Economic Development in Cambodia

Table of Contents

1. Introduction

2. Poverty and Inequality

3. Population Growth and Demographic Change

4. Conclusion

References

The banyan tree grows throughout Cambodia. It may reach a height of over 100 feet, and as it grows, new roots descend from its branches. […].

This is Cambodia today: a thousand intertwined branches, a thousand stories woven together, a thousand currents of history swirling in different directions. To understand Cambodia in the present, it is necessary to look at Cambodia in the past.

by Bruce Sharp

1. Introduction

Cambodia with its capital Phnom Penh is located in Southeast Asia. Bordering on Thailand, Vietnam and Laos it is home to 14.4 million people (2006) living on 181,040 sq km. On November 9, 1953 Cambodia gained its independence from France. Cambodia is one of the poorest countries in the world. With an average per capita gross national income of approximately $480USD (2006) the World Bank classifies it as a low-income country.

The aftermath of the reign of the Khmer Rouge from 1975 – 1979 has had a dramatic impact on its developmental state. Under the tyrannical grip of Pol Pot over two million Cambodians were brutally murdered and the country’s entire infrastructure was destroyed. Thirty years of civil war has led to pervasive levels of corruption throughout Cambodian society. Like every developing country Cambodia has to fight problems like poverty, unemployment, and inequality in general but has the additional burden of having to redress these problems without its best and brightest people since under Khmer Rouge rule this segment of society was eradicated. In addition Cambodia faces issues like a poor healthcare system, unequal income distribution, environmental problems, land tenure reform, high external dependence, foreign exploitation, poor living conditions, human rights issues and a countryside contaminated by land mines.

The current form of government is a multiparty democracy under a constitutional monarchy. Since 2004 the government has been headed up by King Norodom Sihamoni and Prime Minister Hun Sen who came to power in 1985. Major political control is under the Cambodian People's Party (CPP). Elections take place every five years but like others in western democracies the majority of Cambodians are lax about exercising their right to vote. Political and economic corruption is still a significant concern due in large part to the pervasive Cambodian view that wealth and power is more important than trustworthy business relationships and fairness. Cambodia ranks 151st out of 163 on the Corruption Perception Index. However Cambodia’s foreign policy office is making strides towards reintegration into the international community.

Cambodia is fairly homogeneous with about 90% of the population belonging to the Khmer ethnic group and 95% following Theravada Buddhism. As a result religious and ethnic conflicts do not arise. Most of the Cambodians are illiterate which is reflected by the low literacy rate of 73.6% (2004) though this figure is projected to be even lower in rural areas.

The amount of people that are becoming landless is on the rise. According to USAID Cambodia, landless families represented about 3% of total families in 1983. By 1999, this ratio had increased to about 12%, with landlessness in female-headed households being much higher at 21%. Insecurity about land ownership leads to many conflicts which in turn have exacerbated productivity. Land claims issues will become a point of contention in the future.

Cambodia is not overly endowed with known physical resources. There are some known mineral deposits, rain forest resources and some petroleum reserves but petroleum production for export has not yet commenced. Fishery makes up for a large part of basic nourishment. With one of the highest deforestation rates in the world Cambodia's primary rainforest cover fell from over 70 percent in 1970 to just 3.1 percent in 2007. Overfishing in combination with the deforestation problem threatens the fragile ecological system of Cambodia.

The robust GDP growth continued in 2006 with 10.5% p.a. with the inflation rate being as high as 5.4%. Economic growth is highly concentrated in the major cities, especially Phnom Penh. 30.3% of the land area is agricultural with primary concentration being on wet rice cultivation. Other cultivated crops are corn, vegetables, tobacco, cotton, and coffee. About 75% of the labor force works in the agricultural sector but all three sectors (agriculture, industry, and services) contribute about the same percentage to the GDP.

The main accelerators of the economy are tourism, adding 26% to the GDP (2006), garment exports which account for 20% of the GDP (2006), agricultural expansion and construction. Discovery of offshore oil and gas reserves in the Gulf of Thailand has piqued the interest of foreign investors and promises higher growth if the government is able to handle this new challenge and opportunity properly. However, it is widely noted that women working in the garment sector are being exploited by Western firms but also by China for even cheaper labor. The United States of America is Cambodia’s major export partner. 58% of all Cambodian exports go to the US due to the textile trade agreement (1999) with the majority of the remainder going to the EU. While this arrangement benefits the Cambodians it also makes them overly dependent on the USA. Official development assistance and aid especially from the US and the EU account for as much as 537.8 million USD (2005).

Cambodia’s financial service structure is largely underdeveloped and is further affected by high levels of corruption, the ineffective legal system, administrative barriers and the country’s poor infrastructure. Cambodians should remain cognizant of the fact that while foreign investment is generally good for competition and growth it can have the opposite effect if foreign companies have too much power or are not regulated properly.

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