Growth and Development in Cambodia I A Level and IB Economics

Summary

Cambodia has emerged as one of Southeast Asia's fastest-growing economies, achieving impressive growth over the past two decades. With a young population, a booming garment industry, rising tourism, and significant foreign direct investment, the country is on a trajectory towards upper-middle-income status by 2030. However, challenges such as child malnutrition, environmental issues, and reliance on low-value manufacturing remain. Cambodia's growth is largely driven by its textile exports, tourism, and infrastructure development, but it must diversify its economy and address risks like external trade shocks and environmental degradation to ensure sustainable progress.

Takeaways

• 😀 Cambodia has experienced rapid economic growth over the last two decades, positioning itself as one of the fastest-growing countries in Southeast Asia.
• 😀 The country has a young population of approximately 16 million, which is expected to increase by more than 1 million by 2020.
• 😀 Cambodia aims to join the upper middle-income group by 2030, following its 2015 designation as a lower middle-income country.
• 😀 Significant improvements have been made in poverty reduction, with extreme poverty dropping from 48% in 2007 to 13.5% in 2014.
• 😀 The garment sector is a key driver of Cambodia's growth, contributing significantly to exports and providing numerous jobs, particularly for women.
• 😀 Tourism is a growing sector, now accounting for nearly 6% of GDP, with eco-tourism and national attractions like Angkor Wat boosting revenue.
• 😀 Cambodia's high foreign direct investment (FDI) rates, averaging over 11% of GDP, make it one of the most open economies in the world.
• 😀 Challenges for Cambodia include child malnutrition, with nearly a third of children under five facing stunted growth, and environmental concerns like plastic pollution.
• 😀 The country's export base remains narrow, heavily reliant on the garment industry, which exposes Cambodia to risks such as global trade tensions and protectionism.
• 😀 Cambodia's future growth depends on diversifying its economy, improving infrastructure, and addressing labor market issues, such as low-paid informal sector jobs.

Q & A

What makes Cambodia one of the fastest growing countries in Southeast Asia?

Cambodia has experienced rapid economic growth over the last two decades, with an average growth rate of around 7% per year. This growth is driven by factors such as foreign direct investment, the garment sector, tourism, and a young, expanding population.

What is Cambodia’s medium-term economic goal?

Cambodia aims to achieve upper middle-income status by 2030. It also seeks to gain the full benefits from Asia's economic integration and the single market being developed within the region.

How has Cambodia’s poverty rate changed in recent years?

Cambodia has made significant progress in poverty reduction, with extreme poverty falling from 48% in 2007 to 13.5% in 2014. This success can be attributed to the country’s economic growth, which has translated into better development outcomes in education, health, and income.

What are some of the major development challenges Cambodia faces?

Cambodia faces challenges such as high child malnutrition, with nearly a third of children under five suffering from stunted growth. Additionally, there are issues of underemployment in the informal sector, high levels of corruption, and an over-reliance on remittances.

What role does Cambodia’s garment industry play in its economy?

The garment industry is a key driver of Cambodia's economy, accounting for 75% of its exports of goods. It provides nearly 800,000 jobs, particularly for women, and is a major contributor to rural-urban migration. However, the industry faces challenges related to low wages and labor conditions.

How significant is tourism for Cambodia's GDP?

Tourism plays a growing role in Cambodia's economy, contributing nearly 6% to the country’s GDP. The sector has expanded significantly, with investments in eco-tourism and major attractions such as Angkor Wat driving growth.

What are the sources of foreign direct investment (FDI) in Cambodia?

China is the largest source of FDI in Cambodia, accounting for 50% of the total foreign investment. Other major sources include countries like South Korea and Japan. Most of the FDI inflows are concentrated in the garment, construction, and real estate sectors.

What are the risks associated with Cambodia's real estate boom?

The rapid property boom in Cambodia is risky due to unregulated lending and fears of a potential market collapse. This could lead to a broader economic downturn if the real estate sector faces a significant downturn.

What are Cambodia's key growth drivers and how do they contribute to GDP growth?

Cambodia’s key growth drivers include the garment sector, tourism, a construction boom, and increasing consumer demand due to a young and growing population. These sectors contribute to GDP through exports, employment generation, and foreign investment.

What are the environmental challenges Cambodia is facing?

Cambodia is facing significant environmental challenges, including plastic pollution and limited access to clean drinking water. The use of plastic bottles is widespread due to inadequate water infrastructure, and coastal and rural areas are heavily impacted by pollution and land degradation.