s digital future, are we ready to embrace the digital opportunities ahead? This journey is not just a call to action, but an invitation to be part of a transformative process shaping Cambodia’s economic destiny.

References

Cirillo, V., Fanti, L., Mina, A., and Ricci, A. (2022). New digital technologies and firm performance in the Italian economy. Industry and Innovation, 1-30.

Deloitte. (2019). Benefits of small business digital engagement. Retrieved from https://www2.deloitte.com/au/en/pages/economics/articles/benefits-small-business-digital-engagement.html.

Economic Research Institute for ASEAN and East Asia (ERIA). (2019). Study on MSMEs Participation in the Digital Economy in ASEAN: Nurturing ASEAN MSMEs to Embrace Digital

González, J. L., Sorescu, S., and Kaynak, P. (2023). Of bytes and trade: Quantifying the impact of digitalisation on trade. Retrieved from https://www.oecd-ilibrary.org/content/paper/11889f2a-enhttps://doi.org/10.1787/11889f2a-en

Hing, V., and Thangavelu, S. (forthcoming). Quantifying the Impact of Digitalisation on Trade for ASEAN.

Hing, V., Thangavelu, S., and Kong, R. (2023). Technology, Innovation and Firm Competitiveness: Firm Level Analysis in Cambodia. Asian Development Bank Institute (ADBI) Working Paper Series No. 1353.

Tan, M., and Chian, N. W. (2019). Digital adoption among firms and impact on firm-level outcomes in Singapore. Singapore: Ministry of Trade and Industry.

World Trade Organization (WTO). (2018). World Trade Report 2018: The future of world trade: How digital technologies are transforming global commerce  Geneva. Retrieved from https://www.wto.org/english/res_e/publications_e/world_trade_report18_e.pdf.

[1] Labour productivity is measured as real GDP per worker. The computations and comparisons of Cambodia’s productivity with other ASEAN nations are based on data sourced from the GGDC/UNU-WIDER Economic Transformation Database (ETD).

[2] The growth accounting framework is an effective analytical tool for examining the components of economic growth. It dissects the elements influencing economic output, such as capital investment, labour force expansion, and productivity growth. The present analysis forms part of      CDRI’s “Cambodia Vision 2030” project, which assesses Cambodia’s goals for achieving resilient, inclusive and sustainable growth as an upper-middle income nation. This project is funded by the Australian government’s Department of Foreign Affairs and Trade through the Cambodia-Australia Partnership for Resilient Economic Development Programme.

Cambodia 2030: Economic Slowdown Offers Opportunity to Speed Up Reforms

Posted on by piseysorn

សារគន្លឹះ / Key Messages:

  • ប្រទេសកម្ពុជាមានការរីកចម្រើនគួរឱ្យកត់សម្គាល់ក្នុងរយៈពេលប៉ុន្មានទសវត្សរ៍កន្លងមក តាមរយៈកំណើនសេដ្ឋកិច្ចយ៉ាងឆាប់រហ័ស ជាមធ្យមជាង ៧% ក្នុងមួយឆ្នាំក្នុងទសវត្សរ៍មុនការរាតត្បាតនៃជំងឺកូវីដ-១៩ និងបានជួយប្រជាជនកម្ពុជាចំនួន ១,២លាននាក់ឱ្យចាកផុតពីភាពក្រីក្រខ្លាំង។
  • ខណៈពេលដែលប្រទេសកម្ពុជាត្រូវការរក្សាកំណើនខ្ពស់ ដើម្បីសម្រេចបាននូវចក្ខុវិស័យរបស់ខ្លួនក្នុងការប្រែក្លាយទៅជាប្រទេសដែលមានចំណូលមធ្យមកម្រិតខ្ពស់នៅឆ្នាំ២០៣០ សេដ្ឋកិច្ចប្រឈមមុខនឹងរលកឧបសគ្គជាច្រើន រួមទាំងបរិយាកាសពិភពលោកដែលមានការប្រកួតប្រជែង ផលិតភាពទាប និងការពឹងផ្អែកខ្លាំងលើការវិនិយោគលើអចលនទ្រព្យ។
  • ល្បឿនថយចុះនៃកំណើនសេដ្ឋកិច្ចនាពេលបច្ចុប្បន្ននេះ ផ្តល់នូវឱកាសមួយដើម្បីពន្លឿនកំណែទម្រង់ ដើម្បីផ្លាស់ប្តូរទៅរកគំរូនៃកំណើនប្រកបដោយចីរភាពជាងមុន ដែលគាំទ្រដោយផលិតភាពខ្ពស់ ការវិនិយោគប្រកបដោយគុណភាពនៅក្នុងហេដ្ឋារចនាសម្ព័ន្ធ និងមូលធនមនុស្ស និងគោលនយោបាយអភិវឌ្ឍន៍អនុលោមតាមអាកាសធាតុឆ្លាតវៃ។
  • Cambodia has made remarkable development progress over the past decades through rapid economic growth, averaging over seven percent per year in the decade before the COVID-19 pandemic and lifting 1.2 million Cambodians out of extreme poverty.
  • While Cambodia needs to sustain high growth to achieve its visions of becoming an upper middle-income country by 2030, the economy faces headwinds, including a challenging global environment, low productivity and an overreliance on investment in real estate.
  • The current slowdown in growth offers an opportunity to accelerate reforms to shift to a more sustainable pattern of growth, supported by higher productivity, quality investments in infrastructure and human capital and climate smart development policies.

Cambodia has made remarkable development progress over the past decades. In the decade prior to COVID-19, it sustained an average growth rate of seven percent per year, all while keeping public debt below 40 percent of the GDP. This rapid growth translated into equally rapid gains in poverty reduction with the poverty rate in Cambodia declining to 18 percent in 2020 from 26 percent six years earlier. This means 1.2 million fewer Cambodians live on $2.70 a day or less.  Despite this impressive achievement, 50 percent of Cambodians still live on only $4.15 or less a day. To achieve its vision 2030 of becoming an upper middle-income country and to further reduce poverty, Cambodia needs to maintain a high rate of growth.

However, as 2023 draws to a close, Cambodia’s economy has been slowing down. The World Bank projects growth for this year at 5.4 percent, higher than growth in the last three years, but still a far cry from the 7.2 percent average annual growth achieved in the decade before the COVID-19 pandemic (Figure 1a).  Much of this slowdown has to do with a challenging global environment. Weighed down by tight financing conditions, high debt and growing geopolitical and economic tensions, global growth is expected to continue to slow next year for a third consecutive year. Anaemic global trade and investment flows dim the short-term outlook, but also raise concerns over longer-term prospects, especially for developing countries. As a small open economy, Cambodia has not been insulated from these global developments.

While the external environment has contributed to a cyclical slowdown this year, it has also exposed emerging structural challenges at home. These challenges predate the pandemic, but were masked for several years by rapid capital inflows that fuelled a construction boom until COVID-19. Indeed, as we show in the World Bank’s recent Systematic Country Diagnostic Update for Cambodia, Cambodia’s strong economic growth over the past decade was largely driven by factor accumulation, with a negative contribution from productivity (Figure 1b). Investment, largely driven by construction, accounts for more than 90 percent of the growth in the last decade. In contrast, total factor productivity growth – a measure of the efficiency of resource allocation and innovation in the economy – has been negative. One factor contributing to declining productivity has been the slower pace of structural transformation – labour moving from low productivity agriculture to higher productivity manufacturing has slowed in recent years.  While agriculture’s share of employment dropped from 56 percent in 2011 to 36 percent in 2016, the labour share of agriculture has since been stable. This, combined with the construction sector’s growth, means fewer workers are shifting into higher-productivity sectors like manufacturing. Aggregate labour productivity growth -a precondition for sustainable growth in wages— has also decelerated sharply over the past five years from an average of 5.5 percent per year between 2011 and 2016 to 2.4 percent between 2016 and 2021. This is despite Cambodia’s aggregate labour productivity level remaining well below Vietnam and Thailand, which are three and five times higher, respectively.

Higher Growth is Both Necessary and Achievable

Amid weaker growth prospects, there is a sense of renewed urgency to address the rising economic challenges to sustain growth, reduce remaining poverty and achieve Cambodia’s vision to become an upper middle-income country by 2030. The recently adopted 2023–28 Pentagonal Strategy outlines an ambitious reform agenda. Implementation is now key, but what are the top priorities?

First, further improvements to the business environment are critical for boosting the productivity and competitiveness of Cambodian firms. The cost of doing business remains relatively high in Cambodia, reducing international competitiveness and inhibiting innovation and shifts into higher value activities. To help support increased private sector investment, Cambodia needs to strengthen the predictability of the regulatory environment and expand small and medium-sized enterprises’ (SMEs) access to finance. Further efforts to streamline complex and restrictive business entry requirements, together with improvements to the functioning of the insolvency framework, would help reduce costs of firm entry and exit.

Simplifying and digitising business services, especially the issuance of licences and permits, would reduce the associated costs. More competition would foster cost reductions and innovation and promote productivity growth by shifting market share toward more efficient producers and incentivizing firms to become more productive. To support the tourism sector, a reduction of costs and fees (visa, accommodation, food, transport and entrance fees) – including elimination of unofficial fees – would help attract international arrivals.

Second, upgrading Cambodia’s infrastructure and logistics are an important foundation for productivity gains and international competitiveness. Cambodia continues to have a large infrastructure financing gap, resulting in inadequate infrastructure services that are struggling to keep up with rapidly growing demand. Large investments are needed in the energy sector to address the dual challenge of meeting rapid growth in electricity demand (projected to quadruple from 12,400 gigawatt hours (GWh) in 2020 to 54,600 GWh in 2040) while meeting the country’s climate change commitments.  Investments are also needed to upgrade basic urban services such as piped water, sanitation, solid waste management, telecommunications and transport, in conjunction with strengthened urban planning. Moreover, gaps in regional connectivity impact the efficiency and cost of cross-border trade and need to be addressed. Investments are needed to address specific infrastructure gaps in domestic and regional transport connectivity. This will improve the East-West corridor across Thailand, Cambodia, and Vietnam, in addition to the only road corridor connecting Cambodia with Lao PDR. It will also improve the inland waterway connection with Vietnam and the existing railway operations and infrastructure links with Thailand. It is also important to improve trade facilitation and logistics performance. Further efforts must be made to reduce transport and logistics costs by monitoring the efficiency of main trade gateways, such as ports and border checkpoints.

Third, increasing learning outcomes is crucial to address skills shortages, develop a “future-ready” workforce and drive Cambodia’s productivity growth. Firms are reporting growing skills shortages, and labour productivity growth has declined sharply over the past five years. Few young Cambodian children are being enrolled in early childhood education, which is undermining early development and hindering mothers from returning to work. Primary schools are experiencing a decline in learning outcomes despite improved access. Few students are progressing to secondary school, and those that do are often inadequately prepared and experience high dropout rates. Poorer children are disproportionately affected in this disparity. According to the World Bank’s Human Capital index, a child born in Cambodia today can only expect to achieve about half of her potential lifetime labour productivity if she receives adequate education and health services. Alarmingly, only three percent of 15-year-olds in Cambodia can be said to reach a baseline level of performance in mathematics, only two percent in reading and only one percent in science. This directly affects children’s opportunities to participate in and contribute to Cambodia’s future prosperity. Enhancing educational outcomes will require a multi-pronged approach. Expanding access to quality schooling is important. However, additional incentives like conditional cash transfers, may be required to enable kids, especially from poorer families, to stay in school longer.

Finally, climate change further complicates Cambodia’s development. The recent Cambodia Country Climate and Development Report (CCDR) by the World Bank clearly shows that Cambodia is heavily exposed to climate risks. Our simulations show that losses from climate impacts could amount to as much as nine percent of the GDP by 2050 without adaptation. Fortunately, these losses can be significantly reduced through targeted adaptation measures (Figure 4a). While the response requires a multipronged approach, some of the most important policy actions involve halting the loss of natural wetlands and deforestation, as these natural areas protect against wildfires, floods, droughts and landslides. Effective implementation of the recently signed Environment and Natural Resource Code will be key in this respect. At the same time, while not a major emitter of greenhouse gases, Cambodia’s economy, including its export sector, is relatively carbon intensive (Figure 4b). The low-carbon transition in the world’s largest markets is driving a rapid structural transformation in the global economy and boosting demand for low-carbon goods and services. To take advantage of the opportunities that arise from this global shift, Cambodia would need to lower the barriers that hinder competitiveness in these areas. These include reducing high tariffs on parts and components for clean energy technologies, which are higher in Cambodia than in peer countries. The low-carbon transition globally also means the costs of clean energy technologies have been declining rapidly, making the increased usage of clean energy more economically viable than even a few years ago. If managed effectively, this could offer the opportunity to lower energy costs, as well as emissions.

Cambodia has made remarkable development progress over the past decades, thanks in large to strong economic growth. To continue its journey towards ending extreme poverty and enhancing living standards, Cambodia needs to maintain high growth. Fortunately, higher growth is not only desirable, but achievable. It will require Cambodia to shift to a more sustainable pattern of growth, supported by higher productivity, bold structural reforms, quality investments in infrastructure and human capital and climate smart development policies.

 

Ascending the Development Ladder in Cambodia: Progressing Towards Higher Income Status

Posted on by piseysorn

សារគន្លឹះ / Key Messages:

  • ប្រទេសកម្ពុជាបានរីកចម្រើនគួរឱ្យកត់សម្គាល់ ក្នុងការកាត់បន្ថយគម្លាតប្រាក់ចំណូល ជាមួយប្រទេសជាសមាជិកអាស៊ានដទៃទៀត ដោយសម្រេចបាននូវអត្រាកំណើនលឿនជាងប្រទេសដែលមានប្រាក់ចំណូលខ្ពស់ជាង។
  • បន្ថែមលើកំណើន និងការអភិវឌ្ឍកម្រិតម៉ាក្រូ ទិន្នន័យស្ទង់មតិមួយរបស់វិទ្យាស្ថានបណ្ដុះបណ្ដាល និងស្រាវជ្រាវដើម្បីអភិវឌ្ឍន៍កម្ពុជា (CDRI) បានបង្ហាញពីភាពប្រសើរឡើងគួរឱ្យកត់សម្គាល់នៃកម្រិតជីវភាព និងទំហំគ្របដណ្ដប់នៃប្រាក់ចំណូលក្នុងចំណោមគ្រួសារ នៅតំបន់ ជនបទ ដែលទាំងអស់នេះបង្ហាញពីឱកាសកាន់តែ ប្រសើរឡើងសម្រាប់ប្រជាជននៅតាមជនបទ។
  • ដើម្បីសម្រេចបាននូវឋានៈជាប្រទេសមានចំណូលមធ្យមកម្រិតខ្ពស់នៅឆ្នាំ២០៣០ និងឋានៈជាប្រទេសមានចំណូលខ្ពស់នៅឆ្នាំ២០៥០ កម្ពុជាចាំបាច់ត្រូវផ្តោតលើវិស័យសេដ្ឋកិច្ច-សង្គមសំខាន់ៗ។ ទាំងនេះរួមមានការបន្តការវិនិយោគលើវិស័យអប់រំ និងថែទាំសុខភាព ការជំរុញទំនាក់ទំនងពាណិជ្ជកម្ម និងការប្រកួតប្រជែងការនាំចេញ ការលើកកម្ពស់អភិបាលកិច្ច និងគុណភាពស្ថាប័ន និងការគាំទ្រដល់ការអភិវឌ្ឍជនបទ តាមរយៈហេដ្ឋារចនាសម្ព័ន្ធ ការអប់រំ ការថែទាំសុខភាព និងការលើកកម្ពស់ផលិតភាពកសិកម្ម។
  • Cambodia has made significant progress in reducing its income gap with other ASEAN peers, achieving a faster growth rate compared to countries with higher income.
  • In addition to macro-level growth and development, survey data from the Cambodia Development Resource Institute (CDRI) also reveal a notable improvement in living standards and income convergence among households in rural areas, indicating enhanced opportunities for rural populations.
  • To attain upper middle-income status by 2030 and high-income status by 2050, Cambodia needs to focus on key socioeconomic areas. These include continued investment in education and healthcare, boosting trade relations and export competitiveness, enhancing governance and institutional quality and supporting rural development through infrastructure, education, healthcare and agricultural productivity enhancements.

Growth and Development Performance and Catching Up with ASEAN Peers

From the 1990s to the 2010s, Cambodia’s economy experienced remarkable growth, surpassing that of many other developing nations. Cambodia’s real GDP per capita consistently grew, averaging 4.4 percent annually in the 1990s, 6.6 percent in the 2000s and 5.4 percent annually from 2010 to 2019 World Bank, 2023). This sustained growth, resilient even during global challenges like the 2008 financial crisis and the COVID-19 pandemic, has led to optimistic economic forecasts from institutions such as the Asian Development Bank, the International Monetary Fund and the World Bank for the upcoming years.

This continued economic development helped Cambodia transition from a low-income to a lower middle-income country by 2015. A significant factor in this success was the structural shift from an agriculture-dominated economy to a more industry-focused one.

Additionally, between 1995 and 2019, Cambodia significantly narrowed its income per capita gap with its ASEAN peers, demonstrating a faster growth rate compared to countries with higher income per capita (Figure 1).

Figure 1: Cambodia Catching up with ASEAN Peers (GDP Per Capita)

Data source: World Development Indicators, World Bank (2023)

Factors Enhancing Economic Growth: Demand-Side and Supply-Side Perspectives

Cambodia’s growth and development over the past decades have been significantly influenced by both demand and supply factors.

On the demand side, Cambodia’s economic growth has been propelled by international demand, favourable global conditions and domestic stability (Samreth et al., 2023). Key sectors fuelling this growth include labour-intensive exports (such as garments, footwear and simple assembly), tourism and agriculture, all benefiting from expanding overseas markets. This demand has led to increased domestic investment, particularly in manufacturing and tourism. Although household consumption has traditionally been the largest GDP component, its relative share has decreased as the economy has diversified and other sectors grew in importance. Despite the impacts of COVID-19, exports have remained a significant contributor to GDP. Furthermore, while Cambodia has historically been reliant on imports (which led to trade deficits), these deficits have lessened in recent years due to factors, such as improved export competitiveness.

On the supply side, Cambodia’s economic growth has been driven by increases in human and physical capital. In terms of human capital, there has been a notable improvement in education and health, evidenced by rising lower secondary education completion rates (from 18 percent in 1997 to 58 percent in 2020) and a significant decrease in malnourishment rates (World Bank, 2023). These improvements have contributed to a more skilled and healthier workforce. Foreign aid and foreign direct investment (FDI) have played a vital role in the accumulation of physical capital. Although foreign aid has decreased since the early 2000s, FDI has grown, spurred by political and macroeconomic stability and Cambodia’s integration into ASEAN and the World Trade Organization.

Enhancing economic efficiency is crucial for boosting Cambodia’s overall productivity. Despite improvement in this area, Cambodia still lags behind its ASEAN peers in governance and institutional quality, as indicated by rankings in the Ease of Doing Business Index and the Corruption Perception Index (Samreth et al., 2023). Addressing these issues is critical for Cambodia to further enhance its economic efficiency and productivity, and to achieve its ambitious goals of reaching upper middle-income status by 2030 and high-income status by 2050.

Improvement of Living Standards in Rural Cambodia: A Case from 11 Villages

Significant improvements in rural living standards, alongside macroeconomic growth and development, have been also observed in Cambodia.

The Cambodia Development Resource Institute (CDRI) conducted panel surveys in 2011, 2014, 2017 and 2020, tracking the same households across 11 villages in nine provinces. These surveys were aimed at understanding changes in income and living standards over time.

Derived from this panel data, Figure 2 displays the distribution of income across five quintiles, with each quintile representing an equal division of 989 household surveys based on their income per adult household member. The left side of the figure shows the income distribution in 2011, where the first two quintiles represent the poorest 40 percent of the surveyed households. Overall, a significant shift in income distribution among households is observed. Notably, the group comprising the poorest 40 percent in 2011 shows apparent income mobility towards higher income quintiles by 2020, indicating an improvement in living standards among the lower-income groups in the surveyed villages.

Using the same panel data, Figure 3 illustrates the relationship between income per adult household member in 2011 and the average growth rate of income per adult household member from 2011 to 2020. The negative slope of the trend line suggests a convergence in incomes: households with lower incomes in 2011 tended to have higher average growth rates, while those with higher initial incomes exhibited lower growth rates. This pattern indicates a “catch-up” trend, where poorer households have experienced faster income growth compared to wealthier ones, potentially reducing income inequality over time. This convergence might be attributed to various factors, such as redistributive policies and other socioeconomic programmes targeting the poor, which require further investigation.

Figure 2: Mobility of Income Per Adult Among Surveyed Households

                                Data source: CDRI

                                Figure 3: Convergence of Income Per Adult Among Surveyed Households

                          Data source: CDRI

Conclusion and Recommendations

To achieve upper middle-income status by 2030 and high-income status by 2050, Cambodia needs to focus on several socioeconomic factors. Historically, growth in Cambodia has been propelled by improvements in education and healthcare, essential for cultivating a skilled and healthy workforce. Continuous investment in these areas, coupled with robust infrastructure development, is key to ongoing growth and development.

Enhancing trade relations and export competitiveness is crucial for Cambodia’s global market positioning. Ensuring a stable political and socioeconomic environment, along with promoting domestic and foreign investment through market-friendly policies, is essential for job creation and economic diversification.

Moreover, improving governance and institutional quality is vital for boosting economic efficiency and productivity. Effective governance, marked by transparency and efficiency, attracts investment and nurtures local entrepreneurship, contributing to balanced and equitable growth.

Support for rural areas is equally important. Enhancing infrastructure, education, healthcare and agricultural productivity in rural regions is critical. These measures will help improve living standards in rural areas, reduce income disparity and promote inclusive growth and socioeconomic resilience.

References

Samreth, S., Okuda, H., and Ojima, Y. (2023). Development and Structure of Dollarization in Cambodia. In H. Okuda and S. Chea (Eds.), Cambodian Dollarization: Its Policy Implications for LDCs’ Financial Development (pp. 10-37). Routledge.

  1. (2023). World Development Indicators 2023. The World Bank.

Women in the Economy: Building on Strengths and Looking to the Future

Posted on by piseysorn

សារគន្លឹះ / Key Messages:

  • ខណៈពេលដែលប្រទេសកម្ពុជាទទួលបានអត្ថប្រយោជន៍ពីអត្រាខ្ពស់នៃការចូលរួមកម្លាំងពលកម្មរបស់ស្ត្រី អត្រាប្រាក់ឈ្នួលនិងសន្តិសុខការងារនៅតែមានគម្លាតគួរឱ្យកត់សម្គាល់នៅឡើយ ក៏ដូចជាគំរូយេនឌ័រដែលបែងចែកតាមវិស័យ បង្ហាញឱ្យឃើញថាការធ្វើអន្តរាគមន៍យេនឌ័រមិនគួរធ្វើត្រឹមតែឱ្យមានចំនួនស្ត្រីច្រើននោះទេ គឺគួរតែផ្តោតលើគុណភាពនៃឱកាសសម្រាប់ស្ត្រីនៅក្នុងកម្លាំងពលកម្មផងដែរ។
  • គម្លាតទាំងនេះបង្ហាញថា គោលដៅដែលត្រូវធ្វើអន្តរាគមន៍ដើម្បីដោះស្រាយការបែងចែកការងារ វិសមភាពនៃការអប់រំ ក៏ដូចជាភាពលម្អៀងក្នុងការជួលបុគ្គលិក និងដំណើរការដំឡើងតួនាទី គឺពិតជាមានភាពចាំបាច់។
  • ស្ត្រីត្រូវប្រឈមមុខនឹងឧបសគ្គមួយចំនួន ក្នុងការទទួលបានលក្ខខណ្ឌការងារគំរូដែលអនុញ្ញាតឱ្យពួកគេធ្វើការដោយជាប់លាប់ ហើយភាគច្រើនស្ត្រីធ្វើការងារដែលមានប្រាក់ឈ្នួលទាប ឬមានមុខតំណែងដែលមិនសូវមានសុវត្ថិភាពការងារ។
  • ការធ្វើអន្តរាគមន៍របស់រដ្ឋាភិបាលក្នុងការដោះស្រាយឱ្យមាន កន្លែងធ្វើការដែលមានសុវត្តិភាពជាងមុន ការឧបត្ថម្ភប្រាក់លើការថែទាំកុមារ ប្រាក់ឈ្នួលខ្ពស់ និងការបង្កើនសន្តិសុខនៅកន្លែងធ្វើការ អាចរួមចំណែកច្រើនដល់កំណើនសេដ្ឋកិច្ច។
  • ការកាត់បន្ថយគម្លាតនេះតាមរយៈអន្តរាគមន៍ឯកទេសដែលផ្តោតលើស្ត្រីក្រីក្រ ស្ត្រីងាយរងគ្រោះ ស្ត្រីដែលមានជំនាញទាប និងស្ត្រីដែលមានបន្ទុកថែទាំកុមារ អាចបង្កើនក្ដីសង្ឃឹម និងឱកាសជោគជ័យផ្នែកសេដ្ឋកិច្ចរបស់ពួកគេ ខណៈដែលកម្ពុជាខិតខំដើម្បីក្លាយជាប្រទេសដែលមានចំណូលមធ្យមកម្រិតខ្ពស់។
  • While Cambodia already benefits from high rates of women’s labour force participation, notable gaps in wages rates and job security, as well as gendered patterns of sectoral segregation suggest that gender interventions should go beyond the aggregate numbers and focus on the quality of opportunities available to women in the labour force.
  • These gaps suggest that targeted interventions to address occupational segregation, educational disparities, as well as biases in hiring and promotion processes are needed.
  • Women face specific barriers in obtaining ideal working conditions that would allow them to work more consistently, and women are disproportionately in lower wage jobs or positions with less job security.
  • Government intervention in addressing safer workplaces, childcare subsidies, higher wages and increased security in the workplace could contribute to significant economic growth.
  • Reducing this gap through specialised interventions targeting poor women, vulnerable women, women with low skills and women with significant childcare burdens can increase their economic prospects and viability as Cambodia strives to become an upper-middle income country.

With Cambodia’s vision to become a upper-middle income country by 2030, it’s critical to analyse women’s barriers in contributing to the country’s gross domestic product, or GDP. Cambodian women are a crucial part of the roadmap to the country’s Vision 2030, as well as the Royal Cambodian Government’s (RGC) Pentagonal Strategy. The Pentagonal Strategy addresses “supporting growth and economic modernization” and “building human capital with a particular focus on the quality of education,” both of which include under-utilised catalysts that can be used to drive women forward in Cambodia.

Women have historically been key contributors to the Cambodian economy, with relatively high rates of labour force participation. Cambodian women constitute a diverse workforce contributing to various industries. At the same time, the overall numbers do not tell the whole story: gender gaps in wages, job security and within different sectors suggest not only strengths, but also opportunities to improve. With their strong labour force participation rates, women are already contributing to the Cambodian economy: they just need government support in opportunities for higher wages, secure employment, better working conditions and improved access to quality public services.

Notably, Cambodia has a relatively small gender gap in labour force participation, especially compared to other countries in the region and at the same level of economic development. According to the World Bank’s Gender Portal Data, in 2022, women’s labour force participation rate was 69.6 percent, compared to men’s labour force participation of 82.1 percent. This gender gap in labour force participation rate is substantially smaller than the average for lower- middle income countries, where women’s labour force participation rate is as low  33.4 percent, compared to men’s labour force participation rate of 73.3 percent.

In terms of overall gender gaps in labour force participation, the country is already well-prepared for Cambodia Vision 2030. Cambodia’s gender gap is smaller than the average in upper-middle income countries, where women’s labour force participation is 56 percent, compared to men’s at 73.5 percent. Similarly, the average labour force participation rate for high-income countries is 54 percent for women and 68 percent for men, yielding a gender gap of 1.5 percent more than Cambodia.

Despite the admirable progress in increasing women’s labour force participation and closing the overall gender gap, there is still important work to be done in distribution of employment opportunities. While women are indeed contributing to the Cambodian economy at higher rates relative to other countries in the region and in the same income categories, these total numbers can mask disparities within occupations.

Understanding the factors contributing to this disparity is essential for designing targeted interventions. The data reveals a pattern of occupational segregation, where men and women are concentrated in different industries and sectors. Women are often overrepresented in sectors such as textiles and garments, while men dominate industries like construction and manufacturing. This segregation contributes to gender-based wage gaps and limits career advancement opportunities for women.

Another clear area where progress can be made is in reducing the gender wage gap, which is larger than the labour force participation gap, suggesting that while women are participating at high rates relative to men, they are taking lower-paying jobs. The percentage of women in wage and salaried positions remains well below the percentage of men in similar employment. Women also tend to be employed more in vulnerable jobs with low pay and difficult working conditions. Factors such as occupational segregation, educational disparities and biases in hiring and promotion processes contribute to this wage gap, highlighting the need for targeted policy measures.

Challenges to closing these gender gaps in wages and employment opportunities include limited access to formal employment, inadequate maternity support and cultural norms that impact career progression. Addressing these challenges requires a multi-faceted approach, involving both public and private sector initiatives to create a more inclusive and supportive work environment. Closing these gaps will see an improvement in Cambodia’s economy as it becomes an upper-middle and high-income country.

Women are already an important foundation of economic growth in Cambodia. Their strong labour force participation provides a unique opportunity moving towards Cambodia Vision 2030, especially if we look beyond the aggregate numbers and design interventions to close the gender gaps among wage and salaried jobs, as well as gender gaps in job security. Women are already contributing to the Cambodian economy: investing in their skills and opportunities will allow them to contribute to a broader range of sectors and advance their opportunities for higher wages and more secure employment.

Conclusion:

In order to ensure women’s productivity rates reach their full potential in the Cambodian context, government and private sector actors should provide adequate support. From the country’s already strategic position, interventions such as early science, technology, engineering and mathematics education for girls can improve their career prospects as they age into the workforce. Additionally, skills training which targets women or provides subsidised classes in training programmes, which may also include childcare, could have a significantly higher success rate in retention of women in high-skilled jobs.

Advancement of women in the workplace into higher-paying roles that shrink the gender wage gap will contribute to the overall GDP of Cambodia, including providing a more educated workforce to innovate, invest and drive forward the country’s economy. For Cambodia to become an upper-middle income country by 2030 and a high-middle income country by 2050, utilisation of women in safe and well-paid workplaces with opportunity for growth is imperative.

References:

WorldBank. (n.d.). World Bank Gender Data Portal. https://genderdata.worldbank.org/

 

 

Supporting Improved Productivity for Achieving Cambodia’s 2030 Vision Through Government Policy

Posted on by piseysorn

សារគន្លឹះ / Key Messages:

  • កំណើនផលិតភាពចាំបាច់ឱ្យមានការផ្លាស់ប្តូរធនធានការងារពីវិស័យដែលមានផលិតភាពទាប ទៅវិស័យដែលផ្តល់ផលិតភាពខ្ពស់។
  • ការផ្លាស់ប្តូរនេះមានន័យថា ការធ្វើបំលាស់ទីនឹងនាំឱ្យមានការរំខានដល់ជនដែលត្រូវធ្វើបំលាស់ទី ហើយការធ្វើបំលាស់ទីនេះអាចនាំឱ្យមានការរួមបញ្ចូលដោយភាពអវិជ្ជមានទៅក្នុងវិស័យសេដ្ឋកិច្ចថ្មី ដែលផលិតភាពរបស់ពួកគេកើនឡើង ប៉ុន្តែតម្រូវការ និងផលប្រយោជន៍របស់ពួកគេ មិនត្រូវបានការការពារ។
  • ការស្រង់យកបទពិសោធន៍ពីការផ្លាស់ប្តូរ ពីវិស័យកសិកម្មទៅកម្មន្ដសាល ក្នុងរយៈពេល ២៥ ឆ្នាំកន្លងមកនេះ អាចផ្តល់ការយល់ដឹងអំពីថាតើរដ្ឋាភិបាលអាចប្រើប្រាស់អំណាចបទប្បញ្ញត្តិ និងគោលនយោបាយរបស់ខ្លួនដោយរបៀបណា ដើម្បីការពារប្រជាជនដែលមានការងារ និងម្ចាស់អាជីវកម្មខ្នាតតូច ពីបញ្ហានានាដែលកើតមាននាពេលអនាគត។
  • គោលដៅនៃការកែលម្អក្រុមហ៊ុនខ្នាតតូចប្រកបដោយប្រសិទ្ធភាព និងការធ្វើឱ្យប្រសើរឡើងនូវមូលធនមនុស្ស ទាមទារឱ្យមានការវិនិយោគនិងនវានុវត្តន៍ពីបុគ្គលខ្លួនឯងផ្ទាល់។
  • Productivity growth entails shifting labour resources from less productive to more productive sectors.
  • This implies physical relocation is disruptive for people who have to move and can lead to adverse incorporation into the new economic sector where their productivity increases, but their needs and interests are not protected.
  • Learning from the transition from agriculture to manufacturing over the past 25 years can provide insights into how the government can use its regulatory powers and policies to protect working people and small business owners from adverse incorporation in the future.
  • The goals of improving small firm efficiency and upgrading human capital require investments and innovations from working people themselves.

Economic growth is produced by a combination of two aspects: capital formation, when investors spend money to place infrastructure for doing business; and increased labour productivity, when workers move from jobs that produce a low value into jobs that produce a higher value. High levels of economic growth are invariably celebrated as contributing to increased prosperity and well-being; however, both the building of infrastructure and plants for doing business and the movement of workers between jobs can be highly disruptive to communities, to social structures such as households and families and to the wider environment. In the next phase of growth, the Royal Government of Cambodia (RGC) should use its extensive policy and regulatory powers to ameliorate disruption from development that harms citizens’ well-being and quality of life.

Legacies of Migration and Growth in Cambodia

Economic analyses suggest that until 2016, a major driver of productivity increase in Cambodia was the transfer of labour from the agricultural sector to the manufacturing sector. The rise of the manufacturing sector in Cambodia from 1996 to 2016 was a significant success story, providing employment in particular to young women and generating a flow of urban-rural remittances that were considered to have a significant anti-poverty effect. However, it also offers a case study in the kinds of societal problems that are caused by rapid growth, requiring government intervention and regulation.

Movement from agriculture to manufacturing required physical movement of people, often young men and women, from rural to urban areas and sometimes across international borders. This movement disrupts traditional households and communities, providing new opportunities, but also creating new problems. Cambodian factories have been monitored from the earliest days of the industry by the International Labour Organization’s programme Better Factories. This programme appears to have assisted in ensuring the worst kinds of labour abuses — child exploitation, slavery and sexual abuse of workers – have not regularly occurred in Cambodia’s manufacturing sector. Where infringements of labour standards have taken place, the programme has offered opportunities for problems to be identified and resolved in a collaborative way. This represents a major achievement.

However, beyond the factory gates, there has been far less systematic evaluation of living standards and well-being of migrants and the families they leave behind, and the results of the research that has been done is sometimes contradictory. The following examples indicate some areas where migrant workers in Cambodia have faced problems and dangers along the way.

  • In 2017, the United Nations International Children’s Emergency Fund (UNICEF) surveyed the impact of migration on children , including those that moved with their parents and those that stayed behind. The report found that no government or international agency in Cambodia collects systematic data on migrants or children of migrants, despite migration having formed a major plank of Cambodia’s development strategy. The study raised concerns regarding the burden of care imposed on elderly grandparents, often in poor health, when children are left behind. It reported that migrant children face difficulties enrolling in urban schools and often live in unsafe accommodation, including makeshift camps on construction sites. The study recommended that the government should collect better data on children of migrants and should extend support to their carers in rural areas (UNICEF 2017).
  • A scientific study of malnutrition among factory workers, conducted in 2016, concluded that “the prevalence of underweight, anemia and poor iron status among [factory workers] is of concern”, and warned, “higher salaries might not automatically lead to improved nutrition among workers in the short term, as they primarily fulfill a major contribution to the social securing of their family households.” The burden of remitting a proportion of their wage to rural dependents significantly affected the health of factory workers. The study suggested that better social security systems and health security systems for low-income rural households was necessary to ensure that factory workers did not go hungry while supporting rural households (Makurat et al, 2016).
  • A group of Cambodian trade unions studied urban accommodation for factory workers in 2020 and found that the largely private rental housing industry “is often failing its low-income renters, such as factory workers, because of an unequal power relationship between landlords and renters.” Factory workers lived in poor quality and unsafe housing, and were subject to arbitrary rent increases and harassment from landlords. The report suggested that the government should provide better support in the form of “regulation, education and enforcement of the law” (Cambodian Alliance of Trade Unions et al,  2020).
  • A 2022 study by an international NGO found that Cambodian garment workers are adversely affected by climate change. Increased air pollution, heat within the workplace and flooding that causes plant closures have become increasingly common, and the report’s authors calculate this has led to a 2.75 percent decrease in productivity due to ill health and missed days of work. The report also found workers who are not unionised or who are on flexible contracts suffered a greater shortfall in pay as a result. The report’s authors argue that more attention should be paid to garment workers’ concerns in order to ensure that “the costs and risks of climate change are not borne overwhelmingly by workers” (Parsons et al, 2022).
  • Migration for work carries risks of trafficking, and this has long been a concern for Cambodian nationals crossing illegally into Thailand for work, particularly in the sex and fishing industries. The Cambodian government identified almost 1,000 returning victims or suspected victims of trafficking at the Poipet Migrant Transfer Center in 2022 (US Embassy 2023). Survivors of trafficking are prone to economic marginalisation, social stigma and poor mental health (Cordisco Tsai, et al 2021). Recently, sharply rising numbers of foreign nationals trafficked into Cambodia to work in cyber scam and sex operations in Phnom Penh and Sihanoukville have become a significant concern (Office of the United Nations High Commissioner for Human Rights 2023). This necessitated a major police crackdown in 2023.

Adverse Incorporation, Productivity and Vulnerability

These different studies indicate the extent to which improving factor productivity by moving workers has been fraught with danger and difficulty. Workers who leave behind children, who are malnourished due to the need to remit large proportions of their wages, who live in expensive and unsafe housing or who end up trafficked may be described as adversely incorporated into new sectors of the economy. Adverse incorporation “captures the ways in which localised livelihood strategies are enabled and constrained by economic, social and political relations [and] driven by inequalities of power” (Hickey and Du Toit, 2007). It implies that gains from increased productivity are secured, not by the worker themselves, but by employers or landlords, leaving the worker in a precarious and marginalised position.

Adverse incorporation can occur alongside successful income poverty reduction: migrant workers move because they expect their cash income to increase. But in doing so, they forgo certain aspects of security, as they leave behind community-based social support networks, access to housing with family and access to land to grow subsistence food. In their new context, they engage with different sets of actors – landlords, employers and officials – in relationships that are characterised by unequal power. This means that their claim on resources becomes more precarious – for example,      a member of a subsistence farming household is likely to be fed by the household if they are sick, but a sick factory employee will not be fed by their employer. This leads to heightened vulnerability to adverse shocks. This was clearly demonstrated in Cambodia during both the COVID-19 crisis of 2020-2021  and the Global Financial Crisis of 2008, when many migrants returned to rural farms in an attempt to maintain food security as factories closed down.

Household and Small Business Investments and Government Policy

Understanding the situation of migrant workers over the past two decades is essential to strategising for “a new growth model based on skills, technology, and innovation” as envisaged in the RGC’s Pentagonal Strategy. The economic analyses offered by my Cambodia Development Resource Institute colleagues suggest two key ways of promoting a revival of lagging factor productivity growth: promoting efficiency amongst small firms and boosting human capital in the workforce. Without improvement in these two areas, infrastructure investments alone will have a limited effect.

These improvements do not take place without someone to implement them. Who, exactly, needs to take the lead in investing in skills, technology and innovation as the basis for a new growth model? While direct investment from foreign firms, large domestic firms, the government or NGOs might offer a partial answer, it is clear the driving force behind this shift will be the willingness of individual workers, their households and small business owners to invest their own efforts, time and resources in these opportunities. It is individual workers, households and entrepreneurs who will determine the success or failure of the strategy, by deciding whether or not to spend resources learning new skills, sending children to school, taking a risk on a small investment, buying modern equipment or moving to a new place to start a new job.

The key argument of this blog is that a crucial factor determining whether small firms and individual workers will invest in these ways, or will thrive when they do so, is the extent to which their interests and needs are protected within the contemporary economy. At the level of the individual, household and small firm, adverse incorporation and precarity do not promote boldness, innovation and upgrading. They are more likely to lead to deployment of defensive coping strategies of risk aversion, and ways of dealing with downturns that actually deplete household capital. These include coping strategies that deplete human capital, including under    investment in healthy food and taking children out of school and putting them to work.      They can also utilise coping strategies that deplete financial and fixed capital, including taking on loans to pay for basic needs and selling valuable assets at a loss to cope with periodic emergencies (UNICEF et al, 2022). Repeated episodes of household-level capital depletion combined with the disempowerment associated with adverse incorporation produce a lack of faith among ordinary people in the possibility of gaining or retaining any kind of return on investments. The problems cited in the first section above affecting migrating workers – difficulties in childcare, nutrition, housing and risk of trafficking – all make it more difficult for workers to invest in upgrading their own productivity, and therefore it becomes less likely that they will do so.

Upgrading the Cambodian economy through the five Strategic Pentagons of human capital development; economic diversification and competitiveness enhancement; development of private sector and employment; resilient, sustainable, and inclusive development; and development of digital economy and society therefore requires a shift in focus towards households and small businesses as the drivers of development. Supporting these actors requires assessing not only the strengths, but also the limitations of past strategies. It requires the collection of data regarding the multiple challenges affecting the economic, social and cultural rights and needs of the individuals and households. These groups power the Cambodian economy, and expanding government monitoring, provision, policy and regulation to ensure that these rights and needs are reliably provided is imperative.

References

Cambodian Alliance of Trade Unions, Center for Alliance of Labor and Human Rights, Federation Union of Free and Independent, and Sahmakum Teang Thnaot (2020), Low-Income Rental Housing in Urban Areas: Research Focusing on Factory Workers and the Right to Housing, online at https://teangtnaut.org/wp-content/uploads/2021/01/Low-Income-Rental-Housing_ENG_FINAL-1.pdf

Cordisco Tsai, Laura, Vanntheary Lim, Channtha Nhanh, and Sophie Namy, (2022), “ “They Did Not Pay Attention or Want to Listen When We Spoke”: Women’s Experiences in a Trafficking-Specific Shelter in Cambodia,” Affilia, 37.1:151-168, online at https://doi.org/10.1177/0886109920984839

Hickey, Sam, and Andries Du Toit (2007), Adverse Incorporation, Social Exclusion and Chronic Poverty, CPRC Working Paper 81, online at https://www.chronicpoverty.org/uploads/publication_files/WP81_Hickey_duToit.pdf

Makurat, Jan, Hanna Friedrich, Khov Kuong, Frank T. Wieringa, Chhoun Chamnan, and Michael B. Krawinkel, (2016), “Nutritional and Micronutrient Status of Female Workers in a Garment Factory in Cambodia,” Nutrients 8.11: 694, online at https://doi.org/10.3390/nu8110694

Office of the United Nations High Commissioner for Human Rights (2023), Online Scam Operations and Trafficking into Forced Criminality in Southeast Asia: Recommendations for a Human Rights Response online at https://bangkok.ohchr.org/wp-content/uploads/2023/08/ONLINE-SCAM-OPERATIONS-2582023.pdf

Parsons, Laurie, Sabina Lawreniuk, Sok Serey & Joe Buckley, (2022), Hot trends: How the global garment industry shapes climate change vulnerability in Cambodia. Royal Holloway, University of London and University of Nottingham, online at https://www.solidaritycenter.org/wp-content/uploads/2022/07/Hot-Trends-Report.pdf

United Nations Children’s Fund, 2017 Executive Summary: Study on the Impact of Migration on Children in the Capital and Target Provinces, Cambodia, online at

https://www.unicef.org/cambodia/media/1446/file/Study%20on%20The%20Impact%2

0of%20Migration%20on%20Children%20in%20The%20Capital%20and%20Target%20Provinces_Eng.pdf.pdf

United Nations Children’s Fund, World Food Program, Asian Development Bank (2022), Cambodia: COVID19 Socio-Economic Impact Assessment Phase 2, online at https://www.wfp.org/publications/cambodia-covid-19-socio-economic-impact-assessment-phase-2-report

United States Embassy Cambodia (2023) 2023 Trafficking in Persons Report: Cambodia, online at https://kh.usembassy.gov/2023-trafficking-in-persons-report-cambodia/

Towards High-Income Status Through Transformation of Education and Training

Posted on by piseysorn

សារគន្លឹះ / Key Messages:

  • ដោយសារការងារភាគច្រើននៅក្នុងប្រទេសកម្ពុជា មានកម្រិតជំនាញទាប ការលើកកម្ពស់គុណភាពធនធានមនុស្ស និងការផ្លាស់ប្តូរការយកចិត្តទុកដាក់ពីបរិមាណការងារ ទៅគុណភាពការងារ គឺជាតម្រូវការបន្ទាន់។
  • ការលើកកម្ពស់គុណភាពអប់រំកម្រិតមូលដ្ឋាននៅកម្ពុជា មានសារៈសំខាន់ណាស់ សម្រាប់ការ បណ្តុះប្រជាពលរដ្ឋឱ្យមានចំណេះដឹងគ្រប់គ្រាន់ ដើម្បីអាចឆ្លើយតបទៅនឹងទីផ្សារការងារដែលមានការផ្លាស់ប្តូរយ៉ាងឆាប់រហ័ស។
  • ក្នុងការធ្វើសមាហរណកម្មបច្ចេកវិទ្យាក្នុងវិស័យអប់រំប្រកបដោយប្រសិទ្ធភាព ចាំបាច់ត្រូវធានាថាសិស្ស និងគ្រូទទួលបានការបណ្តុះបណ្តាលគ្រប់គ្រាន់ ដើម្បីប្រើប្រាស់បច្ចេកវិទ្យាសម្រាប់គោលបំណងអប់រំ។
  • ដោយសារប្រព័ន្ធបែងចែកគន្លងសិក្សានៅកម្រិតវិទ្យាល័យ នៅកម្ពុជានាពេលបច្ចុប្បន្ន មិនទាន់មានប្រសិទ្ធភាព ក្នុងការលើកទឹកចិត្តសិស្សដែលមានទេពកោសល្យ ឱ្យបន្តមុខជំនាញ និងការងារទាក់ទងនឹងវិទ្យាសាស្ត្រ បច្ចេកវិទ្យា វិស្វកម្ម ឬគណិតវិទ្យា (STEM) នៅឡើយ ដូច្នេះ វាជាការចាំបាច់ ក្នុងការពិចារណាឡើងវិញនូវការបែងចែកគន្លងសិក្សា។
  • កិច្ចសហប្រតិបត្តិការជាមួយវិស័យឯកជនមានសារៈសំខាន់ណាស់ក្នុងការដោះស្រាយបញ្ហាជំនាញមិនស៊ីគ្នា និងកង្វះជំនាញ។ ប៉ុន្តែដើម្បីទាក់ទាញការចូលរួមពីវិស័យឯកជន ការលើកទឹកចិត្តផ្នែកសេដ្ឋកិច្ច និងបទប្បញ្ញត្តិ គឺជាអ្វីដែលគួរយកចិត្តទុកដាក់បន្ថែម។
  • Given that the majority of jobs in Cambodia are low-skilled, there is an urgent need to enhance the quality of human resources and to shift focus from job quantity to job quality.
  • Improving the quality of basic education in Cambodia is crucial for the cultivation of well-rounded citizens who can respond to the rapidly changing labour market.
  • Effective integration of technology in education is necessary to ensure that both students and teachers are adequately trained to leverage technology for educational purposes.
  • As the current high school tracking system in Cambodia does not effectively encourage talented students to pursue science, technology, engineering or mathematics (STEM) majors and careers, reconsideration of the tracking mechanism is necessary.
  • Collaboration with the private sector is crucial to resolve the skills mismatch and shortage, but it needs economic and regulatory incentives to attract private sector participation.

In his commitment to elevate Cambodia to a high-income nation by 2050, Prime Minister Hun Manet has presented his strategic vision outlined in the Pentagonal Strategy Phase I. In this latest national strategy, technology is added as the fifth priority under four previous priorities, namely “people, road, water, and electricity,” introduced in the Rectangular Strategy (Royal Government of Cambodia [RGC] 2023). People continue to be the first priority among the five core priorities. In the past decades, Cambodia’s remarkable economic growth has been driven by labour-intensive manufacturing, tourism and construction sectors. Macroeconomic stability and favourable trade policies, including preferential access to the European Union and United States markets, have facilitated significant foreign direct investment inflows into Cambodia. While these investments have bolstered employment opportunities, a pressing concern emerges: the majority of jobs in Cambodia remain low-skilled with limited productivity (World Bank 2019). It is estimated that nine out of 10 workers are employed in elementary or low-skilled jobs (National Institute of Statistics 2021). Therefore, the central challenge facing Cambodia to strive for high-income status does not depend on job quantity, but in job quality. Cambodia is in urgent need of a mechanism to enhance the quality of its human resources and of employment through the transformation of education and training. This would equip its people with skills and knowledge needed for the adoption of digital technology to perform high-skilled jobs. This blog argues that to prepare for future jobs, ensuring a high quality of basic education, integrating digital technology in education, revisiting the high school tracking system and promoting industry collaboration in technical and vocational education and training (TVET) are priorities.

Ensuring Quality Basic Education

Quality basic education serves as the cornerstone for economic development, enhancing human capital, fostering productivity and innovation, reducing poverty and income inequality and driving technological advancement. However, national and international learning assessments consistently highlight Cambodia’s learning crisis, with a substantial proportion of students failing to attain the expected levels of proficiency (UNICEF 2022; UNICEF and SEAMEO 2020). Based on the Southeast Asia Primary Learning Metrics report, only 11 percent of grade 5 students in Cambodia achieved the expected levels of reading proficiency at the end of primary education. The deficiency in foundational knowledge from primary education is believed to contribute significantly to the high dropout rates and poor learning performance observed in secondary schools. Additionally, it is imperative to recognise that proficient literacy and numeracy skills are essential for success, even for students aspiring to enrol in TVETprogrammes. The absence of quality basic education poses a barrier to transforming Cambodia into a digital society and equipping its citizens with the high-level skills necessary to respond and adapt effectively to the rapidly changing labour market, as well as to fostering skills for lifelong learning. Furthermore, Cambodia’s trajectory toward achieving high-income status is intricately linked to the cultivation of a well-rounded, innovative and socially responsible younger generation. By improving basic education and enhancing early childhood learning, Cambodia can nurture a skilled, innovative and well-mannered workforce capable of propelling the nation into a high-income one.

Integrating Digital Technology in Education

Technology is another asset that will help Cambodia achieve its 2050 vision. In addition to the Cambodia Digital Economy and Society Policy Framework (2021-2035), the Pentagonal Strategy clearly indicates the government’s commitment to utilising digital technology as a means to accelerate the transformation of Cambodia’s economy and society. This strategic approach is highly prudent, recognising that technology adoption plays a pivotal role in supplying the highly-skilled workforce demanded by the economy and thus fostering sustainable economic growth. Many middle-income countries often find themselves falling into the middle-income technology trap, unable to move up to high-income status (Andreoni and Tregenna 2020). Therefore, our education system needs to equip students with digital knowledge and skills, preparing them to embrace and adapt to emerging technologies. While the COVID-19 pandemic has expedited the adoption and integration of technology in teaching and learning, both Cambodian students and teachers lack adequate training and preparation to effectively leverage technology for educational purposes (Chea, Bo and Minami 2022). Without effective measures and inclusive integration, technology can exacerbate disparities and perpetuate digital divides. Presently, the Ministry of Education, Youth and Sport (MoEYS) is in the process of formulating a digital education strategy. This initiative aims to enhance the effectiveness of teaching and learning through the integration of digital technology. A thoughtful and well-executed digital education strategy is essential to ensuring that the benefits of technology in education are harnessed optimally and inclusively, fostering digitally literate people ready for future jobs.

Revisiting the High School Tracking System

Cambodia has made efforts to increase the quantity and quality of STEM workers to meet the demand of the labour market by practising the social science and science tracking system in high schools. Yet, studies and direct feedback from schools and teachers indicate that the current tracking system does not achieve its intended purpose of encouraging talented students to pursue STEM majors and careers (Kao, Chea and Song 2023, CDRI and MoEYS 2023). Instead, students tend to choose tracks based on their chances of passing the grade 12 examination. Both students and teachers seemingly perceive that the social science track is for poor performers, as it is easier for students to pass this track in the national examination. The fact that physics, chemistry and biology are not compulsory subjects in the national examination also discourages social science teachers and students from putting effort into teaching and learning these subjects. Given the ineffectiveness of the current tracking system, which freely allows students to choose tracks without clear criteria, the MoEYS should consider one of two options. The ministry should remove the tracking system from schools and strengthen the quality and relevance of TVET and career counselling at schools and universities. On the other hand, they could also revise the tracking mechanism and the high school examination to address higher rates of student failure in the STEM track.

Promoting Industry Collaboration in TVET

A highly-skilled workforce will attract more investments in the science and technology sectors. Cambodia needs to transform its TVET system, particularly the providers, to reduce skills shortages and mismatches in the labour market. Presently, it is estimated that enrolment in TVET programmes represents only a fraction of the total education and training enrolment. Despite the government’s recent commitment to provide scholarships for 1.5 million poor students, attracting students to TVET remains challenging due to the prevailing perception that it is a last resort for underperformers or dropouts (Song and Chea 2023). To address this challenge, it is imperative to make TVET skills attractive by highlighting the economic value and the demand by the labour market while enhancing the quality and relevance of TVET provision. This involves improving the quality of trainers, upgrading training facilities and curriculum and most importantly, fostering stronger collaboration with the private sector. The partnership with industries is crucial in creating tailored training programmes that enhance trainees’ employability and productivity. A key strategy in this collaboration can be the implementation of work-based learning, providing students with hands-on experiences in authentic workplace settings. This approach effectively integrates theoretical knowledge with practical applications, bridging the gap between classroom learning and real-world challenges. However, to foster a successful collaboration, adequate economic and regulatory incentives are necessary to stir the interest of the private sector.

Conclusion

In summary, Cambodia’s pursuit of high-income status depends significantly on the transformation of its education and training system. A multi-faceted approach, which encompasses quality basic education, effective integration of digital technology, improvement of the STEM pipeline and enhanced TVET through industry collaboration and linkage, is imperative. The government’s commitment to these reforms, coupled with strategic partnerships, will foster resilient and sustainable economic growth to become a high-income country by 2050.

References

  • Andreoni, Antonio, and Tregenna, Fiona. “Escaping the middle-income technology trap: a comparative analysis of industrial policies in China, Brazil and South Africa.” Structural Change and Economic Dynamics 54 (2020): 324-340.
  • Chea Phal, Bo Chankoulika and Minami Ryuto. 2022. Cambodian Secondary School Teachers’ Readiness for Online Teaching During the Covid-19 Pandemic. CDRI Working Paper Series No. 134. Phnom Penh: CDRI.
  • CDRI and MoEYS. 2023. “Learning Ability Gap between Male and Female Students at the Upper Secondary Schools.” Phnom Penh: CDRI and MoEYS.
  • Kao, S., Chea, P. and Song, S. Upper Secondary School Tracking and Major Choices in Higher Education: to Switch or Not to Switch. Education Research Policy Practice (2023).
  • National Institute of Statistics (NIS). 2021. Report of Cambodia Socio-Economic Survey 2019/2020. Phnom Penh: NIS.
  • 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.
  • Song, S., and Chea, P. (2023). Vocational Education and Training in Cambodia. In: Symaco, L.P., Hayden, M. (eds) International Handbook on Education in South East Asia. Springer International Handbooks of Education. Springer, Singapore.
  • United Nations International Children’s Emergency Fund (UNICEF). 2022. “Learning Loss in the Covid-19 Pandemic Era: Evidence from the 2016-2021 Grade Six National Learning Assessment in Cambodia.” Phnom Penh: UNICEF
  • UNICEF and SEAMEO. 2020. “SEA-PLM 2019 Main Regional Report, Children’s learning in 6 Southeast Asian countries.” Bangkok: UNICEF and SEAMEO
  • World Bank. 2019. Cambodia’s Future Jobs: Linking to the Economy of Tomorrow. Phnom Penh: World Bank

Zero Carbon for Whom? The Need for Equity in Environmental Sustainability

Posted on by piseysorn

សារគន្លឹះ / Key Messages:

  • ព្រៃឈើ ការប្រើប្រាស់ដី ការធ្វើកសិកម្ម និងថាមពលកកើតឡើងវិញ ដើរតួនាទីយ៉ាងសំខាន់ក្នុងការលុបបំបាត់ការបញ្ចេញកាបូនក្នុងសកម្មភាពសេដ្ឋកិច្ច ដើម្បីសម្រេចបាននូវភាពអព្យាក្រឹតភាពក្នុងការបញ្ចេញកាបូននៅក្នុងប្រទេសកម្ពុជានៅឆ្នាំ២០៥០។
  • ដើម្បីសម្រេចបាននូវគោលដៅនេះ ប្រកបដោយបរិយាបន្ន គ្រួសារនៅជនបទ ដែលពឹងផ្អែកលើធនធានធម្មជាតិ សម្រាប់ការផ្គត់ផ្គង់ជីវភាពគ្រួសារ គួរតែត្រូវបានផ្តល់អាទិភាព នៅពេលបង្កើនផ្ទៃដីព្រៃឈើ។
  • គ្រួសារកសិករតូចៗ គួរតែទទួលបានការផ្តល់អាទិភាពនៅពេលធ្វើតុល្យកម្មរវាងនិរន្តរភាពផលិតកម្ម និងកាត់បន្ថយការបំភាយឧស្ម័នពីកសិកម្ម។
  • ថាមពលស្អាត និងកកើតឡើងវិញ គួរតែមានតម្លៃសមរម្យ និងអាចប្រើប្រាស់បានសម្រាប់គ្រួសារនៅជនបទ និងសហគ្រាសធុនតូច និងមធ្យម (SMEs) ជាពិសេស សហគ្រាសដែលដឹកនាំដោយស្ត្រី។
  • ការបណ្ដុះបណ្ដាលជំនាញបៃតង គួរតែត្រូវបានបញ្ជ្រាបនៅក្នុងប្រព័ន្ធអប់រំផ្លូវការ និងក្រៅប្រព័ន្ធ ហើយត្រូវផ្តោតលើអ្នកដែលមានការអប់រំ និងជំនាញមានកម្រិត។
  • Forestry, land use, agriculture and renewable energy play important roles in decarbonizing economic activity to achieve carbon neutrality in Cambodia by 2050.
  • To achieve this target in an inclusive way, rural households who depend on natural resources for their livelihoods should be prioritised when increasing the forest cover.
  • Smallholder farmers should be prioritised when balancing sustainable production and reduction of emissions from agriculture.
  • Clean and renewable energy should be made accessible and affordable for rural households and small and medium-sized enterprises (SMEs), especially women-led
  • Green skills training should be mainstreamed in both formal and informal education systems, targeting those with limited education and skills.

Cambodia Vision 2050 and the Pentagonal Strategy Phase I set a target for Cambodia to become an upper middle-income country by 2030 and a high-income economy by 2050 (Royal Government of Cambodia [RGC], 2023). The target concerns not only income, but also social inclusiveness and environmental sustainability. To achieve environmental sustainability, the country aims to decarbonise its economic activity by 2050 (Ministry of Environment [MoE], 2021). However, it needs to pay attention to marginalised segments of the population to ensure social inclusiveness in order to do so. This article discusses these implications and suggests ways for ensuring that Cambodia will be socially inclusive and environmentally sustainable while becoming economically prosperous.

The Long-Term Strategy for Carbon Neutrality (LTS4CN) entails how to achieve the target of zero-carbon by 2050 (MoE, 2021). Specifically, this strategy stresses the key role of the forestry and other land use (FOLU) sector in achieving this target. The LTS4CN modelling suggests that Cambodia could be zero-carbon by 2050 if the FOLU sector provided a total carbon sink of 50 megatons of carbon dioxide equivalent (MtCO2e) by that year. For this to happen, the strategy aims to increase the forest cover to 60 percent of total land area by 2030 and maintain it until 2050, and to reduce emissions from agriculture by 30 percent by 2050. Cambodia has great potential to expand the current forest cover, which is over 40 percent (MoE, 2020). As the country expands the size of protected areas to over seven million hectares (Flynn, 2023), it has also made commitments to plant one million trees every year.

The focus on the FOLU sector is crucial since it is the main source of greenhouse gas emissions. For example, the total emissions, chiefly from the FOLU sector, were estimated to be 163,882 Gg of CO2-eq in 2016 (MoE, 2019). This represented a substantial 284 percent increase compared to the emissions recorded in 1994. The primary driver of this rise was deforestation, which is reflected in the large emissions from this sector.

Hence, increasing the forest cover and reducing emissions from agriculture will enhance the capacity to sink and offset carbon from other sectors. But this needs to be realised in an equitable way. Cambodia is still predominantly rural, with 75 percent of the populace living in rural areas and many of whom still depend on natural resources for their livelihoods (National Institute of Statistics, 2022). Rural poverty remains high, at 23 percent in 2020 (World Bank, 2022). Agriculture is still significant for economic growth and poverty reduction, employing 35 percent of the labour force in 2020 (World Bank, 2022). The sector comprises mainly smallholder farmers, doing subsistence farming in traditional ways that are prone to climate change. These farmers cannot afford smart technologies that are environmentally friendly and climate-resilient. Thus, promoting sustainable agriculture that balances production and emission targets is challenging if comprehensive and well-linked policies are not in place. In other words, the move to smart and sustainable agriculture needs to consider smallholders’ conditions and challenges.

To achieve environmental sustainability, another target is to have 100 percent renewable electricity generation by 2050 (MoE, 2021). Cambodia is committed to clean and renewable energy. In 2022, renewable energy comprised 61.06 percent of the domestic power production, and hydropower comprised 53.89 percent of renewable energy (Electricity Authority of Cambodia [EAC], 2023). The government has stopped granting new approvals for coal power plants and hydropower dams on the Mekong River. Along with efforts to reduce fossil fuels, relevant policies emphasise the transition to clean and renewable energy in economic activity and household consumption. However, the inclusive execution of these policies needs more consideration, taking into account poor households’ livelihoods. While access to the national power grid is high at 98.27 percent of villages using it in 2022 (EAC, 2023), most rural households rely on fossil fuels like charcoal and wood for cooking and other consumption. In 2019, wood and charcoal made up more than 90 percent of the total household energy used in rural areas (World Bank, 2019a). Thus, policies need to make clean and renewable sources of energy attractive, accessible and affordable for rural households to reduce their dependence on fossil fuels.

The transition to clean and renewable energy also needs to go along with the interests of small businesses. This is paramount since SMEs (over 60 percent of which are run by women) dominate the private sector and provide a significant source of employment in the informal economy (World Bank, 2019b). While the green industry in Cambodia is growing, SMEs still struggle to go green in their business (UNDP, 2019). SMEs have limited access to clean and renewable energy for their production due to financial and regulatory barriers (Sean and Ngin, 2023). Hence, the transition needs to maintain and enhance SMEs’ productivity and competitiveness if they are to go green.

Also concerning the transition to green energy is the potential to create green jobs, which is emphasised along with the anticipated benefits of green growth. It is estimated that the investments to be made under the LTS4CN have the potential to create 449,000 green jobs and contribute 2.8 percent to the annual GDP by 2050 (MoE, 2021). However, relevant policies do not address how to prepare workers, especially women, who will lose their jobs to reskill or upskill to take up green jobs. Green skills are quite challenging to achieve, especially for marginalised groups with limited education and skills. Nine in ten Cambodian workers work in elementary or low-skilled jobs (NIS,2021). Only 60 percent of students complete lower secondary schools (ibid). Thus, the potential of green jobs would be realised if it were well-linked to the overall human capital strategy and target the underperformed. Currently, green skills are just an add-on in the education and training curricula. Provision of green skills training is mainly project-based.

In conclusion, policies and strategies for carbon neutrality lack details of how to achieve equity in environmental sustainability. Here are some suggestions for an inclusive decarbonisation pathway:

  • Prioritise rural households who depend on natural resources for their livelihoods when increasing the forest cover.
  • Balance sustainable production and reduction of emissions from agriculture, prioritising smallholder farming.
  • Make clean and renewable energy accessible and affordable for rural households and SMEs, especially women-led

Embed green skills training in both formal and informal education systems and target those with limited education and skills.

References

  • Electricity Authority of Cambodia (EAC). 2023. Salient Features of Power Development in the Kingdom of Cambodia until December 2022. Phnom Penh: EAC.
  • Flynn, Gerald. 2023. Skepticism as Cambodia expands protected areas by more than a million hectares (29 August). Available at: https://news.mongabay.com/2023/08/skepticism-as-cambodia-expands-protected-areas-by-more-than-a-million-hectares/
  • Ministry of Environment (MoE). 2019. National GHG Emissions Inventory Report. Phnom Penh: MoE.
  • Ministry of Environment (MoE). 2020. Cambodia Forest Cover 2018. Phnom Penh: MoE.
  • Ministry of Environment (MoE). 2021. Cambodia: Long-Term Strategy for Carbon Neutrality (LTS4CN). Phnom Penh: MoE.
  • National Institute of Statistics (NIS). 2021. Report of Cambodia Socio-Economic Survey 2019/2020. Phnom Penh: NIS.
  • National Institute of Statistics (NIS). 2022. Report of Cambodia Socio-Economic Survey 2021. Phnom Penh: NIS.
  • Royal Government of Cambodia (RGC). 2023. Pentagonal Strategy Phase I. Phnom Penh: RGC.
  • Sean, Chanmony and Ngin, Chanrith. 2023. Summary Report on Green SMEs in Cambodia. Phnom Penh: Cambodia Development Resource Institute.
  • United Nations Development Programme (UNDP). 2019. Cambodia: Derisking Renewable Energy Investment. New York: UNDP.
  • World Bank. 2019a. Improved energy technologies for rural Cambodia. Phnom Penh: World Bank.
  • World Bank. 2019b. Exploring the Opportunities for Women-owned SMEs in Cambodia. Phnom Penh: World Bank.
  • World Bank. 2022. Cambodia Poverty Assessment 2022: Toward a More Inclusive and Resilient Cambodia. Phnom Penh: World Bank.