“The Royal Government of Cambodia steadfastly adheres to its commitment in realising the aspiration of becoming an upper middle-income country by 2030 and ultimately achieving a high-income country by 2050. […] Cambodia must adhere to the spirit of ‘continued reform and stay proactive’ by trying to build resilience and promote economic diversification.”
For Cambodia to move from a lower middle-income country (LMIC) to upper middle-income country (UMIC) status, its national income per capita (GNI per capita of current US$) needs to increase from the current level of $1,700 (its 2022 figure) to at least $4,046 in 2030 (according to the World Bank 2022 classification ). Prior to the COVID-19 pandemic, Cambodia’s impressive economic growth rate over the past two decades made the vision for UMIC status by 2030 a viable target. However, the Cambodian economy was hard hit by the pandemic and subsequent regional and global economic shocks that resulted in rising inflation and growing geopolitical instability.
Leading up to the pandemic, Cambodia’s limited economic diversification had not greatly affected the rapid pace of growth (see figure below) but did limit its inclusiveness in who participated in that growth. Between 2010 and 2019, Cambodia went through a structural transformation involving rural-to-urban migration as workers transitioned from agriculture into industry and services. However, those structural economic changes may be reaching their limits. The horizontal shift into sectors producing higher value-added products and services has generated a one-off increase in productivity that is not sustainable long-term. Therefore, in the future, Cambodia’s economic growth will have to come from intra-sectoral diversification, which requires a vertical shift into higher value-added products and activities within all sectors. This type of diversification is often referred to as moving up the value-chain. Within manufacturing, moving up the value-chain involves greater participation in global supply chains, which Cambodia has initiated but needs to increase. This new type of structural transformation will require overcoming binding constraints related to human capital, business costs, and the quality of institutions and governance.
CDRI’s preliminary analysis and consultation workshops with relevant national and international stakeholders completed so far regarding its research on Cambodia’s 2030 Vision suggest that achieving the 2030 target is an ambitious task amidst current geopolitical challenges and volatile regional and global economic climate. Achieving UMI status also requires substantial reforms addressing the underlying constraints for long-term growth and development.
Participants at this year’s Outlook Conference reached a consensus around two additional goals that must be met in order to meet the 2030 Vision. First, reaching the 2030 Vision genuinely and sustainably will require Cambodia to go beyond merely generating economic growth. Instead, Cambodia must ensure its growth is inclusive, sustainable, and resilient. Prioritising policies that explicitly include women and people with disability by combatting discrimination in hiring and promotion, providing childcare subsidies, and ensuring higher wages and workplace security will only serve to strengthen Cambodia’s future workforce. Second, Cambodia must prioritise not only reaching the 2030 Vision but also build the foundations for future progress towards becoming a high-income country by 2050. Building in this awareness now will allow Cambodia to avoid the so-called middle-income trap experienced by many countries around the world. Both goals will require sustained attention to strengthening the foundations of human capital and institutions that underpin long-term development.