Cambodia’s Healthy Political and Economic Outlook

13 January 2015

PHNOM PENH (Khmer Times) – Cambodia is entering a new phase of political and economic development.  National, regional and global conditions shape the future of Cambodia. Economic performance remains good, and political development is on the right track.
According to forecasts, the Kingdom will retain its over 7% growth rate for the next few years. For 2015, the growth rate is estimated to be about 7.3%, slightly higher than 2014. However, the sources of growth still narrowly concentrate on the textile industry, construction, tourism and agriculture.
The economic structure is gradually diversifying through the development of light manufacturing industry, agro-industry, financial service and logistics. In addition, E-commerce will potentially take shape in the next few years.
The flow of foreign direct investment, especially from China, Japan, South Korea and other ASEAN emerging economies, is going to concretize such diversification of the economic structure and sources of growth and employment.
Skill gaps are the main constraint for  young workers and fresh graduates seeking suitable employment opportunities. The outflow of Cambodian migrant workers to the regional countries, especially South Korea, Thailand, and Malaysia, is going to increase.
Corruption and inefficiency on the part of the public sector continue to restrain the foreign direct investment flow and slow down economic competitiveness, seriously limiting the growth potential and poverty reduction efforts.
To maintain high economic growth, Cambodia needs to strengthen its fight against corruption, improve the quality of education, and accelerate the pace of skill development programs. Under the new leadership, the Ministry of Education has carried out serious reform, particularly with regard to vocational training.
Political development is generally on the right track. There is good progress in political reconciliation and dialogues, power accommodation and position adjustment between the two main parties: the Cambodian People’s Party (CPP) and the Cambodia National Rescue Party (CNRP).
Newly emerging grassroots-based political organization such as the Khmer for Khmer political network is going to transform country’s rural politics. Political decentralization and the empowerment of the rural local community will challenge the traditional power base of the long-ruling CPP.
Although the new normal Funcinpec party can partially restore its political trust and support, it remains minimal in shaping the fast-changing political landscape and dynamics in the country. The majority of the supporters of Funcinpec have either joined CNRP or CPP. Prince Norodom Rannaridh will find it difficult to convince them to rejoin Funcinpec.
If the small parties can mobilize their support, then it is highly possible to see the return of the establishment of a coalition government after the next general election. The Khmer for Khmer political movement may be transformed into a political party. It can get support from those who are politically neutral and undecided. It can potentially win some seats at the National Assembly.
In that case, the political system will move from the current bi-party back to a multi-party political system. More political actors will join political stage, and political power bargaining may become more complicated.
At the regional level, Cambodia will be greatly impacted by the regional community-building process. This year marks a special year for ASEAN and its member states.  ASEAN Community building will be largely completed by the end of this year, although there are remaining obstacles and gaps to be overcome.
Such deepening regional integration provides Cambodia an opportunity to attract more foreign direct investment, expand its export market, and develop its infrastructure and logistics to link with other economies in the region.
Meanwhile, ASEAN integration also pressures the Cambodian government to speed up institutional reform. To catch up with other member countries, Cambodia has no other choice but to increase its productivity, efficiency and competitiveness.
Cambodia could consider integrating two development models: the developmental state model practiced in East Asia, especially Japan and South Korea, and the successfully implemented social welfare state systems in Scandinavian countries.
As a small and poor country, Cambodia cannot do much to shape the global and regional political-economic development trends. But with strong leadership and national unity, it can smartly transform the external environment into the source of national strength.

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