“The government has been trying to transform the [COVID-19] crisis into opportunities, by accelerating in-depth reforms to improve the business climate and strengthen Cambodia’s competitiveness.”
Keynote speech by Samdech Akka Moha Sena Padei Techo Hun Sen Prime Minister of Cambodia at the 14th Outlook Conference
The 14th Outlook Conference held on 6 October 2022 brought together leaders in government, business, development, and academics to discuss these important issues. The conference focused on exploring possible ways forward for Cambodia to achieve inclusive and sustainable development in the context of post-COVID-19 recovery in order to achieve upper-middle income country status by 2030. This policy brief outlines the policy considerations which emerged from the conference, beginning with risks and opportunities facing Cambodia, changes that should be made to Cambodia’s pre-COVID economic strategy, and the urgent actions that public private partnerships should undertake to achieve economic development.
Prior to the COVID-19 pandemic, Cambodia’s economic development strategy was exemplary. Beginning in 2010 through 2019, the Cambodian economy grew 7% annually making it one of the fastest growing countries in the world and enabling it to achieve lower middle income country status in 2015. However, by 2020, Cambodia experienced its first recession in 30 years placing increased burden on Cambodia’s most vulnerable populations.
COVID-19 and other global pressures, such as environmental degradation, geopolitical instability, and economic nationalism, continue to impact the nation’s development. As a result, Cambodia needs a new direction for growth which will thrive through the new challenges of a continuously changing world.
On the economic front, Cambodia’s growth model needs greater diversification and industrial upgrading, particularly focusing on digital opportunities. Cambodia’s gross domestic product growth in 2020 and 2021 was smaller in comparison to other countries in the region with more diversified export bases. Cambodia also faces geopolitical risks stemming from the war in Ukraine and maintaining a balanced position in the emerging new world order.
On the environmental front, climate change, deforestation, and agricultural water resource governance in the Mekong River threaten the agriculture-dominated rural population. Environmental changes brought about by climate change and governance of water resources is a key issue considering the agricultural sector’s importance for livelihood resilience in Cambodia.
Finally, any future development strategy will need to broaden its horizons to consider a range of multi-dimensional poverty and social indicators. Livelihoods are determined not just by income, but also by food security, access to basic infrastructure, opportunities for education, and a sense of empowerment.
The conference identified four mega trends that Cambodia needs to consider in formulating its development strategy. These mega trends include geopolitical tensions, climate change, the Industrial Revolution 4.0 and digitalisation, and increased regional protectionism coupled with the global economic slowdown.
The COVID-19 pandemic and unfolding global events have generated health and social impacts on an unprecedented scale. The global economic crisis and recent trend toward nationalism and regional protectionism has led to significant reshoring of manufacturing from developing countries to higher income countries. Cambodia can overcome this series of turbulent economic and geostrategic shocks that it currently faces if its future economic development strategy is based on rapid, durable, inclusive, and environmentally sustainable growth. One factor relevant to achieving a sound development strategy that still needs to be addressed would be the evolution of Cambodia’s unorthodox monetary policy settings alongside intensified resource mobilisation efforts as the country graduates from least developed country status supplemented by measures to enhance supply-side competitiveness, phasing out the ‘dual’ commercial incentives regime, and reforming the fiscal incentives framework.
Cambodia’s pre-COVID development was very successful, however the uncertainties and disruptions at both regional and global levels exposed the cracks of this model. The reliance of the economy on four sectors (tourism, construction and real estate, agriculture, and manufacturing) was destabilised when all four were significantly impacted by COVID-19 and the global recession. Increases in wages were not matched by increases in productivity and quality of goods, which lessened Cambodia’s competitiveness in the global market. Revising pre-COVID policy directions would ensure greater economic recovery and achieve the government’s goals for inclusive and sustainable development.
The conference outlined the following areas of future research.