To maintain its current level of economic growth, Cambodia must climb up the regional value chain, expanding beyond garments and into more advanced, technology and skill intensive industries, economists said during a consultation meeting at the Ministry of Economy and Finance last week.
The government has an important role to play in ensuring a smooth transition, promoting the involvement of the private sector and facilitating entrepreneurship for the younger generations, attendants to the event concluded.
Senior economists from the Word Bank (WB), the Asian Development Bank (ADB) and the International Monetary Fund (IMF) convened last Monday in Phnom Penh for a consultation meeting on the future of the nation’s economy with senior officials from the Ministry of Economy and Finance.
Secretary of State for the Ministry of Economy and Finance Vongsey Vissoth said that, according to official forecasts, the country’s GDP growth will equal seven percent in 2018 and 2019.
The agriculture sector will grow by 1.8 percent while the industrial sector could expand by as much as 10 percent, driven by growth in the garment and construction industries.
Mr Vissoth also said that the service sector is forecast to expand by seven percent following strong performances of the wholesale, retail and tourism sectors, while domestic consumption is already on the rise after Prime Minister Hun Sen announced salary raises for civil servants.
However, he pointed out that more products and destinations are needed in the local tourism market to keep luring increasing amounts of visitors into the country.
“There are significant challenges up ahead, both internal and external,” Mr Vissoth said. “They include the United States’ current monetary policy, attracting investment, the lack of finance for the private sector, the slowdown of Chinese economy, and increased competition at the international level.
“Meanwhile, the cost of doing business in Cambodia is high, particularly after the recent hike of the minimum wage,” he explained.
Due to the small size of its economy, the country is very sensitive to external shocks, Mr Vissoth said.
Economists from WB, IMF and ADB and Cambodian officials agreed that the country must now focus on diversifying its economy to increase its competitiveness on the world stage.
With regards to the garment sector, a key engine of economic growth, the economists said the government should adopt a longer-term view of the industry’s development, drafting a strategy for the next 10 years, while encouraging more local investment.
However, they said more advanced forms of manufacturing should be targeted as they have the potential to attract larger sums of capital and could engage local enterprises. To that end, speakers called for the establishment of the SME Bank to be given priority.
In December last year, Prime Minister Hun Sen pledged to start a new bank with an initial capital of $100 million to provide financing for small and medium-sized enterprises (SMEs).
Economists at the meeting also said that governmental guidance is key to establish new engines of growth, and encouraged the authorities to create an entrepreneurship fund that will make it easier for young, aspiring entrepreneurs to turn their ideas into reality.
“Cambodia should be able to maintain its current economic growth in the next five years,” Jayant Menon, ADB’s lead economist for regional trade and cooperation, told Khmer Times.
“The challenge will be to do that in a sustainable and inclusive way,” he said.
Mr Menon said the main hurdles to move up the regional value chain are an insufficiently skilled labour force and the high cost of electricity.