ADB: Cambodia builds exports growth

PHNOM PENH, 4 April 2014: A new Asian Development Bank report says growth in Cambodia will ease back in 2014, but should revert to a steady growth in 2015 on the back of buoyant exports and robust agriculture production.

Released earlier this week, ADB’s flagship annual economic publication Asian Development Outlook 2014 (ADO) said Cambodia economic growth will moderate to 7.0% in 2014 from 7.2% in 2013, with a subsequent edging up to 7.5% in 2015.

ADB country director for Cambodia, Eric Sidgwick, was quoted: “Despite political uncertainty and the risk of future labour unrest, Cambodia is expected to exhibit healthy economic growth over the next two years, reflecting stronger exports, growing services, and a more stable global economy outlook.”

The expected slowdown in 2014 reflects political tensions since national elections in July 2013 and strikes for higher wages by garment workers that dented investors’ confidence and disrupted some production of garments and footwear in late 2013 and early 2014.

These uncertainties could dampen investment and weigh on tourism and real estate activity this year.

The outlook also noted that net foreign direct investment inflows were buoyant at US$1.3 billion in 2013, down from US$1.5 billion in 2012, partly as a result of political tensions.

In 2014, services sector growth is expected to decelerate to 7.1% from 8.4%.

The report advised the need for spurring development of small- and medium-sized enterprises (SMEs) for sustaining and diversifying economic growth.

Cambodia’s private sector is dominated by informal and very small enterprises. Only 2.1% of enterprises fall into the category of SMEs. Large enterprises – primarily in garments, light manufacturing, construction, tourism, and agribusiness – represent a fraction of a percent.

The absence of this segment hinders development and diversification in the economy, the report stressed.

This will require a concerted approach to strengthening the private sector, including development of business associations, promotion of inclusive businesses, and social enterprises to serve the interests of farmers and small enterprises, and support to incubate of new businesses.

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