Reporting that the country had achieved better than expected economic growth last year, Prime Minister Hun Sen on Wednesday targeted a rapid expansion of the country’s rubber industry and predicted that almost 1 in 10 Cambodians would soon be working in rubber.
Delivering the keynote speech of the 2013 Cambodia Outlook conference in Phnom Penh, Mr. Hun Sen said that the government had revised upward its estimate for gross domestic product (GDP) growth during 2012 from 7 to 7.3 percent, owing to garment exports, the service sector and agriculture.
“The future outlook of Cambodia is positive, with projected annual growth of more than 7 percent over the medium term,” the prime minister said, adding that inflation was 2.5 percent in 2012 and was expected to reach 4 percent this year.
In a wide-ranging 45-minute speech, Mr. Hun Sen set out for government officials, business people, and nongovernmental organizations his vision for Cambodia’s energy supply, improved infrastructure and increased agricultural output.
That vision involves increasing cash crop exports including rice, cassava, maize, soy beans and rubber, and increasing the capacity to process crops in country, he said.
“Agriculture continues to play a crucial role in boosting our gross domestic product, employment, and contributing to rural poverty reduction,” Mr. Hun Sen said.
“In achieving our commitment to the diversification of agricultural production, rubber in particular is proving to be an increasingly valuable industrial export crop for Cambodia, contributing to both latex and timber exports.”
According to figures provided by Mr. Hun Sen, rubber plantations now account for 1.2 million hectares of the 1.5 million hectares of land the government awarded to private companies under its controversial economic land concessions.
Human rights groups, however, have estimated that far more land, at least 2 million hectares, has been distributed by the government as private concessions.
So far, Mr. Hun Sen continued, about 300,000 hectares of rubber has been cultivated, and about 100,000 people are employed harvesting the crop.
“In the next five years, 70 percent of the rubber plantations will be cultivated and 840,000 hectares of rubber plantation will be tapped for latex, employing 1.3 million people,” Mr. Hun Sen said, adding that not just large firms benefit from the rubber industry, as about 45 percent of plantation land is owned by smallholders.
Land concessions for rubber in eastern provinces are often granted on areas covered with forest, drawing complaints that the plantation owners—many coming from Vietnam—are more interested in felling the precious timber on their concessions than planting rubber.
Mr. Hun Sen said that despite the government’s land concession policy, which he officially put on hold last year amid growing criticism of the land-grabbing associated with the practice, Cambodia now has 9.2 million hectares of forest cover, about 54 percent of the total land mass.
“This shows that the government balances the need to create jobs for poverty reduction and the need to protect the environment due to the fact that rubber trees are considered part of the forest coverage,” the prime minister said.
During Cambodia’s colonial period, large French-owned rubber plantations, employing cheap Cambodian labor, were established in the same parts of the country. Hang Chuon Naron, secretary of state at the Ministry of Economy and Finance, told Wednesday’s conference that Cambodia’s contemporary rubber industry would soon eclipse its historical size.
“Exports are now 50,000 tons, so it’s a record export from Cambodia, even compared to the prewar [period], the 1960s,” he said.
“Cambodia will expand that further because right now, more than 1 million hectares are covered with rubber and 1 hectare produces around 1 ton of rubber, meaning that in the next say five or 10 years, Cambodia will export more than 1 million tons of rubber.”
International Monetary Fund resident representative Faisal Ahmed told the conference that Cambodia’s economy had the potential to grow at 7 or 8 percent for the medium term, but said the economy was still vulnerable to outside shocks.
“I think the big challenge for Cambodia is going to be…how do you create fiscal space by having more revenue for the government,” he said. “Second is to help to ensure financial stability, and third would be, how do you create this inclusive growth, create a virtuous cycle, create incentives?”
Srinivasa Madhur, director of research at the Cambodia Development Resource Institute—which co-hosted Wednesday’s conference with the ANZ Royal Bank—said Cambodia’s rapid development had left the country with a disparity between the rich and poor.
Mr. Madhur pointed out that Cambodia had a “relatively high” score of 0.38 on the Gini Coefficient—a measure of inequality.
“It’s quite high among [comparable] countries but we don’t see any huge trend up or down,” he said, noting that while poverty reduction had been “significant,” more than half of the population, 53 percent, are still earning below $2 per day.
Chan Sophal, president of the Cambodian Economic Association, asked whether “peace and stability” are alone “good enough” engines for Cambodia’s development, and pointed to poor governance as a potential pitfall for growth.
“In the past, they have been…sufficient conditions,” Mr. Sophal said.
“The private sector could employ labor, export garments to the U.S., …more tourists come to visit Angkor Wat…people can work the land. Banks and investors come in with the dollar, aid [is granted] with the dollar…. Growth was inevitable in the past years,” he said.
In response, Mr. Madhur said Cambodia’s poor reputation for corruption—it is ranked 157th out of 176 countries in Transparency International’s 2012 corruption perception index—need not take priority over other issues, such as improving infrastructure and education.
“If you are also focusing on them and then just going too much [to focus on improving] governance, that will actually not help either,” he said.
“The relationship with growth and corruption is not [well] understood.”