PHNOM PENH, Cambodia — The Cambodian economy is resisting the global trend of slowing growth affecting the rest of the world. According to the World bank, the gross domestic product is projected to increase by 7.3 percent in 2015 and by 7.5 percent in 2016, and despite recent challenges, Cambodia’s economy is looking more energetic than many in the region.
According to the Asia Development Bank, Cambodia’s economy has been growing at an increasing rate, going from six percent in 2010, 7.1 percent in 2011 and to 7.2 percent in 2012. This growing expansion, while still fairly modest, could be an indicator of an exciting take-off down the road for Cambodia.
The growth is due mostly to two industries: tourism and garment manufacturing. Cambodia’s beautiful landscapes and rich history have attracted tourists from all over the world, mainly Europe and America. The low cost of labor there, meanwhile, has attracted investors from all over the world. A growing increase in direct foreign investment is making the economy jump.
However, citizens are not feeling it equally. In late 2013 and early 2014, political unrest and labor protests dented the investment trend and caused a drop-off in tourism. The labor protests were centered in the garment industry. Workers had organized to negotiate for better working conditions and a higher minimum wage. The protests quickly devolved into violence, and for several months the government of Cambodia and the garment manufacturing industry were at loggerheads. In August of 2014, the riots ceased with an agreement signed by both sides. The government agreed to share leadership of the National Assembly of Cambodia with labor representatives to better protect the interests of minimum-wage workers.
With the cessation of violence, Cambodia’s economic growth has resumed its impressive acceleration.
Currently, Cambodia has a very low rate of inflation and unemployment, indicating that its growth is healthy and sustainable, at least from an economic perspective. It is expected that in the next few years, European, American and Thai trade partners will increase their investment in Cambodia. The gross national income per capita, already inching upwards, is steadily approaching the U.S. $1045 threshold that is the global definition of a lower-middle income country; a worthy goal for any developing country.
An additional challenge facing Cambodia is achieving the right kind of growth. Srinivas Madhur, director of research at Cambodia Development Resource Institute, says, “A key restraint to growth is the skill mismatch, or the lack of adequately skilled labour in the high-end industries.” Only about 14 percent of the population is enrolled in tertiary education. This means the pool of highly skilled labor is very small.
Without a generation of energetic and well-educated local labor, the development Cambodia will experience will likely be incomplete, with sectors of the population left behind, and the best jobs going to foreign experts.
Cambodia remains one of the poorest countries in Asia. If it can build stronger educational infrastructure and balance foreign investment with local interest, that may not be true for much longer.
– Marina Middleton
Sources: World Bank, Asian Development Bank, Heritage, Find that Data, BBC