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Cambodia Country profile

December 2016

Cambodia is among Asia’s poorest countries with an income per capita of around US$1100. It also lags the region on creditworthiness and business climate, but growth continues to outperform.  The economy remains heavily reliant on agriculture, tourism and the garment industry. 

 

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Economic outlook

The global financial crisis caused growth to slow sharply, but the economy has since recovered with growth averaging 7% p.a since 2010. Garment manufacturing, tourism and construction have been the largest drivers over the last five years, but agriculture remains the largest employer with most citizens involved in subsistence farming.

Standards of living have improved thanks to early childhood development and primary education programs in rural areas. But weak public service delivery, ineffective management of land and natural resources, environmental sustainability, and good governance are weak points.

ASEAN integration will give Cambodia access to some 600m consumers, but productivity remains very low compared to regional peers. Output per worker in 2010 was two-thirds of Vietnam’s and a fifth of Malaysia’s, while infrastructure remains inadequate. This could pose difficulties for budding industries that compete with more established peers in neighbouring countries. Over the long run, favourable demography will support growth.

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Per capita income has risen 9% p.a. over the last 15 years, which lifted Cambodia into lower-middle-income status in 2015. According to the UN, the poverty rate has more than halved from 53% in 2004 to 20% in 2011. But 60% of the population remains engaged in agriculture, and the majority will need to move into manufacturing and services if standards of living are to lift materially.

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Business climate

Cambodia has an OECD country credit grade of 6 underlining its vulnerability to business, financial and economic setbacks.  Cambodia’s long term foreign currency sovereign debt is rated B2 (speculative grade) by Moody’s. S&P and Fitch do not rate Cambodia.

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Cambodia scores poorly, 131 out of 190, on the World Bank’s ease of doing business gauge— which measures regulation and red tape relevant to a domestic small to mid-sized firm.  Complicated and cumbersome regulations, weak infrastructure and an inadequate judicial system have discouraged foreign direct investment.

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Cambodia scores in the bottom quartile across most facets of governance and performs particularly poorly on corruption. Indeed, Transparency International ranked Cambodia 150 out of 167 of most corrupt countries.

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Bilateral relations

Cambodia is Australia’s 60th largest trading partner. The two countries are parties to the ASEAN-Australia-New Zealand Free Trade Agreement. Australia sent US$129m of goods and service exports to Cambodia in 2015-2016—services accounted for over half, with wheat making up the lion’s share of merchandise exports.  Imports from Cambodia were worth US$365m, consisting mainly clothing and services.

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Student enrolments abroad and in Australia are miniscule, given the low levels of income. But Australia does have an increasing presence in education through the Australian Centre for Education and IDP, teaching English to students who wish to study overseas.

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Australia has set aside A$90m to Cambodia in its 2016-2017 budget (2.4% of the aid budget). Funds are predominantly earmarked for agriculture and the development of infrastructure and trade. Data on Australian investment in Cambodia aren’t readily available. But ANZ in partnership with the Royal Group has a large presence in the banking industry.

Useful links

Department of Foreign Affairs

Country brief

Austrade

Market Profile

Asialink Business

Market profile