Cambodia Investment Review
Cambodia’s developmental ambitions are at a crucial juncture, facing significant threats from climate change, warns a newly released report from the World Bank. The Cambodia Country Climate and Development Report (CCDR) outlines a strategic framework aimed at safeguarding the country’s future, emphasizing the need for reducing exposure and vulnerability to climate impacts, realigning emissions trajectories, and reorienting the economy towards environmentally sustainable opportunities.
Read more: World Bank’s May Economic 2023 Outlook: Unlocking Potential on Cambodia’s FDI Future
The report highlights that Cambodia is already on the front lines of climate change, experiencing an increase in severe weather conditions. A drought that spanned from 2015–2016 wreaked havoc across 18 of the country’s 25 provinces and impacted over 2.5 million people. Furthermore, rice production losses related to the El Nino-triggered droughts of 2019 were estimated to cost $100 million. In September 2022, Cambodia experienced its most significant rainfall in three years, causing widespread flooding in 14 provinces and affecting some 85,000 households, necessitating the evacuation of 5,000 households due to landslides.
Cambodia Could Witness Up To A 9% Decline In Its GDP By 2050
“In order to recover the lost ground due to the pandemic and high food and energy prices, Cambodia needs to sustain high growth, while simultaneously addressing the profound impacts of climate change on its economy and making strides in reducing its carbon footprint,” said Manuela V. Ferro, the World Bank Vice President for East Asia and Pacific.
While Cambodia has posted remarkable economic growth, averaging 7.1% between 1995 and 2021, the World Bank report warns that these gains could be wiped out if the climate issue is not squarely addressed. The country managed to halve its poverty rate from 2009 to 2019 and has ambitious plans to elevate itself to upper middle-income status by 2030. However, without decisive climate action, Cambodia could witness up to a 9% decline in its GDP by 2050, accompanied by a rise in the poverty rate by as much as 6 percentage points by 2040.
Despite its impressive growth story, Cambodia’s development is hamstrung by a number of structural challenges. These include trade-related regulatory barriers, insufficient trade-related infrastructure, low levels of domestic investment, a decline in public capital investment, and increasing levels of private debt. The economy is also vulnerable to external shocks given its limited diversification in terms of exports, markets, sectors, and financing sources.
Action From Both The Government And The Private Sector
Mariam Sherman, World Bank Country Director for Myanmar, Cambodia, and Lao PDR, commented, “Cambodia’s economic vulnerabilities are further heightened by climate impacts, which add layers of complexity to an already intricate development landscape. Floods alone are projected to bring about increased losses to factories, roads, housing, and schools, and disrupt critical services and supply chains. The potential lowering of yields for staple crops and fisheries due to climate change could pose serious threats to food security and nutrition in the country. Moreover, higher temperatures and more extreme rainfall patterns are likely to exacerbate public health issues, including the prevalence of diseases.”
The CCDR report calls for immediate action from both the government and the private sector. It recommends that government-led initiatives should aim at improving the climate resilience of existing infrastructure, including road networks and educational and healthcare facilities. For the private sector, the focus could be on investments in energy-efficient cooling systems and flood-resilient buildings, among other adaptive measures.
The report also outlines potential economic benefits for Cambodia in the global shift towards a low-carbon economy. The country has seen a rapid increase in the share of solar energy in its total power generation capacity, which moved from almost zero in 2016 to 12.5% in 2021. The costs of solar energy are projected to decline further, making it an increasingly attractive option for the country’s energy needs. Cambodia has also committed to achieving carbon neutrality by 2050, a goal that the report suggests is not only feasible but can be achieved without compromising on developmental objectives.
The World Bank’s report underscores that for Cambodia, the imperatives of economic development and climate action are not mutually exclusive but are deeply interconnected. With a strategic approach, Cambodia can navigate the challenges and opportunities that come with being at the intersection of development and environmental sustainability, setting a precedent not just for itself but for other nations grappling with similar challenges.
