Economic Transformation in Cambodia: Prospects, Challenges and Avenues for Further Analysis

Dirk Willem te Velde, April 2019


Cambodia has been the sixth-fastest growing country in the world over the past two decades and it has reduced poverty and inequality significantly. It graduated to lower-middle-income country (LMIC) status in 2015. It has achieved remarkable growth in exports of garments, attracted record numbers of tourists, expanded agricultural land leading to significant exports of rice, benefited from high commodity prices and recently witnessed a construction boom. It has also shown signs of diversification into bicycles, footwear and, to some extent, maize, vegetables, sugar and palm oil. Special economic zones have played a crucial role in kickstarting manufacturing.

However, Cambodia currently also faces major challenges to its hitherto successful growth model in the form of expected graduation from least developed country (LDC) trade preferences; limits to the natural asset base; vulnerability to shocks; and lack of high-quality governance capacities. Cambodia also faces new prospects and challenges owing to automation and digitalisation. These factors provide a more uncertain and potentially threatening context for Cambodia’s future economic transformation, which requires appropriate action for transformation and diversification.

This scoping paper introduces a number of options for further immediate policy analysis. Our discussions on Cambodia’s future transformation paths centre on the quality of skills (including quality and completion in secondary education; issues on science, technology, engineering and mathematics; industry–university linkages); the impact of the digital economy on transformation models based on manufacturing; and the quality and implementation of policies. We conclude that a crucial concern commonly expressed at present relates to gaining a better understanding of the role of appropriate and good quality education and skills in preparing for a digital economy.

Photo: Students take a computer course at the Banana Center, Cambodia. Masaru Goto/ World Bank. License: CC BY-NC-ND 2.0.