Reform: The Future of Cambodia

by: Dr. Chheang Vannarith

Economic performance in Cambodia over the last decade has been remarkable with an average annual growth rate of about 8 percent. However, there are uncertainties and unpredictability in the post-2013 election political crisis and the economic implications of which are still looming. Political polarisation is leading to social fragmentation. There is persistent threat from labour disputes and strikes. Reforms have yet delivered concrete results. The supply of qualified skilled-labour is very limited.

The current development path is vulnerable to internal and external shocks. The bases of the economic growth concentrate on only few sectors: construction, garment industry, tourism, and low-value-added agricultural sector. The widening economic development gap between the urban and rural areas and the increasing income disparity between the rich and the poor can potentially lead to social and political instability if there is no timely and appropriate intervening policy and strategy from the state and development partners. 

Taking these challenges into account, all political parties have to work together to find solutions to the problems. There is little time left before those multiple crisis and issues reach their difficult-to-reverse peak. Political settlement and agreement between the two winning parties (The CPP and the CNRP) need to be realised based on national interests and mutual concessions. The CNRP has to enter the National Assembly (NA) with the guarantee from the CPP that the National Election Committee (NEC) is going to be concretely reformed and the call for an early date of the next general election is met (the exact date of which is subject to negotiation). After the CNRP joins the NA, it is expected that full legitimacy (both legal and moral legitimacy) of the government will be restored, complete international recognition and support will be resumed, and inward flow of foreign direct investment will take a full swing. 

Hopes and expectations are on the horizon. Both parties are responsible to implement deep and comprehensive reform agenda in order to solve national issues such as poverty, environmental degradation, land disputes, deforestation, social injustice, and human rights violation. Most importantly, both parties have to build and strengthen national unity and social cohesiveness. 

Public sector reform is the most urgent task on the list of the agenda. The state institutions are often inefficient, irresponsive, and lack accountability and transparency. It is therefore necessary than ever before to effectively and quickly transform and convert the public institutions into genuine service-oriented institutions for the people. Prime Minister Hun Sen acknowledged such shortcomings and was committed to deepen comprehensive reforms of the state institutions. In his remarks at the first cabinet meeting on 25 September 2013, he urged his newly appointed ministers to practice self-criticism. “Look at yourself in the mirror, take a bath, and rub off dirt from your body, if there is any…We must change or we will fail…We must change our attitude, way of thinking and action in delivering on our election promises.”

Cambodia needs to build a knowledge-based society and invest more in education and human resources development, information flow, and civic engagement. Education and training have to move towards a quality-based education. Transformative and decisive educational leadership is required to implant discipline, ethics, values, critical thinking, and professionalism within the academic institutions and training centers. University-industry innovative partnerships and networks have to be in place in order to narrow and bridge the skill gaps and to better response to the fast-changing labor market forces. Vocational training and skill development should be promoted especially in the field of engineering, manufacturing, apprenticeship, information technology, transport, logistics, entrepreneurship, and health care. 

Diversification of sources or bases of economic growth is also needed. The government, private sector and society should work together to further improve the value chains of products and services, particularly those which Cambodia has comparative and competitive advantages in. An example would be to value-add the supply chains of the agricultural sectors, by investing in technology which allows the processing and packaging of raw materials, instead of outsourcing these processes to other countries.

Small and medium sized enterprises (SMEs) need support from the government in terms of financing, technology, training, market information, business networks, in order to help them integrate into the regional production and service networks. Cambodia has great potential to supply parts and components of electronic, automobile and machinery products to multinational companies in the region. 

Addressing inequality is long-term uphill struggle. Mismanagement of natural and state resources, power abuses and corruption, weak state institutions in redistributing wealth, spatial development bias, gender inequality, and geographical disconnections are some of the drivers accelerating inequality. Inequitable access to new technology, investment, and infrastructure magnify inequality. To address the issue, it requires better and more efficient allocation of state budget by investing more in education, health, and other pro-poor sectors; improve urban-rural linkages through infrastructure connectivity; and develop a balanced and friendly employment opportunity and composition between manufacturing, services, agriculture, SMEs, labor market institutions, public employment scheme. 

Cambodia needs to continue opening up and deepening regional integration. Through the ASEAN regional integration process, Cambodia will gain more access to regional market and be able to attract more foreign direct investment (FDI). With a market of more than 600 million people, ASEAN is a big market for Cambodia. There are opportunities for investment flows, which also further deepen regional production networks. And this in turn creates huge opportunities for the Cambodian people. However, it also imposes new challenges for small and medium enterprises in Cambodia, which do not have financial resources and technology to compete with their counterparts in the region. Within such fierce competitive environment, Cambodian entrepreneurs need to be more innovative, the public institutions more efficient, transparent, and accountable, and the whole society more educated and informed. More attention and investment has to focus on knowledge management and institutionalization.

For the reform path to be successful, it requires leadership, partnership, entrepreneurship, and sustainability. Leadership implies the capacity to translate vision into reality, to convince, influence, and empower others, and to make positive changes based on shared values. Partnership aims to ensure that key actors are empowered to collectively articulate development agenda, encourage learning and sharing of information and knowledge in promoting sustainable development, strengthen interconnectedness, and build a resilient network adaptive to fast-paced changes and transformation. Entrepreneurship refers to the ability and willingness to pursuit, enlarge opportunities beyond resource constraints through continued innovation and risks taking. Sustainability means the balance and harmony between economy, society, and environment.



Note: This article originally appeared in the KhmerTimes on May 14, 2014.