Cambodia Investment Review
A recent report by the Asian Development Bank (ADB) highlights the importance of scaling up green investment in Cambodia to unlock growth potential and build climate resilience. The report underscores the country’s vulnerability to climate change, weak governance, and reliance on climate-sensitive sectors as factors that necessitate climate resilience for sustained economic growth.
The ADB report states, “Cambodia ranks 149th among 182 countries in the 2022 Notre Dame-Global Adaptation Index, indicating a need for significant improvement in climate resilience.” The country is particularly prone to floods, with the report noting, “Cambodia scores 9.5 out of 10 in the 2023 global risk index for humanitarian crises and disasters.”
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The report warns that climate change, if left unaddressed, could significantly hamper Cambodia’s long-term growth, holding down its GDP by about 10% by 2050. This would primarily result from labor productivity lost to extreme weather events and rising temperatures. Agriculture and tourism are cited as the most vulnerable sectors.
Reducing carbon footprint presents new growth opportunities
Cambodia has ambitious goals of becoming an upper-middle-income country by 2030 and a high-income country by 2050. The ADB report emphasizes the need to factor climate change into the nation’s economic growth strategies, stating, “While Cambodia is currently a low emitter of greenhouse gases, its emissions are rising due to deforestation, expanded rice cultivation, and growing energy demand from industry.”
The ADB report suggests that reducing its carbon footprint presents new growth opportunities for Cambodia, as global demand for environmentally sustainable products and services continues to rise. Transitioning to a net-zero economy could create higher-quality jobs and attract global investors increasingly interested in green investment.
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The Cambodian government’s commitment to green growth is evident in its National Strategic Plan on Green Growth, 2013-2030, and its Long-Term Strategy for Carbon Neutrality by 2050. To unlock its growth potential, the ADB report recommends that Cambodia focus on scaling up green investment in priority sectors, such as renewable energy, energy efficiency, climate-smart agriculture, and natural capital management.
Increase investment in renewable energy and energy efficiency
The report observes, “Cambodia boasts abundant solar energy resources, making it well-positioned to increase investment in renewable energy and energy efficiency.” The importance of agriculture in the country’s food security and commercial potential necessitates prioritizing climate-smart agriculture practices and natural capital management, according to the ADB.
The ADB report also stresses the importance of investing in climate-resilient infrastructure, stating, “Constructing and upgrading transportation networks, water supply systems, and urban infrastructure to withstand the impacts of climate change is critical to promoting growth and ensuring long-term sustainability.”
By following the ADB’s recommendations to scale up green investment in these priority sectors, Cambodia can pave the way for sustainable, resilient growth while addressing the challenges of climate change. In doing so, the country can achieve its aspirations of becoming an upper-middle-income nation by 2030 and a high-income country by 2050.