Cambodia’s
economic growth in recent years has been relatively strong,
average around five percent per year. However, this growth
is narrowly based and vulnerable to external factors over
which Cambodia has little if any control. By and large,
economic growth has been concentrated in two sectors
(garments and
tourism) and focused on two urban centers (Phnom Penh and
Siem Riep).
Garments and tourism together account for approximately one
third of GNP and almost all the country’s foreign exchange
earnings. However, they employ only 10% of the work force.
In contract, some 80% of the workforce is agriculture and
fishing, both of which are marked by extremely low levels
of productivity.
As a result, migration to urban areas is rapidly increasing.
At this point, the garment sector employs some 200,000 workers,
80% of them female. By themselves, neither the garment sector
nor tourism can absorb or usefully employ the 200,000 new
Cambodians workers that enter the labor force each year.
The fact that the garment sector is facing new challenges
complicates matters still further. 65% of Cambodia’s
garment exports are quota-driven and most exports go to the
United States.
With the impending abolishment of the quota system globally
in 2005, Cambodia faces the real danger of losing significant
market share to more competitive countries, mainly China
and Vietnam.
Tourism, although demonstrating steady growth, starts from
a very low base and cannot be expected to carry the economy
by itself. Growth and diversification of agriculture is constrained
by lack of improved production technology, high transport costs
(dilapidated roads and expensive fuel), and unofficial fees
charged by middlemen and government officials on the way to
export. Under these conditions, Cambodian agricultural products
have difficulty competing with those from neighboring Thailand
and Vietnam.
Cambodia’s joined the World Trade Organization (WTO)
in late 2004, further underscores in the fact that Cambodia
must compete, both at a regional level and in the global impact.
Despite concerns surrounding some aspects of WTO accession,
Cambodia’s membership undoubtedly will carry benefits
as well. These include relatively free access to marketing
products among all 144 WTO member states. WTO accession should
also help streamline and standardize commercial policies and
the overall administrative regime for businesses, both because
WTO agreements require change and because Cambodia’s
approach to private sector development will have to become
more efficient in order to compete successfully and attract
badly needed foreign investment.
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