Publications
Summary of publication
Cambodia, ASEAN’s second poorest country (USD$1544 per capita in 2020), faces a challenging economic transition as it progresses from Least Developed Country status. The COVID-19 pandemic has underscored weaknesses in the country’s growth model. Economic growth has been heavily reliant on foreign investment, particularly from China and clustered in a narrow band of sectors (garments, construction, tourism, agriculture) leaving the economy highly exposed to the domestic and international effects of the pandemic. At the same time, the pending loss of trade preferences following its graduation from Least Developed Country status, and the impact of wage growth in a highly dollarized economy are eroding the basis for Cambodia’s competitiveness in the low-wage, low-skill activities that have previously driven the country’s export and income growth.
COVID-19 also demonstrated the fragility of women’s economic gains, with the pandemic heavily impacting economic activities where many Cambodia women derive incomes (including as migrant workers in neighbouring countries), at the same time as bringing significant increases in gender-based violence and unpaid domestic labour. Exposure to a range of climate change effects is also impinging on Cambodia’s development path – creating challenges for agriculture, water security and the resilience of infrastructure and cities.
Diversification of Cambodia’s economic structure will require ‘quality’ investment (i.e., productive, inclusive and supporting skills and technology upgrading) by governments, businesses, and households, in physical and human capital, and institutional capabilities - at a time when global interest in emerging markets is likely to be constrained and development financing tight.
Attracting quality private investment in turn will require a range of policy, institutional and market constraints to be tackled including strengthening public infrastructure delivery; providing market-enabling public goods such as standards, certification and trade facilitation, and enabling market-based solutions to current bottlenecks such as poor logistics or the absence of market intelligence or affordable business finance. Efforts to remove barriers to women’s equal economic participation will also be critical.
The challenges of stimulating higher quality investment cut across the RGC’s policy reform agenda, but CAP-RED will primarily focus its efforts in supporting this broader agenda in three domains where Australian has a comparative advantage: agriculture and agro-processing; trade, investment and enterprise development; and infrastructure services. In addition, the whole Facility will be targeted towards reducing the constraints to women and marginalised people participating in and benefiting equally from the economy.