Cambodia’s Economic Slowdown
During 1995, the government implemented firm stabilization policies under difficult circumstances. Overall, macroeconomic performance was good. Growth in 1995 was estimated at 7% because of improved agricultural production (rice in particular). Strong growth in construction and services continued. Inflation dropped from 26% in 1994 to only 6% in 1995. Imports increased as a result of the availability of external financing. Exports also increased, due to an increase in log exports. With regard to the budget, both the current and overall deficits were lower than originally targeted.
Cambodia’s economy slowed dramatically in 1997-1998 due to the regional economic crisis, civil violence, and political infighting.
Foreign investment and tourism fell off.
In 1999, the first full year of peace in 30 years, progress was made on economic reforms. Growth resumed and has remained about 5.0% during 2000-2003.
Tourism was Cambodia’s fastest growing industry, with arrivals up 34% in 2000 and up another 40% in 2001 before the 11 September 2001 terrorist attacks in the US.
Cambodia expects 1 million foreign tourists in 2004. Economic growth has been largely driven by expansion in the clothing sector and tourism. Clothing exports were fostered by the U.S.-Cambodian Bilateral Textile Agreement signed in 1999. Even given Cambodia’s recent growth, the long-term development of the economy after decades of war remains a daunting challenge.
The population lacks education and productive skills, particularly in the poverty-ridden countryside, which suffers from an almost total lack of basic infrastructure. Fear of renewed political instability and a dysfunctional legal system coupled with government corruption discourage foreign investment. The Cambodian government continues to work with bilateral and multilateral donors to address the country’s many pressing needs.
The major economic challenge for Cambodia over the next decade will be fashioning an economic environment in which the private sector can create enough jobs to handle Cambodia’s demographic imbalance. About 60% of the population is 20 years or younger; most of these citizens will seek to enter the workforce over the course of the next 10 years.
About Poverty in Cambodia
Measured by both income and broader human development indicators, Cambodia is among the poorest countries in the world. According to the UNDP Human Development Report (2001), Cambodia ranks 121 of 162 countries in the world on the human development index. Its population of 11.4 million is growing at about 2.5 % per year. Annual per capita income is US$256 (1999). The 1997 poverty estimates confirm that poverty is pervasive in Cambodia. An estimated 36% of the population lives below the basic needs poverty line. Poverty rate is higher in rural areas (40%), which is four times higher than in Phnom Penh (10%). Rural households, especially those for whom agriculture is the primary source of income, account for almost 90% of the poor.
Poverty in Cambodia is characterized by low income and consumption, poor nutritional status, low educational attainment, less access to public services including school and health services, less access to economic opportunities, vulnerability to external shocks, and exclusion from economic, social and political processes. The relatively high prevalence of HIV/Aids in Cambodia is an additional challenge to the current human development situation.
Cambodia women play an active role in the country’s economy and civil society. They represent 53% of the active labour force and head 25% of Cambodian households. In parallel, women face constraints in all areas of life. They continue to face substantial discrimination on the labour market, earning 30% to 40% less than men. The literacy rate for men is 40% higher than women and male school enrolment is 50% higher than that of girls by age 15, and nearly three times as large by age 18. Poor access to quality health services, including maternal and child health services exacerbate the problem of poor reproductive health. Cambodia has one of the highest rates of maternal mortality in Asia (about 500 deaths per 100,000 live births).
Prostitution and sex trafficking are two social problems that have become acute in recent years. While significant progress has been made in drafting and passing legislation to protect the rights of women, law enforcement is weak. Discrimination and violence against women – often underreported – remains a serious problem. The poor of Cambodia include many people who are at risk of being left behind as the economic grows. This includes the disabled, aged, orphans, widows, the landless and the unemployed, subsistence farmers, indigenous and ethnic minorities and particular groups of the urban poor.
The Government has established a poverty monitoring and assessment (PMA) mechanism, under the umbrella of the Ministry of Planning/ Council for Social Development. More specifically, the role assigned by the Government to the Council for Social Development (CSD) to facilitate a participatory, country-owned and result-oriented poverty monitoring and analysis system, capable to inform pro-poor policy decision-making and design of targeted programme for poverty reduction.
In this regard, the Cambodia PMA system, in close partnership with the National Institute of Statistics, aims at regular conducting of socio-economic household surveys, data analysis and monitoring of both processes, intermediary outputs and outcomes of poverty reduction policies, programmes and budget in Cambodia. Such an effort does also provide additional opportunities to monitor Cambodia/’s progress towards achieving the Millennium Development Goals( MDG), including benchmarking national targets and the production of regular progress reports on meeting the 2015 MDGs.
World Bank’s Poverty Assessment for Cambodia
This first poverty assessment for Cambodia is based on the 1997 update of Cambodia’s baseline poverty profile of 1993-94. Since the early 1990s Cambodia has made progress in rebuilding its economy following more than two decades of war. Trade and investment flows have risen to unprecedented levels, supporting average annual growth of 6 percent. In 1997 and 1998 reconstruction and recovery were set back by renewed political instability and by the East Asian crisis. With the assumption of office of a new reform-minded government in late 1998, and the virtual end of the Khmer Rouge movement in early 1999, there is renewed optimism that growth and recovery will resume.
Cambodia is nevertheless still a very poor country, with GDP per capita estimated at only $280 in 1998 and with other non-income indicators of poverty comparing poorly with those in other countries in the region, The 1997 poverty estimates confirm that poverty is pervasive in Cambodia – an estimated 36 percent of the population is poor – and rural households, especially those for whom agriculture is the primary source of income, account for almost 90 percent of all the poor.
The poor are more likely than the better-off to live in households that are larger, have a larger share of children, and have a head of household who is less educated than the average.
East Asia must focus on opening up agriculture and service sectors in negotiating free-trade agreements in order to reduce poverty in the region and reap 300 billion dollars in annual benefits, according to the World Bank.
They also have much less access to public services than the better off. For example, while 17 percent of people in the richest consumption quintile have access to piped water, only 4 percent in the poorest quintile do. In rural areas the poorest quintile has net primary school enrollment of 50 percent, considerably below the 75 percent for the richest quintile. Less than 5 percent of children ages 12-14 in the poorest quintile in rural areas are enrolled in lower secondary schools, but 25 percent in the richest quintile are. About 21 percent of people in the poorest quintile have to travel more than 5 kilometers to reach a health clinic; only 14 percent in the richest quintile have to travel that far. About 6 percent of the poorest two quintiles live more than 5 kilometers from the nearest road; only 1.4 percent in the richest quintile do. While almost 20 percent of the richest rural quintile have access to publicly provided electric lighting, under 1 percent in the poorest quintile receives the same service.
Despite its pervasiveness poverty in Cambodia is relatively shallow, suggesting great scope for poverty reduction through rapid growth. In fact, income poverty rates could be cut by as much as 50 percent by 2005 if Cambodia is able to resume and maintain average annual growth of 6 percent. But such gains in poverty reduction will depend strongly on the pattern of growth. If growth continues to be urban-focused, poverty reduction gains can be expected to be much less and rural poverty in particular will remain high–especially since the depth of poverty is greater in rural areas. In contrast, poverty in Phnom Penh would be almost eradicated.
Source: World Bank – Poverty