Exports are up 12% in the first quarter of 2017 compared with the same period last year, thanks to the improved economic performance in countries which make up the markets, especially the United States and the European Union.
Data from the Ministry of Commerce shows exports reached $2.55 billion, compared with $2.28 billion last year. Hiroshi Suzuki, the CEO and chief economist of the Business Research Institute for Cambodia, said the growth rate was acceptable amid the economic recovery of main exporting destinations.
“Fortunately, the economies of the US and EU are in a better situation than last year, though it is far from the best condition. It seems that the Cambodian economy enjoys this lukewarm global economic situation,” he said. Cambodia also increased exports to new countries after trying to diversify for years, he added. “The International Labour Organisation reported that garment exports to countries other than the US and EU, such as Japan, Canada and China, increased in 2016.The diversification of export destinations is very important for the promotion of exports,” he continued.
in Suzuki’s view, diversification of the economic base would be essential to enhance exports, which could be achieved by attracting many more value-added industries such as Japanese parts manufacturing. Improvements to the investment environment, better labour productivity and positive investment in infrastructure, especially in logistics and the power sector would also be key.
By the numbers, however, Cambodia still has a big trade imbalance; the country imported a lot to supply the local consumption. Total imports in the first quarter of this year rose 13.3% on last year to total more than $3.2 billion. The trade deficit increased by 18.73%, equal to $117 million.
David Marshall, managing partner of research firm Mekong Strategic Partners, put the increase in the trade imbalance down to rising domestic consumption, which however also showed improvement in the production sector, which needed to import more raw materials.“Cambodia needs to boost its manufacturing base, for domestic and export consumption,” Marshall said. “A major hurdle for Cambodia is economies of scale and whether larger non-garment related companies feel it economically viable to relocate here, either for import substitution, as they have with cement manufacturing, or for export.”
Suzuki said it was natural for developing countries to see a trade deficit. Even Japan faced a very big deficit from the 1950s to the 1960s. “In the case of Cambodia, very fortunately, the deficit has been and is financed very well by foreign direct investment, earnings from tourism and official development assistance,” he said. “Cambodia has enjoyed being in the black in total balance of payments for many years and accumulated very big foreign reserves.”
The International Monetary Fund and Asian Development Bank as well as the government project that Cambodia’s growth will be around 7% this year with inflation below 5%.