Asian Development Bank (ADB) President Takehiko Nakao yesterday (March 10th) met Cambodia’s Prime Minister Samdech Hun Sen, Minister of Economy and Finance, Aun Pornmoniroth, and Minister for Education, Youth and Sport, Hang Chuon Naron to discuss the Cambodian government’s development strategy and how ADB can support its efforts to diversify the economy, promote inclusive growth and further reduce poverty.
Mr. Nakao said the country’s rapid economic growth—driven by strong gains in industry, services and agriculture—has brought Cambodia to the verge of transitioning from a low-income to a middle-income country. “Cambodia is among the world’s fastest-growing economies,” Mr. Nakao said. “It has rapidly reduced poverty from nearly 50% of the population in 2007 to just 19% in 2012, although many people have moved only slightly above the poverty line and remain vulnerable.”
Cambodia’s gross domestic product expanded at an average annual rate of 6.5% between 2007 and 2014. ADB predicts growth of 7.3% in 2015, underpinned by well-managed inflation, a stable exchange rate and sustained competitiveness. Mr. Nakao noted however, that the economy is vulnerable to external price and demand shocks due to dependence on sectors such as garments—which comprised 71% of exports in 2013—despite recent success in producing more sophisticated products such as electronics components.
Further reforms to improve the business climate would attract foreign capital and expertise, accelerating the economy’s diversification. Ensuring stable supplies of electricity and reducing its cost—currently among the region’s highest—and improving access to finance for smaller enterprises would enhance the private sector’s contribution to growth. Mr. Nakao welcomed the Industrial Development Policy which upon approval will provide a comprehensive framework for more broad-based and sustainable economic growth.
Steady progress has also been made on reforming public financial management, Mr. Nakao noted. The government’s Public Financial Management Reform Program—supported by ADB—had improved budget credibility and financial accountability, and is strengthening linkages between the budget and government policy and programs. ADB is also ready to support ongoing decentralization of public functions to outlying regions, to enhance service delivery by local governments.
Another key to inclusive growth is to address low educational achievement and a mismatch between the skills of graduates and those needed by industry, said Mr. Nakao. He commended sharp increases in primary and secondary enrolments in recent years. But the fact that only 32% of the labor force is educated beyond primary school highlights the importance of curbing drop-out rates. “ADB will work with the government to improve the quality and relevance of education, through targeted skills development at post-basic education level, especially for women and the poor,” said Mr. Nakao.
ADB is committed to helping Cambodia upgrade inadequate infrastructure services. Much of the country’s rural road network is in poor condition, inhibiting the movement of people and goods within Cambodia and into neighboring countries. Inadequate access to water and sanitation are a health risk, especially for the poor. Mr. Nakao said ADB would continue its work to expand the rural road network and extend access to safe water and proper sanitation in rural areas.
ADB resumed operations in Cambodia in 1992 following two decades of conflict, and has since delivered $2.11 billion in concessional loans, grants and technical assistance. Under the recently approved Country Partnership Strategy, ADB is supporting Cambodia with more than $800 million in assistance between 2014 and 2018, focusing on boosting rural incomes and infrastructure, enhancing rural-urban-regional connectivity, and improving the quality of public sector management.
ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, it is owned by 67 members – 48 from the region.
This article was first published by the Asian Development Bank (www.adb.org).