Cambodia Scrapes Bottom of Economic Innovation Index

Cambodia ranked at the very bottom of a new index measuring economic innovation in 22 Asian countries, dragged down by its uneducated workforce, uncertain political situation and endemic corruption.

The Creative Productivity Index, released in a report by the Asian Development Bank and the Economist Intelligence Unit on Friday, measures 36 “inputs,” such as infrastructure and workforce skills, along with eight “outputs,” including patents and agricultural productivity.

What sets the index apart, the report says, is its measure of the efficiency with which the surveyed countries turn their inputs into outputs.

“The transition from resource-driven, export-led economies to more sustainable growth models based on human capital development, new technology and innovation will be a key challenge for many Asian countries over the next decades,” the report says.

“In more advanced economies, long-term economic growth is ultimately sustained through innovation and creativity. Developing Asian countries must cultivate creativity and innovation if they are to achieve sustainable high-income status,” it says.

Of the 22 countries surveyed—along with the U.S. and Finland for comparison purposes—Cambodia was deemed the least innovative, behind Pakistan and Burma. Japan ranked best, followed by Finland, South Korea and the U.S.

But it was not all bad news for Cambodia. It received the fifth best score for “firm dynamics,” or the ease with which companies can hire and fire workers, trailing only Singapore, Hong Kong, China, the U.S. and Kazakhstan.

But the same rules that make it easy for firms to employ and terminate people have helped fuel widespread strikes among Cambodia’s roughly 600,000 garment workers, many of whom accuse the factories of abusing short-term contracts and firing unionists arbitrarily.

The report notes this unrest and warns that an end to trade benefits for Cambodian garment exports in the wake of the government’s “violent suppression” of protests in January, which left at least five workers dead, “could topple a pillar of the local economy.”

The report also highlights Cambodia’s “poor human capital,” owing to few years of schooling on average and low secondary-school enrollment compared with the other countries.

“Poor governance remains a problem, with instability a feature of the political scene following the disputed election that took place in July 2013,” it adds.

“The business environment is characterized by endemic corruption and poor rule of law, and often only well-connected Cambodians have the means to invest in the country.”

To boost innovation, the report concludes, Cambodia should focus on improving the quality of its universities, increasing access to electricity and paving more roads.

The government has acknowledged the poor state of its universities. In February, the Education Ministry said it would overhaul its accreditation process and begin a full audit of university programs.

The government is also in the midst of constructing a series of hydroelectric dams around the country to lower electricity costs, but many of the projects have been marred by land disputes and reports of illegal logging.

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