Cambodia Struggles to Diversify Its Exports

After a year of lower-than-ex­pected economic growth and faced with a potentially flagging garment sector, Cambodia should diversify exports to boost the economy, a World Bank report recommended Tuesday.

But the question remains: What does Cambodia have to offer in terms of exports? And analysts on Wednesday had no clear answer.

The World Bank report warned that poverty is increasing in Cam­bodia and the country’s economic growth, which relies heavily on gar­ment exports, could face “significant risk” due to the phasing out of garment quotas to the US and the European Union in Jan­uary 2005.

The garment industry contributed to $1.6 billion, or 80 percent, of total exports last year.

But when it comes to diversifying exports, “we just have garments and agriculture,” Kang Chandararot, an economist at

the Cambodian Development

Re­source Institute, said Wednes­day.

Further hampering growth, the country lacks any policy to develop these sectors, he said.

Though the World Bank report suggested construction, tourism and garment exports would help drive economic growth by

5.5 percent in 2004, none of

these sectors are sustainable, Kang Chandararot maintained.

Following the Asean Economic Ministers meeting in Phnom Penh last September, Commerce Minister Cham Prasidh said Cam­bodia was banking on its status as a least-developed country to attract foreign investors.

As a least-developed country in the World Trade Organization, Cam­bodian-made exports to the US, EU, Canada, Korea and Ja­pan would be allowed lower tariffs, providing incentive for businesses to set up shop here, Cham Prasidh said at the time.

Kang Chandararot said pursuing foreign direct investment through labor intensive manufacturing industries might contribute to growth. But it will not help Cambodia stake a competitive advantage over its neighboring countries, he said.

Production here “must be based on rural people’s skills,” he said. “But so far we haven’t seen any clear skills besides handicrafts and some agro-processing,” he said, adding that the government should try to promote these industries at the local level.

Kao Kim Hourn, executive di­rector of the Cambodian Institute for Cooperation and Peace, on Wednesday suggested agricultural production, in terms of rice, corn, livestock and other commodities, could be the key to new growth opportunities.

But asked whether Cambodia’s agricultural sector could compete globally, he said, “That is a good question.”

Cambodia will have to “streng­then competitiveness in terms of quality and quantity” of its commodities, he said.

World Bank economist Robert Taliercio on Tuesday also mentioned cash crops as a possible channel for export diversification.

But he declined to offer more specific opportunities for economic growth. The World Bank will soon launch a study on export diversification here, he said.

 

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