PHNOM PENH (AFP) — Cambodia's economic growth is expected to slow to 7.0 percent this year, the United Nations said Tuesday, warning that the country's exports remained too narrowly based on garments.
Growth is expected to be slower than last year, when the economy expanded by 8.5 percent, according to a report from the UN Economic and Social Commission for Asia and the Pacific (ESCAP).
While Cambodia's economy remains one of the region's most vibrant, "a key concern lay in the country's narrow export base which was considered vulnerable because of its dependence on garment exports," the report said.
The garment industry grew only 8.0 percent last year after suffering a dismal fourth quarter that saw orders plummet by nearly half, according to the World Bank.
The sector -- the country's largest source of foreign exchange -- faces increased competition from China and Vietnam, with further risks looming due to an economic downturn in the US, Cambodia's biggest market for textiles.
"For Cambodia, a significant slowdown of the US economy could have an economic fallout," said Suomi Sakai, acting UN resident coordinator.
Hang Chuon Naron, a secretary-general at Cambodia's finance ministry, said the government would try to prop up the garment sector by seeking higher wages for factory workers.
But he also said Cambodia needed to diversify its economy, and placed special emphasis on the country's tourism sector, which brought in 1.4 billion dollars last year.
Tourism revenues are expected to grow by at least 20 percent in 2008, according to the government.
The government "needs to look at how to ensure the development of tourism by developing the coastal areas," he said, adding that other tourism sites also needed to be created.
Growth is expected to be slower than last year, when the economy expanded by 8.5 percent, according to a report from the UN Economic and Social Commission for Asia and the Pacific (ESCAP).
While Cambodia's economy remains one of the region's most vibrant, "a key concern lay in the country's narrow export base which was considered vulnerable because of its dependence on garment exports," the report said.
The garment industry grew only 8.0 percent last year after suffering a dismal fourth quarter that saw orders plummet by nearly half, according to the World Bank.
The sector -- the country's largest source of foreign exchange -- faces increased competition from China and Vietnam, with further risks looming due to an economic downturn in the US, Cambodia's biggest market for textiles.
"For Cambodia, a significant slowdown of the US economy could have an economic fallout," said Suomi Sakai, acting UN resident coordinator.
Hang Chuon Naron, a secretary-general at Cambodia's finance ministry, said the government would try to prop up the garment sector by seeking higher wages for factory workers.
But he also said Cambodia needed to diversify its economy, and placed special emphasis on the country's tourism sector, which brought in 1.4 billion dollars last year.
Tourism revenues are expected to grow by at least 20 percent in 2008, according to the government.
The government "needs to look at how to ensure the development of tourism by developing the coastal areas," he said, adding that other tourism sites also needed to be created.
Economy - overview
From 2001 to 2004, the economy grew at an average rate of 6.4%, driven largely by an expansion in the garment sector and tourism. The US and Cambodia signed a Bilateral Textile Agreement, which gave Cambodia a guaranteed quota of US textile imports and established a bonus for improving working conditions and enforcing Cambodian labor laws and international labor standards in the industry. With the January 2005 expiration of a WTO Agreement on Textiles and Clothing, Cambodia-based textile producers were forced to compete directly with lower-priced producing countries such as China and India. Better-than-expected garment sector performance led to more than 9% growth in 2007. Its vibrant garment industry employs more than 350,000 people and contributes more than 70% of Cambodia's exports. The Cambodian government has committed itself to a policy supporting high labor standards in an attempt to maintain buyer interest. In 2005, exploitable oil and natural gas deposits were found beneath Cambodia's territorial waters, representing a new revenue stream for the government if commercial extraction begins. Mining also is attracting significant investor interest, particularly in the northeastern parts of the country, and the government has said opportunities exist for mining bauxite, gold, iron and gems. In 2006, a US-Cambodia bilateral Trade and Investment Framework Agreement (TIFA) was signed and the first round of discussions took place in early 2007. The tourism industry continues to grow rapidly, with foreign arrivals reaching 2 million in 2007. In 2007 the government signed a joint venture agreement with two companies to form a new national airline. The long-term development of the economy remains a daunting challenge. The Cambodian government is working with bilateral and multilateral donors, including the World Bank and IMF, to address the country's many pressing needs. The major economic challenge for Cambodia over the next decade will be fashioning an economic environment in which the private sector can create enough jobs to handle Cambodia's demographic imbalance. More than 50% of the population is less than 21 years old. The population lacks education and productive skills, particularly in the poverty-ridden countryside, which suffers from an almost total lack of basic infrastructure.
Source: CIA World FactbookUnless otherwise noted, information in this page is accurate as of May 16, 2008
GDP (2007): $8.6 billion. Per capita GDP (2007): $606. Annual growth rate (2007): 10.2%. Inflation (2007): 10.8%. Natural resources: Timber, gemstones, some iron ore, manganese and phosphate, hydroelectric potential from the Mekong River, unknown quantities of oil, gas, and bauxite. Agriculture (29% of GDP, 2007): About 4,848,000 hectares (12 million acres) are unforested land; all are arable with irrigation, but 2.5 million hectares are cultivated. Products--rice, rubber, corn, meat, vegetables, dairy products, sugar, flour. Industry (27% of GDP, 2007): Types--garment and shoe manufacturing, rice milling, tobacco, fisheries and fishing, wood and wood products, textiles, cement, some rubber production, paper and food processing. Services (39% of GDP, 2007): Tourism, telecommunications, transportation, and construction. Central government budget (2006): Revenues--$814 million; expenditures--$973 million; foreign financing--$213 million. Trade: Exports ($4.1 billion, 2007)--garments, shoes, cigarettes, natural rubber, rice, pepper, wood, fish. Major partners--United States, Germany, U.K., Singapore, Japan, Vietnam. Imports ($5.4 billion, 2007)--fuels, cigarettes, vehicles, consumer goods, machinery. Major partners--Thailand, Singapore, China, Hong Kong, Vietnam, Taiwan, United States. Economic aid received: Pledges of $698.2 million in grants and concessional loans for calendar year 2007. Major donors--Asian Development Bank (ADB), UN Development Program (UNDP), World Bank, International Monetary Fund, Australia, Canada, China, Denmark, the EU, France, Germany, Italy, Japan, Sweden, Thailand, the U.K., and the U.S.; 100% of the $601 million pledged by donors for 2006 was actually disbursed, according to the Cambodia Aid Effectiveness Report 2007. Principal foreign commercial investors: Korea, China, Russia, Thailand, the U.S., and Vietnam. Exchange rate (2007): 4,006 riel per U.S. $1
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