Cambodia’s Development Path

Friday, 10 October 2014

PHNOM PENH (Khmer Times) – Developing Asia is maintaining its growth momentum. But the recovery process of  major industrialised economies remains uncertain and falls short of expectations, according to the Asian Development Bank.
The Bank estimates the growth rate of developing Asian countries is 6.2 percent, and for Southeast Asian countries 4.6 percent this year.  For Cambodia, the growth rate is slightly over 7 percent.
The ASEAN Economic Community scheduled to be completed in the end of 2015 will create more opportunities for Cambodia, but it needs to prepare to face intensive competition in  goods and services.
Locating in such a dynamic region full of potential, Cambodia can quickly move up the economic development ladder, from a labour intensive and natural resources based economy to a knowledge based economy.
Political leadership, bureaucratic capacity, social democracy, and entrepreneurship can unlock Cambodian potential.  Robust governance reforms and constructive social mobilization are preconditions to build an accountable and clean state institution.
If it can maintain an annual GDP growth rate of 7 percent in the next two decades, then Cambodia can realize its vision of becoming a middle-income country by 2030.
But the question is: how to sustain that high economic growth? The growth base relies on four sectors: garment industry, tourism, construction, and agriculture. It is therefore necessary to diversify the sources of economic growth.
To create new growth drivers, the Royal Government of Cambodia has introduced veconomic development policies that include industrial development policy and human capital development.
Industrial development policy aims to facilitate investment in industrial infrastructure, promote manufacturing industries and agro-processing, create more value to the service sector, and link domestic production bases with regional and global production networks.
Structural constraints in promoting industrialization are: weak institutional coordination, low technology knowhow, low human capital, insufficient infrastructure, limited financing, and lack of government’s facilitation and incentives.
The National Strategic Development Plan 2014-2018 lays out comprehensive economic reform programs, including business sector development. The private sector is regarded as the engine of economic growth. It plans to create a favourable investment climate to attract more foreign direct investment, promote domestic investment, and support local entrepreneurs.
Concerning human capital development, education reform has been robust under the new leadership. There are eight integrated reform measures: enhancing the quality and efficiency of education, strengthening personnel management, strengthening examinations, higher education reform, developing technical skills for the youth, reform of the public financial management, improving physical education and sports, and creating intellectual back in education sector.
Remaining challenges are the widening development gap between the rich and the poor, between the urban and rural areas. Socio-economic inequality and injustice  threaten long-term peace and development.
Development needs to go beyond economic growth. It has to include social policy.
For long term solutions to social and economic issues, Cambodia should develop a national welfare state and socially just development. It needs to carry out comprehensive reforms including taxation, labor market, pensions, health care, and education/training to serve interests of the people, not the elites.
Addressing social exclusion and injustice requires development of a structural social policy. It needs to address the sources and causes of structural vulnerabilities and power hierarchies.  Development programs need to promote social inclusion and accountability.

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