Cambodia aims to become a high-income, developed country by 2050, and Prime Minister Hun Manet has consistently reaffirmed this vision.
This ambitious vision entails that 26 years from now, the Cambodian economy will be robust, resilient, diversified, industrialized, and sustainable with a gross national income (GNI) per capita of $13,846 or above.
In terms of society, Cambodia will attain positive peace with good governance and accountable institutions in place, respecting the rule of law, social justice, rights and human dignity. As to human development, Cambodians are expected to be highly educated, have skills responding to emerging labor market demands and have access to a strong social protection and assistance system.
Indeed, with the top leadership instilling such a visionary promise, can Cambodians today be optimistic about their future?
Pledge Of Leapfrogging Cambodia’s Socioeconomic Development
For the royal government, delivering on the monumental pledge of leapfrogging Cambodia’s socioeconomic development from its current lower-middle-income status will demand continued unwavering political commitment to transformative change.
Drawing from developmental success stories in the region, such as that of Singapore, Cambodia’s 2050 vision will be tested by the government’s sincere ability to implement strategic policies to generate strong and inclusive economic growth.
This can build a reliable reputation for the country to capture diversified foreign investments. Validly, creating a friendly environment for the environment cannot be successful without good governance reforms for clean and efficient public institutions, anti-corruption norms and respect for the rule of law, investments in human resources, and promotion of meritocracy. These are aspects that Cambodia still lacks.
Yet for a post-conflict state with a poor corruption perception score, Cambodia’s economic performance, averaging 7.6 percent annually pre-COVID-19 pandemic, is acknowledged as one of the fastest growing in the world. Thus, it was a success story.
However, in 2020, the Cambodian economy saw a 3.1 percent contraction for the first time in 25 years due to the global economic slowdown from the pandemic, affecting growth sectors including tourism, manufacturing exports, real estate, and construction.
In addition to COVID’s impact, in the same year, Cambodia’s leading garment industry bore the brunt of deteriorating commercial relations with top export markets – the EU and the US, over domestic human rights and corruption records, and growing ties with China amidst great power rivalry, which resulted in the 20 percent withdrawal of the EU’s Everything But Arms (EBA) preferential trade scheme, and the non-renewal of the US Generalized System of Preferences (GSP) after its expiry in December.
In post-pandemic years, Cambodia’s reputation for the effectiveness of institutions, corruption, and the rule of law has been unfavorably perpetuated by headlines about alleged land disputes, forced evictions of people living near the Angkor Archeological Park, international job scams, drugs and human trafficking, and scandals of tycoons committing frauds across the country among others.
Challenges Against The Current Economic And Governance Models
For the government, stakeholders, and analysts, these issues reveal the challenges against the current economic and governance models in realizing Cambodia’s 2050 vision. A National Bank’s assessment says the current foundation of Cambodia’s economy is vulnerable to global shocks due to heavy dependence on a narrow range of sectors, trade preferential schemes – often attached with intrusive conditions, and limited options in external demands, markets, and inflow of foreign direct investments (FDIs).
On the technical side, Cambodia is encouraged to pursue structural transformation to move up the value chain from cheap labor-intensive industries to value-added manufacturing and knowledge-based industries.
To mitigate risks, Cambodia is urged to diversify its export markets and to attract more foreign direct investment, in which China dominates, from a diverse source of partners.
The first steps to implementing these recommendations all circle back to good governance reforms at home. For the labor force to upskilling, transparent expenditure in human capital development is a priority.
To enhance productivity, competitiveness, and social cohesion of the workforce, fair access to quality public services needs to be guaranteed. To attract private and foreign firms to invest in Cambodia, which is situated next to robust performing economies such as Vietnam which are also proactively working on structural reforms to attract FDIs, a credible image of political stability with a strong legal and regulatory system is essential to persuade businesses over their pre-conceived perceptions and risk assessments.
On that point, several research works studying the effects of good governance on FDI inflows do find there to be a strong positive relationship between scores of good governance elements, such as the rule of law, regulation, and corruption, and FDI inflows among ASEAN countries, India, and China.
These studies imply that countries with high or improved good governance scores are generally able to attract more FDIs.
As it currently stands, the government’s pursuit of good governance reforms is a pragmatic approach for Cambodia to effectively implement its economic development strategy as it moves forward to ensure high-income aspirations.
Neighboring Countries Working To Improve Their Good Governance
Even more, with the trend of neighboring countries working to improve their good governance scores for a more attractive business climate, Cambodia needs to catch up on its good governance reputation to compete.
On the domestic front, the success of good governance reforms rightfully enlisted as priorities in the first phase of the 7th mandate’s Pentagonal Strategy will play a decisive factor in making Cambodia’s business climate indisputably attractive to all, especially to concerned Western investors who may overlook Cambodia’s potential.
The efforts will also enhance the effectiveness of Cambodia’s smart foreign policy pivot to economic diplomacy, allowing Cambodia to draw opportunities home while navigating the challenging and uncertain global arena of geopolitics.
Overall, Cambodia can achieve its 2050 goal by living up to its commitment to good governance. Although the path to reforms may trigger certain socio-political liabilities in the short term, its successful undertaking will be an asset for the national interest in the long term.
For all that Cambodia has gone through in modern history, the government’s promise of realizing the vision is our common aspiration for this country. We are counting on the new mandate to chart the path and steer Cambodia in the right direction. Truly, our country and people deserve equal opportunity for peace, stability and prosperity.
Pin Reaksa is a Global Affairs B.A. graduate from the American University of Phnom Penh and a research lead at TYS Cambodia. This article was first published in Cambodianess.
