World Bank Outlines Key Reforms to Elevate Cambodia to Upper-Middle-Income Status, Government Affirms Implementation Progress

• 1 February 2024
• Local News
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Proclaiming the government’s dedication, Prime Minister Hun Manet has said, “The government steadfastly adheres to its commitment in realizing the aspiration of becoming an upper-middle-income country by 2030 and ultimately achieving a high-income country by 2050.” His unwavering commitment was underscored during a poignant address at the Cambodia Development Resource Institute conference in November.

As Cambodia charts its trajectory into 2024, the World Bank issues a strategic economic analysis, emphasizing pivotal reforms essential for the nation to realize its ambition of achieving upper-middle income status by 2030. The report, dated 13 December 2023, underscores the imperative of transformative changes in the business environment, infrastructure, and workforce to counteract a potential economic slowdown.

1. Transforming the Business Landscape: Small and medium-sized enterprises (SMEs) face obstacles in securing funding and demand increased competition to foster a conducive business environment. The World Bank report cites challenges predating the pandemic, such as corruption and intricate bureaucratic hurdles. Lim Viriya, co-founder of LM. LIMA Angkor Food, notes the pervasive impact on businesses, stating, “complex bureaucratic… in the system is hard to solve, which makes people afraid to do business. [they see] other owners close their businesses and lose money due to injustice in the business sector”

Heng Sok Kong, spokesperson for the Ministry of Industry, Science, Technology and Innovation (MISTI), acknowledges the challenges and underscores the government’s efforts to facilitate SME competitiveness. “All SMEs always have major challenges related to access to markets, finance, technology and information,” he said. “But the government is already aware of all these issues and has taken care to make continuous adjustments.”

Initiatives like the KhmerSME website aim to connect small businesses with financial institutions. As of end-2023, MISTI reported 44,628 registered manufacturing SMEs, reflecting a modest 1.5% increase from 2022.

2. Revitalizing Infrastructure and Logistics: A robust economy demands upgraded infrastructure and logistics, positioning Cambodia competitively on the global stage. The World Bank emphasizes the need for increased financing to enhance rail, road, and waterway connections linking Cambodia, Thailand, Vietnam, and Laos. Urban planning, with a focus on essential services such as water, sanitation, waste management, electricity, and telecommunications, emerges as a crucial component.

Ses Aronsakda, a research fellow at Future Forum, stresses that well-planned urban development enhances living standards, fostering economic growth. He asserts that “Rapid development must also be accompanied by increasing levels of livability.”

3. Bridging Workforce Gaps: Addressing workforce skill shortages emerges as a priority, with labor productivity growth witnessing a significant decline in the past five years. The World Bank underscores the need for urgent measures to tackle learning outcomes and high dropout rates, especially impacting children in poverty. Incentives like cash transfers may be pivotal in ensuring attendance and retention, especially for underprivileged children.

Kata Orn, spokesperson for the Labour Ministry, outlines the government’s proactive stance, with plans to provide vocational training to 1.5 million young people. He emphasizes that “We are striving to train workers to respond to the job market.”

Responding to the World Bank’s analysis, government spokesperson Pen Bona assures that key priorities have been implemented, supporting laws to enhance investments, logistics, infrastructure, human resources, and climate change adaptations.

“Even though [the World Bank publication] does not show these key implementations, the government has been implementing them,” he said.

However, the bank’s projections for Cambodia’s 2023 economic growth stand at 5.4%, a dip from the pre-pandemic 7.2% average over the preceding decade. Despite strides in poverty reduction, half the population still grapples with daily earnings of US$4.15 or less, according to the same source as reported by Cambojanews on 27 January 2024.

• Analysis
• Economy and Finance