Cambodia: Sustaining Strong Growth for the Benefit of All

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Key Findings of the Systematic Country Diagnostic (SCD) Over the past two decades, Cambodia has achieved stellar economic growth and poverty reduction.Cambodia grew at an average rate of 7.6% from 1994-2015, and became a lower middle-income economy in 2015. This growth was driven by exports of goods and services (mainly garments and tourism), which grew 19.6% a year over the same period.Around 3.6 million jobs in industry and services were created over the past two decades.Cambodia’s growth has been pro-poor. The percentage of Cambodians living under the national poverty line fell from 47.8% in 2007 to 13.5% in 2014, according to official estimates. Cambodia has made significant progress in attaining the Millennium Development Goals. Since 1990, the country has more than halved extreme poverty and maternal mortality, achieved nearly universal primary education enrollment, and made significant progress in combating HIV/AIDS. As a lower middle-income economy, Cambodia is facing new challenges to sustaining strong economic growth.Going forward, Cambodia may not be able to rely on the same factors that drove strong growth and poverty reduction over the past two decades. Cambodia’s successful economic growth is expected to bring a progressive decline in preferential trade treatment and donor financing. Low prices for agricultural commodities prices along with rising salaries will require improvements in productivity in order to remain competitive.Constraints in the business environment pose a challenge to firm dynamism and economic growth. Cambodia ranks 180 out of 189 countries in terms of starting a business, with 87 days needed, compared to an average of 25.9 days in East Asia and the Pacific.Poor learning outcomes and persistent malnutrition threaten the future of Cambodia’s people. Lower-secondary education completion rates (43% in 2013) remain significantly below the average for lower middle-income economies (71%), 39% of grade 6 pupils have below basic proficiency in reading Khmer, and a third of the children under five are stunted.Risks posed by the degradation of natural resources could affect economic sustainability. Official estimates indicate that forest cover declined from nearly 60% in 2006 to less than 47% in 2014. The Systematic Country Diagnostic (SCD) identified three “pathways” or avenues for maintaining strong and sustainable growth with poverty reduction:Increasing economic competitiveness and diversification to sustain strong growth and create jobs. Reducing the cost of establishing and operating a business and boosting public and private investments are key to remaining competitive, complemented with strengthening the resilience of the financial sector and overall macroeconomic management.Investing in skills to facilitate shared prosperity. This can be done by improving accreditation and quality assurance mechanisms in secondary and higher education, as well as technical/vocational training. This would need to be accompanied by efforts to tackle malnutrition.Maintaining and developing natural resources while strengthening climate resilience. Sustainable management of protected areas and forests and implementing a robust urban planning agenda are key. These three pathways require significant public sector capacity to implement reforms and improve service delivery.Cambodia’s ongoing efforts to reform public financial management, public administration and decentralization are positive steps. SCD findings are based on in-depth analysis and extensive consultation with a broad range of stakeholders.The SCD is a World Bank report prepared in consultation with stakeholders, and aims at identifying key challenges and opportunities for strong and sustainable growth with poverty reduction in a country.Nearly 400 stakeholders (elected officials, private sector representatives, development partners and civil society) participated in the nine consultation meetings held in four different regions in Cambodia.    

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