Economy of Cambodia

Economy of Cambodia

Currency	United States Dollar (USD) and Cambodian riel (CR) The CR is non-convertible.
Fiscal year	1 October - 30 September
Statistics
GDP by sector	agriculture (0.0%), industry (0.0%), services (0.0%)
Inflation (CPI)	0.0%
Population below poverty line	0.0%
Labour force	0.0 million
Labour force by occupation	managerial and professional (0.0%), technical, sales and administrative support (0.0%), services (0.0%), manufacturing, mining, transportation, and crafts (0.0%), farming, forestry, and fishing (0.0%)
Unemployment	0.0%
External
Exports	$0.0 million
Export goods	(list export product and percent of total exports)
Main export partners	(list export partners and percent of total exports)
Imports	$0.0 million
Import goods	(list import product and percent of total imports)
Main import partners	(list import partners and percent of total imports)
Gross external debt	$0.0 million
Public finances
Government debt	$0.0 million
Revenues	$0.0 million
Expenses	$0.0 million
Economic aid	ODA $0.0 million (0.0% of GDP, add year)
All values, unless otherwise stated, are in US dollars.

Rice cropping plays an important role in the provincial economy

The economy of Cambodia has seen rapid progress in the last decade. Per capita income, although rapidly increasing, is low compared with most neighbouring countries. The main domestic activity on which most rural households depend is agriculture and its related sub-sectors. Manufacturing output is varied but is not very extensive and is mostly conducted on a small-scale and informal basis. The service sector is heavily concentrated in trading activities and catering-related services. Reuters has reported that oil and natural gas reserves have been found off-shore. Production of oil could potentially have a great effect on the future of the economy.

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.

After four years of solid macroeconomic performance, Cambodia's economy slowed dramatically in 1997-98 due to the regional economic crisis, civil violence, and political infighting. Foreign investment and tourism fell off. Also, in 1998 the main harvest was hit by drought. But in 1999, the first full year of peace in 30 years, progress was made on economic reforms and growth resumed at 4%. 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. Recurring political instability and corruption within government discourage foreign investment and delay foreign aid. On the brighter side, the government is addressing these issues with assistance from bilateral and multilateral donors. So long as political stability lasts, the Cambodian economy is likely to grow at a respectable pace.

Cambodia's emerging democracy has received strong international support. Under the mandate carried out by the United Nations Transitional Authority in Cambodia (UNTAC), $1.72 billion (1.72 G$) was spent in an effort to bring basic security, stability and democratic rule to the country. Regarding economic assistance, official donors had pledged $880 million at the Ministerial Conference on the Rehabilitation of Cambodia (MCRRC) in Tokyo in June 1992, to which pledges of $119 million were added in September 1993 at the meeting of the International Committee on the Reconstruction of Cambodia (ICORC) in Paris, and $643 million at the March 1994 ICORC meeting in Tokyo. To date, therefore, the total amount pledged for Cambodia's rehabilitation is approximately 1.6 G$.

Recent developments

2007 GDP grew an estimated 9.6%, in line with the 2000/06 average of 9.5 percent. Foreign direct investment reached US$600 million (7% of GDP), slightly more than was received in foreign aid. Garment exports rose almost 8%, tourist arrivals jumped nearly 20%, and construction activity doubled. With exports decelerating somewhat, the 2007 GDP growth was driven by consumption and investment. Foreign direct investment (FDI) inflows reached US$600 million (7 percent of GDP), slightly more than the country received in official aid. Domestic investment, driven largely by the private sector, accounted for 23.4 percent of GDP. Approximately 2,860 new businesses registered for operation in 2007, a 71 percent increase over 2006.

Although risks have increased, economic prospects for 2008 remain strong. The projected 7.5 percent growth rate for 2008 reflects a mix of growth in services (mainly tourism) and construction combined with a slowdown in garment exports. Export growth, especially to the US, began to slow in late 2007 accompanied by stiffer competition from Vietnam and emerging risks (slowdown in the US economy and lifting of safeguards on China’s exports). Although exports of cash crops have grown fast in recent years, developments in the garment industry have a major impact on Cambodia’s export performance. On the other hand, Cambodia’s exporters might benefit from the depreciation of the dollar. Another risk is uncertainties in the construction sector. However, although the boom driven by real estate could slow, other sources of demand––tourism and infrastructure––could enable continued growth in construction.

Sustainable Development and Predictions of Future Crises

While foreign investors and international banks look at Cambodia's "growth" statistics based on income, sustainable development analysts believe the country is on a path towards unsustainability based on two key factors: population that continues to grow and that has largely doubled in the past 30 years and rapid destruction (sale) of forest and other natural resources. The sustainability of the country's ethnic indigenous minority cultures, particularly in the northeast, is at risk. Rural land is being sold or appropriated by large businesses and officials, urban areas are rapidly growing as available land is exhausted, and large disparities remain between rich and poor. The country's growth in income is largely based on tourism that is said to already be at its limits at major sites like Angkor where tourism is already blamed for deterioration of the monuments; by sales of resources; and by some copying of foreign technology. One foreign analyst, David Lempert, has argued that the country's development policies are now following the very same development model that foreigners brought or imposed on the country during the period of French colonialism and early independence and that conditions are being recreated for the same kind of political instability that led to peasant rebellions and civil war.

The recent discovery of oil off of Cambodia's coast could provide enough income to feed the growing population for an additional 15 years, but such resource sale is evidence of unsustainable development. If the oil income is used to support consumption but without slowing population growth, educating the population for continued productivity increases, and protecting resources, the problems are only being postponed.

Statistics

GDP: purchasing power parity - $12.61 billion (2007 est.)

GDP - real growth rate: 9.1% (2007 est.)

GDP - per capita: purchasing power parity - $1,800 (2007 est.)

GDP - composition by sector:
agriculture: 31%
industry: 26%
services: 43% (2007)

Population below poverty line: 35% (2004 est.)

Household income or consumption by percentage share:
lowest 10%: 2.9%
highest 10%: 34.8% (2004)

Inflation rate (consumer prices): 5% (2006 est.)

Labour force: 7 million (2003 est.)

Labour force - by occupation: agriculture: 75% (2004 est.)

Unemployment rate: 2.5% (2000 est.)

Budget:
revenues: $915.5 million
expenditures: $1.101 billion (2007 est.) Industries: tourism, garments, rice milling, fishing, wood and wood products, rubber, cement, gem mining, textiles

Industrial production growth rate: 12% (2007 est.)

Electricity - production: 134 million kWh (2005)

Electricity - production by source:
fossil fuel: 59.52%
hydro: 40.48%
nuclear: 0%
other: 0% (1998)

Electricity - consumption: 121.8 million kWh (2004)

Electricity - exports: 0 kWh (1998)

Electricity - imports: 0 kWh (1998)

Agriculture - products: rice, rubber, corn, vegetables, cashews, tapioca

Exports: $3.331 billion f.o.b. (2006 est.)

Exports - commodities: clothing, timber, rubber, rice, fish, tobacco, footwear

Exports - partners: US 48.6%, Hong Kong 24.4%, Germany 5.6%, Canada 4.6% (2005)

Imports: $4.477 billion f.o.b. (2006 est.)

Imports - commodities: petroleum products, cigarettes, gold, construction materials, machinery, motor vehicles, pharmaceutical products

Imports - partners: Hong Kong 16.1%, China 13.6%, France 12.1%, Thailand 11.2%, Taiwan 10.2%, South Korea 7.5%, Vietnam 7.1%, Singapore 4.9%, Japan 4.1% (2005)

Debt - external: $3.664 billion (2006 est.)

Economic aid - recipient: $504 million pledged in grants and concessional loans for 2005 by international donors

Currency: 1 new riel (CR) = 100 sen

Exchange rates: riels per US dollar - 4,119 (2006), 4,092.5 (2005), 4,016.25 (2004), 3,973.33 (2003), 3,912.08 (2002)

Fiscal year: calendar year

References

• David Lempert, “Foreign Aid: Creating Conditions for the Next Civil War,” Phnom Penh Post, 16 / 01, January 12 – 25, 2007, available on the internet.

See also

• Economy of Asia
• List of Cambodian companies
• Economic history of Cambodia