In this webinar, Dr Jayant Menon, H.E. Dr Sok Siphana and Dr Hal Hill shared their views on the structural transformation and diversification that Cambodia needs to undergo in order to achieve its economic aspirations.
REGIONAL ECONOMIC STUDIES PROGRAMME WEBINAR
Thursday, 14 December 2023 – Despite a tragic history, Cambodia has recovered remarkably since the 1991 Paris Peace Agreements and continues to harbour great economic aspirations. It aims to become an upper-middle-income country (UMIC) by 2030 and a high-income country (HIC) by 2050. To realise these goals, the country must not only undergo structural transformation and diversification, but also address various constraints to achieve inclusive growth that is both sustainable and resilient. To discuss this, the Regional Economic Studies Programme of the ISEAS – Yusof Ishak Institute organised a webinar featuring Dr Jayant Menon, Senior Fellow at ISEAS; H.E. Dr Sok Siphana, Senior Minister in the Royal Government of Cambodia; and Dr Hal Hill, H.W. Arndt Professor Emeritus of the Southeast Asian Economies at the Crawford School, College of Asia and the Pacific, Australian National University (ANU). The event was moderated by Dr Cassey Lee, Senior Fellow at ISEAS.
Dr Menon started his presentation by sharing about the ‘What’, giving background information and context into Cambodia’s development and its vision for UMIC and HIC. He elaborated on the reasons that necessitated new drivers of growth, such as the early phase of inter-sectoral diversification involving rural-urban migration from agriculture to industrial and services sectors reaching its limit, and changing trade preferences. This in turn substantiated the need for intra-sectoral diversification and structural transformation in order to achieve further increase in productivity and sustainable growth.
He then followed up by discussing the ‘How’, explaining that this can be achieved by addressing three key constraints – limited human capital, high business costs, and the lack of resilience and sustainability – through policy reforms, and public and private investment. In particular, the quality of human capital can be improved by refining the quality of education at all levels, and business costs can be reduced by enhancing physical and logistic infrastructure and lowering costs of energy and finance. Lowering business costs would be salient in boosting private sector growth, which is especially important for Cambodia, given its small public, private and state-owned enterprise sector. Improving the sustainability of growth and its drivers involves diversifying trade and investment flows. Increasing resilience includes preparing for, adapting to, and mitigating the impacts of climate change, other financial, health shocks or crises, and technological change, especially the acceleration towards a digital economy. He exemplified this with the example of cyclo (a form of transportation in Cambodia) being displaced due to digital disruption.
Dr Menon concluded his presentation by reviewing the ‘When’, stating that although Cambodia was on track to achieving UMIC by 2030 and HIC by 2050, the effects of the recent pandemic have made it difficult for the country to attain this goal in a timely manner. However, he emphasised that Cambodia’s achievements are reflected not merely by the hitting of numerical targets such as GDP, but more importantly by how the economy and society evolve to become resilient and sustainable in the long run. He also asserted that Cambodia has managed many notable successes that bode well for the future in spite of the difficult challenges that it faces.
Adding on to the discussion, Dr Siphana concurred that the journey towards Cambodia’s goals is more important than the destination; the amount of time it takes to reach the development targets is inconsequential compared to the progress towards the vision. He spoke of the capabilities and passions of Cambodia’s newly elected government and is convinced that its visions and hopes of leaving a legacy will filter down into the economy. He also highlighted Cambodia’s achievements over the years, where persistent peace and political stability have attracted investments, which has resulted in the rapid growth of the private sector. An example of this includes the expansion of the local cashew and rubber industries. He contended that the private sector is dynamic, and that the future will be largely driven by local entrepreneurship. He underscored that more education and resources should be invested in productive sectors as it is vital to promoting inclusive growth.
Dr Hal also commended Cambodia’s rapid development despite its odds, and raised a few questions for further discussion, such as how Cambodia-China relations come into play, how education and poverty rates contribute to growth, and about Cambodia’s institutions and vulnerabilities, all of which were answered by Dr Menon.
The two-hour-long webinar was attended by an audience composed of research scholars, students, policymakers and the general public. The speakers also answered their questions on an array of topics, including the connection between economic diversification and inclusive growth, the role of trade openness in driving intra-sectoral diversification, elaboration on the education and poverty situation in Cambodia, and how the value of land evolved and its implications.