Cambodia’s Economic Growth Lags

Amid robust economic growth throughout East Asia, growth in Cambodia’s economy fell short of expectations last year, while the estimated number of people living in poverty continues to increase, according to a report released Tuesday by the World Bank.

Cambodia’s economy grew by 4.8 percent in 2003, compared with 5.5 percent in 2002, hampered by a slump in tourism due to the anti-Thai riots last January and severe acute respiratory syndrome, the report said.

The government deadlock also hurt revenues, which reached only 85 percent of the budget target, the report said, leading to reduced spending on priority social sectors such as health, education, agriculture and rural development.

And while most other countries in the region have seen a steady decline in the number of people living below the poverty line, the population of Cambodia’s poor continues to grow as the number as a whole increases.

In 2005, an estimated 5.8 million Cambodians will be living on less than $1 a day, the World Bank reported. This year, that number is estimated to be 5.6 million, or about 43 percent of Cambodia’s population, the report said.

The World Bank, however, gave a positive outlook for the Cam­bodian economy in 2004, predicting growth could reach 5.5 percent, helped by the construction, tourism and garment industries.

But, the report cautioned Cambodia’s growth prospects “could be challenged” by the phasing out of garment quotas to the US and European Union in January 2005.

The garment industry contributed $1.6 billion, or 80 percent of all exports in 2003, it said.

To catch up with its more prosperous neighbors like Thailand and Vietnam, which saw its economy grow by 7.2 percent last year, Cambodia must take measures to ensure good governance, find new areas for growth and make itself more competitive, World Bank officials said Tuesday.

During a video conference from Washington, Homi Kharas, the World Bank’s chief economist for the East Asia and Pacific region, said the country should reduce “the ‘Cambodian costs’ of starting up a new business…the excess costs that appear to face Cambodian businesses when they try to invest.”

Businesses have long complained of having to pay bribes to operate in Cambodia.

World Bank officials also said they hoped for a quick end to the government deadlock.

According to the report, “there has been little progress on the anti-corruption agenda, military demobilization, or civil service reform, due, in part, to” the deadlock.

“The sooner the political situation returns to normalcy the better,” said World Bank economist Robert Taliercio. “Certainly there are things that are being held up…. We can’t sign any new loans until the new government is in place,” he said.

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