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Cambodia can utilize post-COVID recovery for economic reform: ADB

Harrison White

The Asian Development Bank in Cambodia (ADB) is ready to assist the country implement its ambitious economic reform agenda as the Kingdom looks to bounce back repressed growth due to the COVID pandemic.

Speaking to Cambodia Investment Review ADB Acting Country Director Mr. Anthony Gill explained the country’s economic prospects looked strong post COVID and would be further boosted if the government focused on implementing its recovery, resilience and reform agenda.

“Cambodia has got a lot of things rights over the last two years, including achieving high vaccination rates among the population (88.6% vaccinated by December 2021) while introducing a series of measures to support and revive business activities and protect incomes and livelihoods of the poorest households,” he said.

Gill explained that the Cambodian government had already allocated over $800 million in 2020 and close to $1.5 billion in 2021 for health, social, and economic interventions, Cambodia maintained macroeconomic and financial stability and prevented a significant increase in poverty.

To read more about Cambodia’s 2022 economic outlook click here.

“The government’s COVID-19 emergency cash transfer program helped build resilience and avoid a sharp increase in poverty – simulations suggest that without the transfer, 17.3 percent of Cambodian households would have been pushed below the international poverty line of $1.9/worker/day,” he said.

However Gill noted that Cambodia’s post COVID recovery was the right time for the country to continue developing its reform agenda referencing the government’s Strategic Framework for Economic Recovery.

“The framework offers important lessons from the pandemic to ensure an inclusive recovery, and outlined the 3 R’s – recovery, reform and resilience – that will be key to getting the economy back on track,” he said.

Harrison White Cambodia
ADB Acting Country Director Mr. Anthony Gill and Cambodia Investment Review reporter Harrison White talk at the ADB Cambodia Head Office in Phnom Penh.

“The priorities outlined are all important, but will require substantial resources and financing mechanisms together strong institutional coordination and capacity across government departments and development partners supporting each pillar to put plans into action,” he added.

The 3R’s include:

  • Recovery (reviving sectors that were previously important engines of growth prior to the pandemic and ensuring that they generate more and better jobs).
  • Reform (structural reform measures to improve the business and investment environment, competitiveness, and economic diversification).
  • Resilience (Strengthening preparedness and responsiveness to future shocks, focusing on developing human resources and productive capacity, improving resilience to climate change, harnessing digital technology, and strengthening health and social protection systems).

Developing Cambodia’s workforce

Increasing productivity levels amongst Cambodia’s workforce has been a top priority for development organizations to assist the country to achieve its ambitious aim of becoming an upper-middle country by 2030.

“Cambodia can strengthen skills development ecosystem in partnership with the private sector, industry or business associations and investors to provide skills development opportunities for the current and future workforce,” Gill said.

Upper middle-income countries are defined as economies with a gross national income per capita of between $4,406 and $12,535 that currently includes regional neighbors Thailand and Malaysia.

“Employer and industry-led training opportunities in Cambodia are still limited however public and private training providers in Cambodia can enhance flexible and stackable skilling pathways for the workforce to meet emerging and future demands that are relevant to industries in 4IR and green economy,” Gill said.

“For example, many foreign investors face challenges to find adequate number of mid-level management and technicians with right skills set including both technical and soft skills for problem-solving, communication, team work skills,” he added.

In addition, the ADB believes that properly utilizing trade agreements and regional cooperation’s initiatives already implemented will further open up Cambodian economy. Adding, the government of Cambodia should maximize such opportunities by increasing skilled workforce required for diversified and sustainable economy.

To read more about opportunities of free trade agreement for Cambodia click here.

Continue expanding Cambodia’s social services

The COVID pandemic has somewhat forced the Cambodia government to address the large number of its population that work predominately in the informal sector and are highly vulnerable to economic downturns – not seen in Cambodia since the Global Financial Crisis in 2008.

The ADB stated the country’s IDPoor system has become the primary mechanism for identifying poor and vulnerable households for a range of social benefits including cash transfers to support human capital development during “normal times” but also emergency transfers in the face of an unprecedented shock such as COVID-19.

The IDPoor card is part of the “Cash Transfer Programme for Poor and Vulnerable Households,” a government initiative designed to help strengthen social protection in Cambodia in the face of COVID-19.

“As of October 2021, 95 percent of eligible IDPoor households (678,459 households) or 19 percent of all households in the country, had received support through the COVID-19 cash transfer program. These transfers not only helped avoid pushing “near-poor” households below the poverty threshold, but likely also lifted around 164,000 households out of poverty compared to pre-pandemic baseline,” Gill said.

ADB Cambodia
ADB Cambodia security staff outside the development organizations Head Office in Phnom Penh.

“The transition to an on-demand IDPoor now allows poor households to self-register themselves in the government database at any time without needing to wait for periodic updates every three or four years to be identified for critical social assistance,” he added.

However the increase social spending resulted in Cambodia’s foreign owned debt-to-gross domestic product ratio hit record highs last year at 34% with development organizations previously stating Cambodia can borrow 40% of its GDP before becoming a risk.

To read more about Cambodia’s economic debt levels click here.

According to Gill an assessment of Cambodia’s key economic and financial indicators including revenue collection, exchange rate, inflation, balance of payments, and liquidity in financial sectors shows that the public debt situation is stable and low-risk.

“Of course, there is still room for mobilizing more financing, bilaterally and multilaterally, and through domestic resource mobilization, he said.

“But investing in social assistance and social protection systems today has multiplier effects, by stimulating and smoothing consumption among the poor in the short term, promoting human capital development in the medium to long term, and building resilience in the face of future economic, health, and environmental shocks,” he added.

The ADB’s country partnership strategy for Cambodia, 2019–2023 states it will focus on the country’s post-pandemic recovery by strengthening the health systems and addressing key constraints to growth, competitiveness, inclusion, and sustainability.

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