The Cambodian economy: ready for take-off?

This article was downloaded by: [Umeå University Library]On: 24 November 2014, At: 08:31Publisher: RoutledgeInforma Ltd Registered in England and Wales Registered Number: 1072954 Registered office: MortimerHouse, 37-41 Mortimer Street, London W1T 3JH, UK

The Pacific ReviewPublication details, including instructions for authors and subscription information:http://www.tandfonline.com/loi/rpre20

The Cambodian economy: ready for take-off?Örjan Sjöberg a & Fredrik Sjöholm ba Professor of economic geography in the Dept. of Economics at the Stockholm School ofEconomics ,b Associate Professor in the European Institute of Japanese Studies, Stockholm School ofEconomics ,Published online: 08 Dec 2006.

To cite this article: Örjan Sjöberg & Fredrik Sjöholm (2006) The Cambodian economy: ready for take-off?, The PacificReview, 19:4, 495-517, DOI: 10.1080/09512740600984911

To link to this article: http://dx.doi.org/10.1080/09512740600984911

PLEASE SCROLL DOWN FOR ARTICLE

Taylor & Francis makes every effort to ensure the accuracy of all the information (the “Content”) containedin the publications on our platform. However, Taylor & Francis, our agents, and our licensors make norepresentations or warranties whatsoever as to the accuracy, completeness, or suitability for any purpose ofthe Content. Any opinions and views expressed in this publication are the opinions and views of the authors,and are not the views of or endorsed by Taylor & Francis. The accuracy of the Content should not be reliedupon and should be independently verified with primary sources of information. Taylor and Francis shallnot be liable for any losses, actions, claims, proceedings, demands, costs, expenses, damages, and otherliabilities whatsoever or howsoever caused arising directly or indirectly in connection with, in relation to orarising out of the use of the Content.

This article may be used for research, teaching, and private study purposes. Any substantial or systematicreproduction, redistribution, reselling, loan, sub-licensing, systematic supply, or distribution in anyform to anyone is expressly forbidden. Terms & Conditions of access and use can be found at http://www.tandfonline.com/page/terms-and-conditions

http://www.tandfonline.com/loi/rpre20

http://www.tandfonline.com/action/showCitFormats?doi=10.1080/09512740600984911

http://dx.doi.org/10.1080/09512740600984911

http://www.tandfonline.com/page/terms-and-conditions

http://www.tandfonline.com/page/terms-and-conditions

The Pacific Review, Vol. 19 No. 4 December 2006: 495–517

The Cambodian economy: ready fortake-off?

Orjan Sjoberg and Fredrik Sjoholm

Abstract Cambodia is facing the familiar problem of achieving sustained rates ofeconomic growth that could help it alleviate widespread poverty. Against the back-ground of some encouraging developments, and quite a few that are not equallyreassuring, we argue that any push for development needs to consider both agri-culture and industry. This is so as both labour absorption, primarily in secondarysector activities, and productivity growth in agriculture are necessary to lift largesegments of the population out of the poverty associated with subsistence agricul-ture, landlessness and informal sector activities. Given that the major success storyof the past decade – the garment and textile industry – is under threat, we concludethat Cambodia is yet to achieve an economic take-off.

Keywords Cambodia; economic development; agriculture; industry.

Introduction

To much of the outside world, Cambodia is still associated with the dev-astation brought about by the Khmer Rouge, and understandably so. Yetdevelopments, both economic and political, have moved on since that ill-fated period of the 1970s. Not only has the ultra-radical Khmer Rouge beenremoved, the successor one-party state under Hun Sen, kept in power largelythanks to the presence of the Vietnamese, is also gone. Instead, democratic

Orjan Sjoberg is Professor of economic geography in the Dept. of Economics at the StockholmSchool of Economics. His research has a focus on developing and transition economies.

Address: Stockholm School of Economics, PO Box 6501, SE-113 83 Stockholm, Sweden. E-mail:[email protected]

Fredrik Sjoholm is Associate Professor in the European Institute of Japanese Studies, Stock-holm School of Economics. His research covers a broad range of issues in international eco-nomics and development studies, often with a focus on Southeast Asia. He is currently coveringmacro-economic development in Cambodia on behalf of Sida.

Address: Stockholm School of Economics, PO Box 6501, SE-113 83 Stockholm, Sweden. E-mail:[email protected]

The Pacific ReviewISSN 0951-2748 print/ISSN 1470-1332 online C© 2006 Taylor & Francis

http://www.tandf.co.uk/journalsDOI: 10.1080/09512740600984911

Dow

nloa

ded

by [

Um

eå U

nive

rsity

Lib

rary

] at

08:

31 2

4 N

ovem

ber

2014

496 The Pacific Review

elections have been held, the press is reasonably free and the presence ofNGOs, both national and international, is noticeable. In parallel, Cambodiahas become a tourist destination of some note and its garment sector hasseen a decade of sustained rapid growth, in the process earning Cambodia areputation for applying and maintaining fair labour standards in an industryotherwise often characterized by sweatshop conditions. In the meantime,although not without a number of hiccups, Cambodia became a member ofASEAN (e.g. Kraft 2000) and more recently the World Trade Organization(WTO).

These noteworthy achievements must not be allowed to conceal the veryreal problems that continue to beset the country. The key theme of thispaper is that despite a robust annual growth over the last few years, mostCambodians remain poor, very poor. Together with Myanmar and Laos,Cambodia ranks as the poorest country in the region (see Table 1). More-over, in Cambodia, inequality with respect to incomes and wealth are pro-nounced and most people depend on subsistence farming with low andvolatile incomes.

Data on socio-economic conditions in Cambodia are relatively fragmentedand at times contradictory, but the situation seems very worrying and there islittle evidence of any improvement in overall living conditions. For instance,UNDP (2005) reports that about one-third of the population lives belowthe poverty line, a figure that is substantially higher than in other SoutheastAsian countries and only a small decrease from the 39 per cent in 1994. Thistallies in part, but only in part, with newly released poverty estimates from theWorld Bank. The latter suggest considerable, and unexpected, progress witha decline in poverty rates from about 47 per cent of the population in 1994 and1997 to about 35 per cent in 2004 (World Bank 2006: i). The time horizon

Table 1 Development indicators for Cambodia and other countries, 2003

Country

GDP percapita

(PPP US$)

Populationliving on

below US$1(PPP) a day

Lifeexpectancy

at birth(years)

Under-fivemortality rate

(per 1,000live births)

Malaysia 9,512 <2 73.9 7Thailand 7,595 <2 70.0 23Philippines 4,321 14.6 70.4 27Indonesia 3,361 7.5 66.8 41Vietnam 2,490 17.7 70.5 23Cambodia 2,078 34.1 56.2 140Lao 1,759 26.3 54.7 91Myanmar – – 60.2 107All developing countries 4,359 – 65.0 88

Note: PPP: Purchasing Power Parity.Source: UNDP (2005: 219–222).

Dow

nloa

ded

by [

Um

eå U

nive

rsity

Lib

rary

] at

08:

31 2

4 N

ovem

ber

2014

Orjan Sjoberg and Fredrik Sjoholm: The Cambodian economy 497

obviously matters, but it should be set against other reports that suggestthat poverty has increased over the period 1999–2003. For instance, anotherrecent study by the World Bank estimates that about 45.5 per cent of thepopulation was considered poor in 2003, up from 41.5 per cent in 1999 (EIC2004: 39), while Lundstrom and Ronnas (2006) suggest that improvementsthere probably were, at least until about the turn of the millennium. Atthat point the inability of rural areas in general and agriculture in particularto absorb additional labour began to translate into urban informal sectorgrowth, with increasing rates of poverty being an immediate result. In asimilar vein, the IMF (2004e: 34) reports an increase in poverty from around37 per cent of the population in 1996 to about 42 per cent in 2002. TheIMF also notes that this development is in stark contrast to the situation inChina, Laos and Vietnam where poverty has been reduced by half since 1990.Moreover, regional inequality seems to increase. Whereas Phnom Penh andits surroundings have benefited from the emerging formal economy, at leastup to the end of the 1990s one should perhaps add, most other parts of thecountry have been left behind; average household expenditure in rural areashas declined from 33 per cent of that in Phnom Penh in 1993 to about 25 percent in 2002 (IMF 2004d: 5).

Poverty also translates into low life expectancy and high child mortality.Child mortality is higher than in other countries in the region (RGC 2002:15) and is actually reported to have increased over the past ten years, mainlythrough sharp increases in diseases such as acute respiratory infections andmeasles (IMF 2004d: box 1, 2004f: 89). At about 437 per 100,000 live births,the maternal mortality rate also remains extremely high (IMF 2004d: 6).Hence, it comes as no surprise to learn that Cambodia is ranked 130th out of177 countries, according to the Human Development Index in 2003 (UNDP2006: 175). Thus, progress is slow and Cambodia is not likely to meet theMillennium Development Goals.

Against this background, it should be clear that poverty is severe inCambodia and the question is: what kind of development strategy can im-prove upon the situation? We argue in this paper that any push for devel-opment needs to consider both agriculture and industry. This is so as bothlabour absorption, primarily in secondary sector activities, and productivitygrowth in agriculture are necessary to lift large segments of the popula-tion out of the poverty associated with subsistence agriculture, landlessnessand informal sector activities. While not aiming to provide policy advice,we simply note that the development is likely to require a sustained effortat improving primary and expanding secondary sector activities. It is not aquestion of either or.

In pursuit of economic growth

In a number of policy documents Cambodia has stated the goal of an eco-nomic growth rate in the range of 6–7 per cent (most recently in the National

Dow

nloa

ded

by [

Um

eå U

nive

rsity

Lib

rary

] at

08:

31 2

4 N

ovem

ber

2014


Table 2 Key macroeconomic indicators, 1997–2005

1997 1998 1999 2000 2001 2002 2003 2004 2005

Real GDP growth (%) 6.8 3.7 10.8 9.2 7.7 6.2 8.6 10.0 13.4Agriculture 6.4 5.8 3.4 −3.9 4.5 −2.2 12.1 1.2 16.6Industry 19.6 −2.5 19.3 32.0 11.4 17.3 12.1 16.4 12.1Services 3.4 4.8 10.9 13.8 8.7 6.3 4.4 11.7 12.1

Inflation (%) 9.2 13.3 −0.5 −0.8 0.7 3.7 0.5 5.6 6.7Government budget

(% of GDP)Revenue 8.9 8.1 10.2 10.2 10.0 10.5 9.7 10.4 10.5Expenditure 12.7 13.5 14.1 15.0 15.2 16.8 15.7 15.2 13.9Balance (incl. grants) −0.4 −2.5 −1.3 −2.1 −2.6 −3.6 −3.7 −3.0 −1.3

Balance of paymentsExports of goods — — — 35.0 36.8 38.8 43.0 46.7 44.1

(% of GDP)Imports of goods — — — 54.1 54.4 57.1 60.4 64.7 65.5

(% of GDP)Current account –7.4 −12.4 −13.2 −11.5 −8.8 −9.5 −10.8 −8.4 −9.5

(% of GDP)

Source: IMF (2004c, d, 2006).

Strategic Development Plan; RGC 2005: 41–3), an ambitious target that thecountry has, on average, been able to reach by some margin during the lastfew years (IMF 2004a: 2). Considering the relatively low income and level ofdevelopment in Cambodia, and therefore the large demand for investmentin physical and human capital, it is reasonable to assume that such growthrates would be possible to sustain for a relatively long period of time. How-ever, there was a high degree of pessimism in relation to Cambodia’s abilityto continue on a high growth path as late as in early 2004. This was partlycaused by a relatively low growth in 2003, despite very high growth in theimportant agriculture sector (see Table 2). The main reasons for low growthin 2003 were a drop in tourism, related to the outbreak of SARS, togetherwith the uncertainties created by the stalemate following the elections inJuly 2003 (on which see, for example, Sullivan 2005). Moreover, the phasingout of the Multi-fibre Arrangement (MFA) obviously made foreign textileproducers reluctant to expand production in Cambodia.

Most observers predicted economic growth also to be low in 2004 and2005. At the pessimistic end of the spectrum, the IMF (2004b) suggestedthat economic growth in 2004–05 might slow down to about 2 per cent. Thiscan be compared to more optimistic observers (e.g. EIC 2004: 5), whichexpected the economy to grow at about 7 per cent in 2004 and then fall toabout 3.5 per cent in 2005. ADB (2005) estimated the growth in 2004 to be6 per cent and expected it to fall to 2.3 per cent in 2005.

Hence, all observers failed to predict the high economic growth in 2004and 2005. Reasons for the pessimistic forecasts were not difficult to find.

Dow

nloa

ded

by [

Um

eå U

nive

rsity

Lib

rary

] at

08:

31 2

4 N

ovem

ber

2014


For one thing, local demand still suffered from low levels of income, whileinfrastructure of almost all types left much to be desired; the latter was (andremains) often of deplorable quality and, when not, of limited geographicallyextent and/or expensive to use. This translates, amongst other things, intoa lack of integration of the domestic market and difficulties in competingin foreign ones. For another, agriculture has had its ups and down. Thus,although agricultural output boomed in 2003, due to deficient rainfall in thelast quarter of 2003, harvests in 2004 were smaller and resulted in famine insome regions.1 In 2005, however, things turned and a surplus food balancewas recorded (MAFF 2006: 4). To top it off, just as the mobilization ofeconomic resources is important to actors in the political sphere (e.g. Hughes2003), domestic politics tends to influence the course of the economy.

There are two main explanations for the high growth in the last two years.The first is that the MFA has not materialized in the expected withdrawalof foreign textile producers. One reason is the recently imposed quotas onChinese textile exports to the United States and the European Union. Itseems that textile producers in Cambodia will remain at least as long asthese quotas are in place. Another positive development is found in tourism,which has been growing faster than previously expected. The growth in thenumber of foreign visitors reached a surprisingly high 50 per cent in 2004and another 35 per cent in 2005 – growing from 710,000 arrivals in 2003to 1,055,000 in 2004 and 1,422,000 a year later – implying a boost to thewhole service sector and to the economy as a whole. This development,which was expected to continue in 2006, if at a somewhat lower rate, is inpositive contrast to previous worries in the tourism sector following the anti-Thai demonstrations in 2003, SARS, avian flu and competition from othertourist destinations in the region. However, the employment potential of thetourism sector is widely seen as lower than in manufacturing, while low valueadded and a dominance of foreign-owned companies adds up to a concernthat foreign exchange leakage is high (e.g. Sok et al. 2001: 71–3).

Economic development in 2004 and 2005 were very positive, but there areeconomic and political reasons to remain cautious about Cambodia’s abilityto continue this development over the coming years. Some of the problemshave been discussed above. On the political side, it is also worth mentioningthat the form and content of the political system itself, despite being moredemocratic and transparent today than in the pre-UNTAC period, still do notadd up to a free society, or so Freedom House (2005) contends. One reason isthe unchallenged dominance by the Cambodian People’s Party (CPP) overTV broadcasting; another is the same party’s control of the civil service.Indeed, it might even be argued that it is the need to please the donors,and not any democratic impulse, that allows for the continued existence ofpolitical opposition and lively NGOs (Marston 2002). In fact, Cambodianrule is still based largely on patronage, and transparency is not the mostprominent feature of its political culture (e.g. Downie and Kingsbury 2001;Gottesman 2002). Corruption, which is pervasive (e.g. Nissen 2005a, b; RGC

Dow

nloa

ded

by [

Um

eå U

nive

rsity

Lib

rary

] at

08:

31 2

4 N

ovem

ber

2014


2005: 10), is just one expression of this lack of accountability, as are ostracismand assassination of political opponents (e.g. Sambath 2004).

On the economic side, it is also worth mentioning that Cambodia is highlydollarized. This brings some potential benefits in terms of reduced exposureto exchange rate risks, deepening of the financial market, economic andfinancial integration with the outside world and improved fiscal discipline (deZamaroczy and Sa 2003: 17–19). Such positive features should be balancedagainst the negative effect of losing control of the base money supply andtherefore the ability to control inflation (Kang 2001). As can be seen fromTable 2, over the past two years inflation seems to be picking up from previouslow levels. For instance, it was negative in 1999–2000 and less than 1 per centin 2001. Inflation has since increased to 5.6 per cent in 2004 and 6.7 percent in 2005. It is still unclear whether interest rates will accompany therise in inflation. Cambodian interest rates remain substantially above thosein neighbouring countries: interest rates on lending in foreign currencies in2002 were about 16 per cent in Cambodia, 9 per cent in Vietnam and 7 percent in Thailand (Kang and Chan 2003: 22).

Further pressures on inflation are provided by the budget deficit, which hasbeen maintained for a number of years at a level of about 6 per cent of GDP.Part of the deficit is financed through foreign grants, which currently bringsdown the remaining deficit to about 1.3 per cent of GDP. The main reasonfor the budget deficit is low revenues: these amounted to around only 10per cent of GDP over the period 1999–2004. Taxes account for about 70 percent of revenues, the most important of which are VAT and trade taxes. Theremaining part of government income comes mainly from quota auctionsand from various licences and royalties. The phasing out of the MFA impliesthat revenues from such quota auctions will decrease and represents a lossof approximately US$30 million.

Hence, public revenues are low and need to increase both to balance thebudget and to facilitate increased expenditure on development-related areassuch as education, health and infrastructure. Revenues are still low comparedto many other developing countries. In fact, public revenues in Cambodiatoday are lower than in the 1960s when tax revenues alone amounted toabout 15 per cent of GDP (MEF 2004: 74). Improvements in the legal sys-tem, increased salaries for tax officials, decreased opportunities to exercisepersonal discretion and the simplification of tax structures are some of thereforms that are needed.

Exports and imports have both grown, with double-digit figures over thelast few years: exports increased from about 19 per cent of GDP in 1997 toabout 44 per cent in 2003 and imports increased from about 31 per cent toabout 65 per cent. Hence, despite a strong expansion of exports, primarilyof garments, imports tend to grow at a similar or higher pace resulting in alarge current account deficit. Most of the deficit is covered through officialtransfers, bringing down the remaining deficit to about 2–3 per cent of GDP.It should be noted that the figures capture only registered trade. A large

Dow

nloa

ded

by [

Um

eå U

nive

rsity

Lib

rary

] at

08:

31 2

4 N

ovem

ber

2014


share of imports and export is smuggled over the long borders to Thailandand Vietnam and the real trade balance is difficult to estimate. Still, thefigures might suggest that any decrease in official transfers could put thecountry at risk of a balance-of-payments crisis. Foreign exchange reserves in2004 amounted to about US$633 million, or about three months’ worth ofimports of goods and services.

Against this background it becomes obvious that short-term develop-ments are not always propitious and, as such, tend to reduce the scope forimplementing long-term economic strategies. Indeed, problems issuing fromthe political sphere and the public sector are such that attention is focusedelsewhere. Thus, not only do public finances allow little room for public in-vestments but also the government is often forced to engage in rearguardaction simply to solve urgent problems, thereby crowding out policy initia-tives for securing long-term growth. While the current and previous govern-ments’ policy declarations also include provision of a long-term or strategicnature in the spheres of economic development and poverty reduction (e.g.RGC 2004), it does not seem to quite add up to a coherent strategy foreconomic growth. It remains to be seen to what extent the new NationalStrategic Development Plan 2006–2010 (RGC 2005) will be able to changethis perception.

A balanced growth approach to future development

Although very substantial problems persist, one might argue that the foun-dations for growth are in place. This is because the political and economicreforms implemented since the early 1990s, for all their shortcomings, rep-resent a decisive step forward and as such are crucial for future economicdevelopment. Yet, even if political stability and a commonality of purposeare attained, the question remains as to how this development could best beachieved. It seems plausible that the development has to rest on two pillars:improvements in agriculture and expansion of manufacturing production.Applying a slightly modified Lewisian line of reasoning,2 below we outlinewhat this might entail.

Development of a highly agrarian economy, dominated by subsistenceproduction and a large pool of unemployed or under-employed labour, pre-supposes a shift out of agriculture and hence makes the ability of the non-agricultural sector to absorb labour the critical factor. To the extent that thenon-agricultural sector is able to do that, productivity levels will eventuallystart to increase also in agricultural production. Such productivity increasesin agriculture are important to lift broad segments of the population out ofpoverty. As this happens, the expanding non-agricultural sector will also in-crease its demand for agricultural produce, thereby contributing to a virtuouscircle.

Furthermore, or so the argument goes, increased demand – possibly ascombined with other sources of income for the agricultural household – will

Dow

nloa

ded

by [

Um

eå U

nive

rsity

Lib

rary

] at

08:

31 2

4 N

ovem

ber

2014


open up an opportunity for specialization. As long as subsistence agriculturepredominates, risk minimization and a need to cater to a varied crop for on-farm consumption are likely to prevail; otherwise, reserves such as commonpool resources will have to be accessed. Although rational in relation to theindividual household, it cannot be expected to improve productivity or turnagriculture into a thriving part of the economy. This is because gains fromspecialization will not come about. If subsistence needs prevail, the abilityto foot the bill for improved inputs will be severely constrained and anymarketable surplus resulting from farming activities is likely to go on themarket at about the same time as everyone else has a marketable surplus,thereby depressing the prices fetched by the individual household. Althoughhouseholds do need a measure of cash income to meet various obligations(e.g. taxes) and to purchase essential goods not possible to produce on-farmor by recourse to commons, if market production is limited to this minimum–as is indeed a distinct possibility due to the restrictions imposed by riskminimization and on-farm consumption needs – continuing low returns tomarket activities are unlikely to help sway producers away from subsistenceactivities. Instead, a negative spiral will set in, particularly so if populationpressure on the land increases as a result of high levels of natural growth.

Much of this appears relevant to Cambodia. Currently around 80 percent of the population3 and 90 per cent of the poor live in rural areas andare largely dependent on agriculture and common pool resources (Chanand Acharya 2002; World Bank 2006). Hence, improvements in agriculturewill have a large impact on the welfare of large segments of the Cambo-dian population provided that output and marketed produce increase as aresult of such investment. Areas close to major urban centres have seensome success in increasing the volume of marketed produce. However, itcan be argued that such improvements are necessary but not sufficient forsustainable economic development. This is so precisely because Cambodiais a country characterized by substantial labour surplus or, in other words,under-employment of its labour force. The problem is aggravated by rapidpopulation growth. Cambodia has a very young population; about 43 percent of the population is below 15 years of age (NIS 2003: table 2). More-over, the fertility rate is around 4.1 births per woman, leading to a relativelyhigh population growth of 2.3 percent annually (UNDP 2005: 234). As aresult, the labour force increases at a rate of more than 200,000 people everyyear. This need not necessarily be a problem; if in parallel to fertility de-cline (which helps reducing the youth dependency ratio) the large numbersof new entrants into the labour force are gainfully employed, growth ratesare in fact likely to increase substantially (e.g. Bloom et al. 2000; Chan et al.1998: 51). However, the total fertility rate remains high (RGC 2002: 13–15)and currently only about 20,000 new jobs are created annually in the formallabour market. Most of these new entrants to the labour force have to makea meagre existence out of subsistence agriculture. As a result, the numberof people of working age engaged in agriculture has increased by close to

Dow

nloa

ded

by [

Um

eå U

nive

rsity

Lib

rary

] at

08:

31 2

4 N

ovem

ber

2014


40 per cent, from 3.1 million people in 1993 to 4.3 million in 2002 (NIS 2003).Output increased in the first half of the 1990s but has been more stagnantin recent years, which has resulted in declining labour productivity in agri-culture since 1997 (Sok and Acharya 2002). From that point on, or possiblysomewhat later (Lundstrom and Ronnas 2006), informal sector employmentin urban areas has become a main, if not the major, safety valve.

Due to limited absorptive capacity and other factors, any improvementsin agricultural production techniques as might come about will not immedi-ately solve the problem of under-employment. For instance, changes in farmtechnology, such as irrigation and use of fertilizers, will increase output butare not likely to create many new jobs. Previous experience suggests thatnew technology and employment are not necessarily complementary to anylarge extent. Yet, as noted above, productivity growth in agriculture is alsoimportant in order to improve the general level of incomes and well-beingin rural areas; expansion through intensified land use must not be allowed toreplicate the phenomenon that anthropologist Clifford Geertz (1963) onceidentified as involution.

Rather, a substantial degree of job creation combined with the improve-ment of productivity levels in agriculture will require an expansion of in-dustrial production. As the experience from other developing countries alsosuggests, the secondary sector might be best suited to absorb huge numbersof labour in a relatively short time period. If so, and under ideal circum-stances, industrialization will not only help create jobs for the lucky few butwill also reduce the level of under-employment in other sectors. Against thisbackground it is easy to see why the government is keen to increase invest-ments in labour-intensive industry to bring about ‘productive employmentto absorb the inflow of surplus laborers from rural areas’ (RGC 2004: 38).Furthermore, in parallel to improving productivity in agriculture, as alreadynoted, such a shift of labour increases demand for agricultural produce fromhouseholds outside agriculture, which in turn may provide possibilities andincentives to improve the technology employed.

Hence, a process of economically sustainable development in Cambodiaseems to require both improvements in agriculture and an expansion ofmanufacturing production. This is not to suggest that, for instance, tourismcannot play a role in Cambodia’s development. However, experiences fromother countries in the region suggest that the secondary sector is betterplaced to absorb a labour surplus. Most recently, China and Vietnam haveembarked on this road to structural change and economic growth. An im-portant question is whether such development could be achieved also inCambodia.

Agriculture

The agricultural sector, then, is not only the linchpin of the Cambodianeconomy, but must as such be part of any strategy relating to economic

Dow

nloa

ded

by [

Um

eå U

nive

rsity

Lib

rary

] at

08:

31 2

4 N

ovem

ber

2014


development and poverty reduction. Here, it is widely agreed (e.g. Kangand Chan 2003) that a move out of subsistence production is an importantobjective. As rice predominates, and as the production of rice and mostother crops is predominantly rain-fed, the scope for output expansion isconsiderable. Investments in infrastructure and improved varieties, or sothe argument goes, would do much to improve the plight of peasants.

This may well be the case, provided that the requisite funds for investmentscould be found, which is questionable, at least over the short and mediumterm. However, as in neighbouring Vietnam (Jirstrom and Rundquist 1999),specialization within agriculture may not solve the problem. As statistics sug-gests that the overwhelming part of the land available to farmers is alreadydevoted to rice, it would be more relevant to speak of intensification ratherthan specialization as a means of moving beyond subsistence agricultureand high levels of on-farm consumption. There is scope for specializationin cash crops, provided that markets can be found and reached, but furtherspecialization along current lines would in fact imply intensification.

This is also the view of the current government, which sees intensificationas a key to improving agricultural productivity (RGC 2004: 26). Althoughthe scope for intensification appears large, bottlenecks abound (Beresfordet al. 2004: 52). Furthermore, as intensification is more demanding with re-spect to inputs than is the current system it may, despite a great need forlabour to control weeds and pests, prove a non-viable strategy on groundsof sustainability. Intensifying production, with its increased input costs andtherefore falling returns from additional output, and farmers who are de-pendent on the market may find it more worthwhile either to diversify or tomove into subsidiary non-agricultural activities, only the former option ofwhich is mentioned in the so-called ‘Rectangular Strategy’ (and then at thevillage rather than farm level; RGC 2004: 27–8). The choice is in part con-ditioned by the policies pursued by the government: if rice self-sufficiencyis a national priority, efforts at diversification are likely to run up againstconsiderable hurdles and a shift into other activities becoming all the moreattractive – if only such options exist or can be developed.

As previously mentioned, roughly four-fifths of the workforce is employedin agriculture. Indeed, 90 per cent of the poor live in rural areas. Hence,progress in agriculture will have large effects on Cambodian welfare. Ex-amining the agriculture sector in more detail in Table 3, we see that ricedominates land use and output, leaving only minor shares to cash crops suchas maize, soybeans and vegetables. However, the share of rice is substan-tially larger in terms of land use than in value terms. More specifically, riceconstitutes about 88 per cent of cultivated land but contributes only to about54 percent of crop value, or 9 per cent of GDP. This confirms that most agri-culture is subsistence farming with low yields. In fact, the majority of farmerscultivate no more than one hectare of rice. It is no surprise to find, therefore,that rural households with little land at their disposal are very dependenton other sources of income, such as those derived from common property

Dow

nloa

ded

by [

Um

eå U

nive

rsity

Lib

rary

] at

08:

31 2

4 N

ovem

ber

2014


Table 3 Crops cultivated in Cambodian agriculture in 2002 (percentage shares)

Share of total cultivated area Share of total crop value

Rice 88 54Maize 6 3Cassava 1 3Sweet potato <1 1Vegetables 2 8Mung bean 1 1Peanuts <1 <1Soybeans <1 2Black and white sesame <1 1Sugar cane <1 1Tobacco <1 <1Jute <1 <1Cotton na 0Other crops na 24

Note: total cultivated area refers to area cultivated for short-term crops; na – not available.

Source: IMF (2004c); NIS (2003).

resources or, where available, non-farm work (Acharya et al. 2003; Chan andAcharya 2002: 51–62).

Although Cambodia’s soil, access to water and climate does not provideit with a unquestionable competitive advantage in agriculture production,there is potential for expansion of a wide range of agricultural products.As yet, however, this potential has not been realized because of a numberof constraints. The main problems of agricultural expansion seem to be thelack of irrigation and fertilizers, while crop varieties and cropping systems arealso not up to scratch. As one report recently pointedly put it, ‘no significantimprovement of rice production [has occurred] in Cambodia in 40 years’(Asia Pacific Biotech 2003: 1201). With reference to overall output growth,others would suggest otherwise (Kang and Chan 2003: 33), but are likely toagree that there is substantial variation across years and uncertain prospectsfor sustained long-term expansion. Indeed, it appears that, despite effortsby donors and government agencies, productivity remains low except inthe as yet small part of the agricultural economy where farmers have notonly sizeable land resources at their disposal but also access to irrigationand related infrastructure. This is a privilege of a small minority and mostfarmers devote little attention to growing cash crops, a problem that has itsroots in poor market access, widespread monopolization and/or corruptionin the supply chains, cross-border trade barriers and insecurity of land tenure.

Poor market access is in part caused both by substandard infrastructureand by a poor marketing and distribution system. From this observationalone, improved physical access seems to be desirable. As improvementsof, for instance, roads not only extend the number of farmers that could

Dow

nloa

ded

by [

Um

eå U

nive

rsity

Lib

rary

] at

08:

31 2

4 N

ovem

ber

2014


conceivably reach the market but also increase the market area of existingurban areas and improves the feasibility of pluriactivity in rural areas, thereis much to be said for such investments. As such, it also has the potentialof resulting in multiple, if small, streams of incomes for rural households(Acharya et al. 2003). However, not even under the best of circumstancesare improvements in the provision of infrastructure likely to solve all out-standing problems. For one thing, the attractiveness of produce still needsto be attended to. Consider the example of the tourist trade. Despite a pricethat is three to five times higher than locally produced food, almost all largerhotels in Cambodia import their vegetables from Vietnam (Murshid andTuot 2005). Uncertainties in delivery from local producers, together withquality problems, still make imports the preferred option. Indeed, in the ab-sence of some unique competitive advantage of non-core regions, any suchexpansion of the market economy is likely to be spatially uneven. Areas inclose proximity to major urban centres are the most likely to benefit notonly in the short run (as is, in fact, already happening) but conceivably alsoover the long term. As the pressure on land adjacent to urban areas buildsup, progressively more distant districts might be drawn into such a processof growth.4

On the other hand, and despite higher output in leading producer countriessuch as Thailand and the United States, increases in consumption worldwidehave outstripped production increases in each of the past three years, result-ing in rapidly increasing world market prices (by one-third or more in 2004alone). As this pattern has continued, for a country like Cambodia wherefood security has been and still is at the top of the agenda (e.g. Murshid 1998;RGC 2005: 44), such developments are cause for concern and constraints toexports are, wittingly or not, in place. For instance, while the government en-courages the export of surplus grain, food security concerns have translatedinto the need to obtain a licence for exports (Chea 2004). As a result, offi-cial revenues from rice exports are appallingly low. However, considerableamounts of produce find their way across the border to neighbouring coun-tries (in particular to Thailand), thereby fuelling fears about Cambodia’sability to feed itself. If anything, however, this shows that farmers may re-spond to demand, provided that their produce fetches a reasonable priceand the marketing channels are in place. The loser for now is the state bud-get, as incomes earned from export trade in rice are beyond the reach of theauthorities.

Indeed, farmers will not invest in new production methods or shift fromsubsistence farming to cash crop production unless they see clear economicbenefits from such investments and changes – and then only if they areprovided the means to do so. Problems include ill-defined land rights, whichbring pronounced uncertainty as to the economic rewards for long-terminvestments (for a review of land-related issues, see, for example, Ballardand So 2004). The problem is partly due to the legacy left behind by theKhmer Rouge regime, as it abolished private property rights and destroyed

Dow

nloa

ded

by [

Um

eå U

nive

rsity

Lib

rary

] at

08:

31 2

4 N

ovem

ber

2014


all cadastral maps, registers of title deeds and other similar records, but thetwists and turns of post-Khmer Rouge land legislation have also contributedto the problem, not least because of the time it has taken to arrive at a modernlaw on the issues of land ownership and use (Russell 1997; Simbolon 2002).

A programme for allocating land rights to the farmers exists but progresshas been slow, with no more than one in ten rural families holding legal titlesto the land they cultivate (Beresford et al. 2004: 46). Hence, it seems impor-tant to speed up the process of distributing title deeds, but the signs are notpositive. In fact, as improvements in infrastructure and price liberalizationincrease the return to the land, resource appropriation by officials and othermembers of the elite appears to have become more common (Ana 2004;Beresford et al. 2004: 46–7; De Lopez 2002). In parallel, there are also in-stances where ethnic minorities are loosing land that they have farmed for along time to ethnic Khmer migrants (Bottomley 2002; Chandara 2004). Un-fortunately, not even in instances were there are defined land rights can thefarmer be fully secure, since such rights do not seem to prevent the govern-ment from reselling the land to government officials. Complaints are seldomreferred successfully to the judicial system.

An additional problem with poorly defined land rights is the difficulties infinancing improvements in farming methods (Ballard and So 2004). Farmersneed collateral to get access to bank credit. Land rights can be used as suchcollateral. In their absence, the farmers are not likely to get loans from theformal financial sector. This is an important reason for the low use of fertil-izers and means of pest control, which are relatively costly and often haveto be imported from Vietnam. The lack of credit is also a major constrainton the ability of farmers to diversify to crops such as fruit trees, where thereturns do not start until at least three years after the investment.

Industry

One advantage that Cambodia enjoys is the lack of an inefficient state-ownedindustry sector of the sort found in, for instance, Vietnam and China (Woo1999). Moreover, there have been no, or very few, attempts by the ruling eliteto build their own business empires with the help of protection from domes-tic and foreign competition. This is in contrast to industrialization in much ofthe rest of Southeast Asia, which is characterized by strong links between thepolitical and business sphere. Typically this means that the political estab-lishments throughout the region have large direct or indirect owner interestsin the industry (MacIntyre 1994; Rodan et al. 1997). This does not appear tobe the case in Cambodia, where corruption is a major problem but where thepolitical establishment seems to have economic interests in forests and landownership rather than in manufacturing (Le Billon 2002); hotels and casi-nos are other areas where members of the political elite have large personalinterests. As a result, there are fewer distortions in Cambodia’s industrialpolicy compared to most other countries in the region, where politicians have

Dow

nloa

ded

by [

Um

eå U

nive

rsity

Lib

rary

] at

08:

31 2

4 N

ovem

ber

2014


an incentive to provide subsidies and protect industries where they have pe-cuniary interests. Cambodia’s membership of the ASEAN Free Trade Area(AFTA) and the WTO will presumably ensure that that situation of rela-tively few domestic distortions will remain, since introduction of exclusivemonopoly rights or high tariffs and other trade-related barriers will then bedifficult to pursue.

The garment sector is the only manufacturing sector in Cambodia of anynote. Its development has been quite impressive; in 1995 it employed about10,000 workers in the modern sector, which grew to about 230,000–240,000at the end of 2004 (Keo and Seng 2005: 75; Sok et al. 2001: 51). It is alsoestimated that the industry indirectly feeds about 1 million people throughincome linkages and remittances (Cattaneo and Marniesse 2004: 52; Cheaand Sok 2003). In terms of exports, by the end of the MPA era only Lesothoand Haiti were proportionally as dependent on garments as was Cambodia(World Bank 2005: 124).

The unexpected success of Cambodian garment production started withthe bilateral trade agreement with the United States in 1996, which reducedthe average US tariff from around 60 per cent to about 15 per cent. Theindustry has also benefited from export quotas under the MFA as well asadditional special and generous quotas from the United States. The UnitedStates accounts for about 65 per cent of Cambodia’s total garment exports(Keo and Seng 2005: 76). However, quotas have been phased out under theglobal liberalization of the textile and garment sector. Moreover, China’s andVietnam’s entry into the WTO serves to further competition in the textilesector, as does the CAFTA process, that is, the free trade agreement betweenASEAN and China signed in Vientiane in November 2004.

Quite naturally, there is concern that this will have a severely negativeimpact on the industry. How negative the effect will be is open to debate.The government believes the effect to be modest since the adherence to corelabour standards might support demand for made-in-Cambodia garments(IMF 2004d: 15). However, a report by the Ministry of Economy and Financeis more pessimistic and estimates that the effect of increased competitionfrom China will decrease Cambodian exports of garments by between 10and 30 per cent (MEF 2004: 34). The IMF (2004d: 11) is similarly pessimistic.It observes that Cambodia only manages to export to markets where it hasspecial quotas, and is not able to compete with Chinese exporters in marketswhere no such quotas exist. According to the IMF, for Cambodia to retainits competitiveness would require a cost reduction in the range of 15–30 percent.

There are also other, more positive views on the future of Cambodiangarments. The possibility that multinational producers of garments might bereluctant to concentrate all their production in any one country should notbe discounted. Recent events such as terrorism, SARS and avian flu havehighlighted the benefit of diversifying production in the interest of reducingrisk. The agreement reached between China and the United States in 2005

Dow

nloa

ded

by [

Um

eå U

nive

rsity

Lib

rary

] at

08:

31 2

4 N

ovem

ber

2014


reinforces any such effects. Hence, it is likely that producers of garmentswill stay in Cambodia in the short run, which gives the country some time toaddress important policy issues and try to increase competitiveness. In fact,during the first half of 2005 garment exports actually increased by about 10per cent (Oum et al. 2005: 10) and the full year ended on a similar note,with the ILO (2006) registering an increase of 9.66 per cent by value. Asimportantly, from the beginning of 2005 to late April 2006, 30,000 new jobswere added in the sector. Moreover, there has been little attention given tothe textile industry that has emerged along the border to Thailand (but seeMurshid and Tuot 2005). This domestically owned industry is located mainlyin Poipet and is said to consist of some hundred firms and to employ severalthousand employees and home workers. The textile mills are supplying theThai market exclusively and hence are not a result of international quotason garment production. The conclusion is that Cambodian garments andtextiles might be able to continue to compete in some niche products and insome markets for some time to come.

In sum, the exact magnitude of the impact of China’s entry into the WTOand the end of the MFA on Cambodia’s garment sector is difficult to esti-mate. It does seem clear, however, that the sector will at least not act as anengine of growth in the long run, which is a concern in view of the rather nar-row export base that Cambodia has (Leung et al. 2005). The question as towhat industries that might provide future growth is very difficult to answer,but it is likely that it will be in labour-intensive and natural-resource-basedsectors. What seems important for the government is to lay the foundationfor such an expansion. Official pronouncements suggest that the currentgovernment is aware of the need to encourage labour-intensive manufac-turing activities (RGC 2004, 2005). In other words, if the environment forindustrial production is reasonably good in Cambodia, foreign investors anddomestic entrepreneurs will start production. Unfortunately, not only didthe political stalemate following the elections in 2003 imply a loss of valu-able time but today the conditions for industrial production are somewhatpoor and a host of measures have to be implemented. The necessary reformsrange from improving the judiciary and other parts of the civil service, tobetter infrastructure and improved skills and productivity of the workforce.As formal tertiary sector investments, primarily in tourism, suffer from asimilar set of problems, a shift of focus from manufacturing to services willnot change the picture to any greater extent. Some of the more demandingchallenges are described in more detail below.

Obstacles to further industrialization

One of the main problems preventing the rapid industrialization ofCambodia might be the poor level of education. The relatively low levelof educational attainment in Cambodia can be explained in several ways.Obviously, the dramatic political turmoil during the past few decades has

Dow

nloa

ded

by [

Um

eå U

nive

rsity

Lib

rary

] at

08:

31 2

4 N

ovem

ber

2014


Table 4 Education in Cambodia and other Southeast Asian countries, 2002

Adultliteracy

rate

Primaryenrolment(net, %)

Secondaryenrolment(net, %)

Tertiaryenrolment(gross, %)

Share oftotal

publicexp.

Shareof

GDP

Pupil–teacher

ratio(primary)

Cambodia 69 86 21 3 2 15.3 28Indonesia 88 92 na 15 1.3 9.8 13Laos 69 83 31 6 3.2 10.6 16Malaysia 89 95 69 27 7.9 20 23Myanmar 90 82 35 12 na na naPhilippines 93 93 56 31 3.2 14 30Thailand 93 86 na 37 na na naVietnam 90 94 65 10 na na 21

Source: UIS (2004). Note: na – not available.

had an impact.5 Moreover, there has arguably never been any emphasison education in Cambodia, which seems to make the country differ from,for instance, China and Vietnam (Ayres 2000). Following a long period ofstagnating enrolment rates and low public expenditure on education, thesituation had become a cause for concern by the end of the 1990s. The gov-ernment then launched the Education Sector Programme in 2000, which hasincreased public spending on education with the aim of improving enrol-ment rates in primary education (MEF 2003). As seen in Table 4, however,the situation remains troublesome. Almost one-third of the adults are illit-erate, a figure that is higher than in most other countries in the region. Thereare also suggestions that the situation is even worse than official statisticssuggest: according to a survey by UNESCO (quoted in Sok 2003: 14), abouthalf of those who are considered to be literate do not read or write correctly.Moreover, enrolment in primary education has increased sharply in the lastfew years but enrolment in secondary and tertiary education remains verylow. Finally, a strong expansion of primary education has not been matchedby similar improvements in the quality of education. Teachers are few andpupil–teacher ratios therefore high; earning US$20–30 per month (2004),teachers are also badly paid, which forces them to engage in other income-earning activities.

The poor level of education is likely to have a negative impact on a bal-anced growth path, particularly on the expansion of industrial production,which typically requires some basic literacy and numeracy. The lack of work-ers with appropriate vocational training is also noticeable. The expansion ofeducation in Cambodia during recent years is important and will hopefullyhelp mitigate the problem of a poorly educated labour force and relativelyhigh wages. It should be noted that many neighbouring countries in SoutheastAsia managed to industrialize despite poor levels of education. In fact, un-like Northeast Asian countries, Southeast Asia has traditionally neglectededucation (Booth 1999a, b). It is likely, however, that the current global

Dow

nloa

ded

by [

Um

eå U

nive

rsity

Lib

rary

] at

08:

31 2

4 N

ovem

ber

2014


focus on development through export orientation, attraction of foreign di-rect investment and manufacturing expansion will put increasing stress onthe country’s ability to provide a skilled and educated workforce.

Bureaucratic obstacles are another major constraint on industrial expan-sion. For instance, to register a firm in Cambodia requires about ninety-fourdays and costs about US$1,500.6 This is longer and more costly than in anyof the neighbouring countries, which often compete in the same industries.Compared to Thailand, the cost is seventy-six times higher and it takes fifty-two days longer to register a firm. It comes as no surprise, then, that thereare a large number of unregistered firms in Cambodia; about 27,000 in 2003compared to only 9,000 registered ones. The main problem with unregisteredfirms is that they are likely to have poor access to credit and marketing sup-port, and that they tend not to grow in size. By remaining small, they avoidthe attention of public officials and the costs associated with such attention.These include both the formal fees mentioned above as well as informalcharges or bribes; registered firms pay about three times more informal feesthan unregistered firms do. Such informal fees are also considerably higherthan in most other countries. For instance, according to the World Bank In-vestment Climate Survey (cited in IMF 2004d: 11), informal fees or bribesare estimated to be about 51/2 per cent of sales in manufacturing – more thandouble the rate in Bangladesh, Pakistan and China. Finally, slow custom rou-tines are a major problem for exporters; on average it takes eighteen daysto obtain export customs clearance in Cambodia, compared to eleven daysin India and seven in China.

The formal and informal fees thus increase the cost of production inCambodia compared to many other countries. Wage policy is another rea-son for high relative cost of production in Cambodia. Minimum wages areadopted in most of the formal sector and are high compared to current pro-ductivity levels as well as to wages in other sectors of the economy. Forinstance, the minimum wage of US$45 a month and an average of US$61a month in the garment sector are substantially higher than in some com-peting countries such as Vietnam, India, and Sri Lanka (IMF 2004d: 11). Inaddition, foreign-owned firms are required to pay a 100 per cent wage pre-mium for night shifts, and are restricted from operating at weekends and onthe twenty-two national holidays. Hence, the minimum wage policy reducesemployment opportunities in the formal sector. The policy is unfortunatesince job creation is, as previously discussed, one of the main challenges forCambodia. The minimum wage is also making it difficult to compete withforeign producers in that relatively high wages are not matched by similarlyhigh levels of productivity.

Concluding remarks

Few countries have had to make a new start from such appalling con-ditions as has post-Khmer Rouge Cambodia. Against this background,the progress that has been observed over the past few decades, and in

Dow

nloa

ded

by [

Um

eå U

nive

rsity

Lib

rary

] at

08:

31 2

4 N

ovem

ber

2014


particular since the early 1990s, must be said to represent an achievementof quite some magnitude. This is as true of political changes as of socialchange and the transformation of the economy. Yet it would be to err onthe side of optimism to argue that Cambodia is securely on its way to atake-off.

Perhaps the most worrying aspect of Cambodia’s development is that rel-atively robust growth has not resulted in improvements in the welfare ofmost Cambodians. Economic development is highly concentrated in a fewmetropolitan areas and most of the country experiences stagnant incomes,persistent poverty and little access to health facilities and anything more thanvery basic education. Moreover, it is uncertain whether the new Cambodiangovernment can be expected to improve the record. Even though the stale-mate that developed in the wake of the elections in July 2003 was at long lastresolved, it was resolved in a fashion that does not bode well. With an armyof new ministers and the swollen ranks of top tier civil servants now filledwith political appointees – the compromise needed to come to an agreementin June 2004 included the provision of several hundred new positions – itdoes not take a vivid imagination to visualize a still less efficient system ofdecision making and implementation than the one that has prevailed untilnow. Although decision making is likely to be increasingly centralized to thevery top, transparency and a common sense of purpose are likely to suffer.Indeed, if corruption is a problem today, it is not difficult to conceive offurther deterioration resulting from the no doubt tricky negotiations thateventually led to a new government.

As the challenges facing the economy alone would ideally require theundivided attention of national politicians, the outlook is not very bright.The removal of the MFA along with increasing competition to be expectedfrom the combined effect of WTO membership and the CAFTA process arelikely to erode the hard-won gains of the past decade or so unless concertedaction to mitigate the negative effects and strategies to capitalize on theopportunities offered by these changes are quickly put in place. The factthat Cambodia is still perceived to be facing a food security problem (asis indeed often the case at the household and local levels if not necessarilythe national level) and continuing high levels of population growth doeslittle to alleviate these concerns. In addition, while government spendingis constrained by substantial budget deficits and difficulties in increasingrevenues, social and regional inequality is on the rise. Health and educationneeds are by no means met even at low levels of ambition and the backlog insupplying basic infrastructure is overwhelming. Again, while GDP growthover the past few years has been quite substantial, there is little reason toadopt a sanguine attitude.

All in all, then, provided that the conventional wisdom is correct in sug-gesting that increased incomes and productivity levels in agriculture arecritical and that the major contributing factors to such a desirable out-come are not immediately apparent, Cambodia does not seem ready for

Dow

nloa

ded

by [

Um

eå U

nive

rsity

Lib

rary

] at

08:

31 2

4 N

ovem

ber

2014


a take-off. Despite some promising exceptions, a substantial and contin-uous shift from subsistence production to market-based farming and anexpansion of job opportunities in the secondary sector are simply not onthe horizon. In view of lower capacity at formal sector employment cre-ation, lower value added and higher foreign exchange leakage, tourism,which is in fact growing at respectable rates, is not likely to compensatein full for the inability of the secondary sector to provide the neededjobs. Indeed, there is little to suggest that the policies that conceivablycould contribute to poverty alleviation by virtue of making possible con-tinued economic growth are in place or imminent. Adverse initial condi-tions and a less than a fully conducive external environment are no doubtimportant hurdles, but domestic developments are the key to any potentialimprovement.

Acknowledgements

In addition to the constructive and useful inputs from an anonymous ref-eree, we are grateful for valuable comments and suggestions from ClaesLeijon, Sok Narom, Wing Thye Woo, and participants at a seminar heldat the Swedish International Development Cooperation Agency (Sida) inStockholm in February 2005. Sida also provided the financial support with-out which this study would never have materialized. It goes without saying,however, that the views expressed in the paper are the authors’ and notnecessarily those of Sida.

Notes

1 For instance, the United Nations started delivering emergency food aid to droughtvictims in southern Cambodia in October 2004.

2 Modified in that we do no necessarily accept a spatially undifferentiated, unlim-ited supply of labour and the rather bleak prospects for productivity growth thatLewis’s (1954) original ideas imply. Marginal productivity may well be zero, orclose to zero, across much of the agricultural sector, but because demand forlabour and land is spatially uneven, this need not be universally true. In the Cam-bodian context, this can be illustrated by, for example, Acharya et al. (2003: 14).This study on rural incomes indicates that both opportunities and needs for non-agricultural earnings varies regionally, depending on relative location.

3 The 1998 Census found the level of urbanization to have reached 15.7 per centand rising as a result of urban in-migration (Acharya 2003: 4–6; Huguet et al. 2000:12–15).

4 The one exception, as is also made evident by Acharya et al. (2003, maps p. 14),being peripheral areas with little scope for productive agriculture. Here non-agricultural pursuits are a necessity, even though it should be said that opportuni-ties are not distributed evenly. Not surprisingly, it appears that areas close to theThai border do better in this regard than other parts of the country.

5 For instance, only about 15 per cent of the population with higher educationsurvived the Khmer Rouge regime (Gottesman 2002: 73).

6 World Bank Bulletin cited in Wood (2004).

Dow

nloa

ded

by [

Um

eå U

nive

rsity

Lib

rary

] at

08:

31 2

4 N

ovem

ber

2014


References

Acharya, S. (2003) Labour Migration in the Transitional Economies of South-eastAsia, Working Papers on Migration and Urbanization, Bangkok: Economicand Social Commission for Asia and the Pacific.

Acharya, S., Kim, S., Chap, S. and Meach, Y. (2003) Off-farm and Non-farm Employ-ment: A Perspective on Job Creation in Cambodia, CDRI Working Paper 26,Phnom Penh: Cambodia Development Resource Institute.

ADB (2005) Asian Development Outlook 2005, Manila: Asian Development Bank.Ana, P. (2004) ‘Poor farmers fighting to keep their land’, The Cambodia Daily, 17

June, pp. 1–2.Asia Pacific Biotech (2003) ‘Uphill task ahead to improve rice production in

Cambodia’, Asia Pacific Biotech News 7(19): 1201–2.Ayres, D. M. (2000) Anatomy of a Crisis: Education, Development and the State in

Cambodia, 1953–1998, Chiang Mai: Silkworm Books.Ballard, B. and So, S. (2004) ‘Can land titles help reduce rural poverty in

Cambodia?’,Cambodia Development Review 8(3): 1–5.Beresford, M., Sokha, N., Roy, R., Sisuvanna, S. and Namazle, C. (2004) The Macroe-

conomics of Poverty Reduction in Cambodia, Phnom Penh: United NationsDevelopment Programme.

Bloom, D. E., Canning, D. and Malaney, P. N. (2000) ‘Population dynamics andeconomic growth in Asia’, Population and Development Review 26S: 257–90.

Booth, A. (1999a) ‘Education and economic development in Southeast Asia: mythsand realities’, ASEAN Economic Bulletin 16(3): 290–306.

——– (1999b) ‘Initial conditions and miraculous growth: why is South East Asiadifferent from Taiwan and South Korea?’, World Development 27(2): 301–21.

Bottomley, R. (2002) ‘Contested forests: an analysis of the highlander response to log-ging, Ratanakiri province, northeast Cambodia’, Critical Asian Studies 34(4):587–606.

Cattaneo, O. and Marniesse, S. (2004) Le Cambodge. De l’ere des quotas textiles aulibre-echange, Paris: Agence francaise de developpement.

Chan, S. and Acharya, S. (2002) Facing the Challenge of Rural Livelihoods: A Per-spective from Nine Villages in Cambodia, CDRI Working Paper 25, PhnomPenh: Cambodia Development Resource Institute.

Chan, S., Godfrey, M., Kato, T., Long V. P., Tia S., Orlova, N. and Ronnas, P.(1998) Cambodia: The Challenge of Productive Employment Creation, Work-ing Papers in Economics and Finance 267, Stockholm: Stockholm School ofEconomics.

Chandara, L. (2004) ‘Villagers, police clash in attempted land grab’, Cambodia Daily,18 June, p. 13.

Chea, S. (2004) ‘The rice industry in Cambodia’, Economic Review [Phnom Penh:Economic Institute of Cambodia] 1(3): 1–4.

Chea, S. and Sok, H. (2003) ‘WTO accession for Cambodia: opportunities and chal-lenges’, Economic Review [Phnom Penh: Economic Institute of Cambodia]1(1): 2–6.

De Lopez, T. T. (2002) ‘Natural resource exploitation in Cambodia: an examination ofuse, appropriation, and exclusion’, Journal of Environment and Development11(4): 355–79.

de Zamaroczy, M. and Sa, S. (2003) Economic Policy in a Highly Dollarized Econ-omy: The Case of Cambodia, IMF Occasional Paper No. 219, Washington, DC:International Monetary Fund.

Downie, S. and Kingsbury, D. (2001) ‘Political development and the re-emergenceof civil society in Cambodia’, Contemporary Southeast Asia 23(1): 43–64.

Dow

nloa

ded

by [

Um

eå U

nive

rsity

Lib

rary

] at

08:

31 2

4 N

ovem

ber

2014


EIC (2004) Cambodia Economic Watch, Phnom Penh: Economic Institute ofCambodia.

Freedom House (2005) Freedom in the World: Civic Power and Electoral Politics,New York: Freedom House; accessed at http://www.freedomhouse.org/ re-search/survey2005.htm, 12 April 2005.

Geertz, C. (1963) Agricultural Involution: The Process of Ecological Change inIndonesia, Berkeley, CA: University of California Press.

Gottesman, E. (2002) Cambodia after the Khmer Rouge: Inside the Politics of NationBuilding, New Haven, CT: Yale University Press.

Hughes, C. (2003) The Political Economy of Cambodia’s Transition, 1991–2001,London: RoutledgeCurzon.

Huguet, J. W., Chamratrithirong, A., Rao, N. R. and Than, S. S. (2000) ‘Results of the1998 population census in Cambodia’, Asia-Pacific Population Journal 15(3):3–22.

ILO (2006) Cambodian Garment Industry: One Year Later, Phnom Penh: Interna-tional Labour Organization, fact sheet.

IMF (2004a) Cambodia: Selected Issues, IMF Country Report 04/331, Washington,DC: International Monetary Fund.

——– (2004b) IMF Concludes 2004 Article IV Consultation with Cambodia,Washington, DC: International Monetary Fund.

——– (2004c) Cambodia: Statistical Appendix, IMF Country Report No. 04/330,Washington, DC: International Monetary Fund.

——– (2004d) Staff Report for the 2004 Article IV Consultation, Washington, DC:International Monetary Fund.

——– (2004e) Cambodia: Ex Post Assessment of Longer-term Program Engagement,Washington, DC: International Monetary Fund.

——– (2004f) Cambodia: Poverty Reduction Strategy Paper Progress Report,Washington, DC: International Monetary Fund.

——– (2006) Cambodia: Selected Issues and Statistical Appendix, IMF Country Re-port No. 06/265, Washington, DC: International Monetary Fund.

Jirstrom, M. and Rundquist, F.-M. (1999) ‘Diversify or perish! Structural transforma-tion of agricultural systems – intensification and diversification in Vietnam’,in K. Cederlund, T. Friberg and M. Wikhall (eds) Geografi i Lund. Essaertillagnade Gunnar Tornqvist, Lund: Department of Social and EconomicGeography Lund University, pp. 74–87.

Kang, C. (2001) Voraussetzungen zur Entdollarisierung in Kambodscha (einemonetary-keynesianische Losung), Frankfurt am Main: Peter Lang.

Kang, C. and Chan, S. (2003) Cambodia’s Annual Economic Review, Issue 3, PhnomPenh: Cambodia Development Resource Institute.

Keo, C. and Seng, S. (2005) ‘The garment industry in Cambodia: current and longterm prospects’, Cambodian Economic Review 1: 71–83.

Kraft, H. J. S. (2000) ‘ASEAN and intra-ASEAN relations: weathering the storm?’,The Pacific Review 13(3): 453–72.

Le Billon, P. (2002) ‘Logging in muddy waters: the politics of forest exploitation inCambodia’, Critical Asian Studies 34(4): 563–86.

Leung, S., Vo, T. T. and Viseth, K. R (2005) Integration and Transition – Vietnam,Cambodia and Lao PDR, International and Development Economics WorkingPaper 05-1, Canberra: Asia Pacific School of Economics and Government,Australian National University.

Lewis, W. A. (1954) ‘Economic development with unlimited supplies of labour’,Manchester School of Economic and Social Studies 22(2): 139–91.

Lundstrom, S. and Ronnas, P. (2006) Employment and Growth in Cambodia – An Inte-grated Economic Analysis, Sida Country Economic Report 2006:2, Stockholm:Swedish International Development Cooperation Agency.

Dow

nloa

ded

by [

Um

eå U

nive

rsity

Lib

rary

] at

08:

31 2

4 N

ovem

ber

2014


MacIntyre, A. J. (1994) Business and Government in Industrializing Asia, StLeonards: Allen & Unwin.

MAFF (2006) Annual Conference 2006 on Agriculture, Forestry and Fisheries (TakingStock of 2005–2006 Performance and Setting Direction for 2006–2007), PhnomPenh: Ministry of Agriculture, Forestry and Fisheries, unofficial translationfrom Khmer, March.

Marston, J. (2002) ‘Cambodia: transnational pressures and local agendas’, in South-east Asian Affairs 2002, Singapore: Institute of Southeast Asian Studies,pp. 95–108.

MEF (2003) ‘The education sector: executive summary of findings and recommen-dations’, paper prepared by the Ministry of Economy and Finance, presentedat the IFAPER Workshop, 20 October 2003, Phnom Penh.

——– (2004) The Medium-term Expenditure Framework for Cambodia: 2005–2007,Phnom Penh: Ministry of Economy and Finance.

Murshid, K. A. S. (1998) Food Security in an Asian Transitional Economy: The Cam-bodian Experience, CDRI Working Paper 6, Phnom Penh: Cambodia Devel-opment Resource Institute.

Murshid, K. A. S. and Tuot, S. (2005) The Cross Border Economy of Cambodia:An Exploratory Study, CDRI Working Paper 32, Phnom Penh: CambodiaDevelopment Resource Institute.

NIS (2003) Kingdom of Cambodia Statistical Yearbook 2003, Phnom Penh: NationalInstitute of Statistics.

Nissen, Christine J. (2005a) Corruption and Cambodian Households: Household Sur-vey on Perceptions, Attitudes and Impact of Everyday Forms of Corrupt Prac-tices in Cambodia, Phnom Penh: Center for Social Development.

——– (2005b) Living under the Rule of Corruption: An Analysis of Everyday Forms ofCorrupt Practices in Cambodia, Phnom Penh: Center for Social Development.

Oum, S., Neak, S., Dourng, K. and Sieng, D. (2005) Cambodia Economic Watch, Issue3, Phnom Penh: Economic Institute of Cambodia, October.

RGC (2002) Towards a Population and Development Strategy for Cambodia, PhnomPenh: Ministry of Planning.

——– (2004) Address by Samdech Hun Sen, Prime Minister of the Royal Governmentof Cambodia on ‘Rectangular Strategy’ for Growth, Employment, Equity andEfficiency, Phnom Penh: Royal Government of Cambodia.

——– (2005) National Strategic Development Plan 2006–2010, Phnom Penh: RoyalGovernment of Cambodia.

Rodan, G., Hewison, K. and Robison, R. (1997) The Political Economy of SoutheastAsia, Oxford: Oxford University Press.

Russell, R. (1997) ‘Land law in the Kingdom of Cambodia’, Property Management15(2): 101–10.

Sambath, T. (2004) ‘Rights group reports rise in political slayings’, The CambodiaDaily, 18 June, p. 12.

Simbolon, I. (2002) Access to Land of Highland Indigenous Minorities: The Caseof Plural Property Rights in Cambodia, Working Paper 42, Halle/Saale: MaxPlanck Institute for Social Anthropology.

Sok, H. (2003) ‘Addressing social justice for economic development and democracy’,Economic Review [Phnom Penh: Economic Institute of Cambodia] 1(2): 12–15.

Sok, H. and Acharya, S. (2002) Cambodia’s Annual Economic Review, Issue 2, PhnomPenh: Cambodia Development Resource Institute.

Sok, H., Chea, H. and Sik, B. (2001) Cambodia’s Annual Economic Review 2001,Phnom Penh: Cambodia Development Resource Institute.

Sullivan, M. (2005) ‘The parliamentary elections in Cambodia, July 2003’, ElectoralStudies 24(1): 129–36.

Dow

nloa

ded

by [

Um

eå U

nive

rsity

Lib

rary

] at

08:

31 2

4 N

ovem

ber

2014


UIS (2004) Global Education Digest 2004: Comparing Education Statistics across theWorld, Montreal: UNESCO Institute of Statistics.

UNDP (2005) Human Development Report 2005: International Cooperation at aCrossroads: Aid, Trade and Security in an Unequal World, New York: UnitedNations Development Programme.

——– (2006) Trade on Human Terms Transforming Trade for Human Developmentin Asia and the Pacific. Asia-Pacific Human Development Report 2006, Delhi:Macmillan India.

Woo, W. T. (1999) ‘The real reason for China’s growth’, China Journal 41: 115–37.Wood, R. (2004) ‘Businesses find it’s cheaper to be illegal’, Phnom Penh Post, 4–17

June.World Bank (2005) Global Monitoring Report 2005. Millennium Development Goals:

From Consensus to Momentum, Washington, DC: World Bank.——– (2006) Cambodia: Halving Poverty by 2015? Poverty Assessment 2006, Phnom

Penh: World Bank.

Dow

nloa

ded

by [

Um

eå U

nive

rsity

Lib

rary

] at

08:

31 2

4 N

ovem

ber

2014

Documents

The Cambodian economy: ready for take-off?