IMF Director Says Education Crucial to Growth

Greater government spending on education is crucial to ensuring future economic growth and stability in Cambodia as it becomes increasingly interconnected with global markets, Christine Lagarde, managing director of the International Monetary Fund, said Tuesday in a speech at the Royal School of Administration in Phnom Penh.

“[I]f we listen to those who invest, those who develop business, those who want to hire, they will tell you that what they need is a skilled workforce. So education will deliver the set of skills that are needed,” she said, noting that a third of the Cambodian population is under 14 years of age.

“Public spending has to be increased on education, just to allow young people to get to their potential,” she told the crowd of about 300 civil servants studying at the school, mostly men.

“2.5 percent of the budget spent on education is good, but there should be more of it, particularly given the size of the young population,” she added.

Ms. Lagarde said that official figures on unemployment in the country—a recent report from the International Labor Organization put the figure at 2.7 percent—did not reflect the actual problem of youth unemployment in the country.

“I tell you this—something maybe that is not a clear imperative here if we look at the unemployment rates officially reported…but jobs for young people is absolutely key and will be delivered by education,” she said.

Also among her recommendations for Cambodian policy makers was strengthening state institutions. Cambodia was ranked 160 out of 177 countries in Transparency International’s Corruption Perceptions Index 2013, released Tuesday.

“[S]trong institutions and governance, in order to generate a better climate for investment, is also critical for the country,” she told the audience.

Ms. Lagarde also said that although Cambodia has made great strides in reducing poverty over the last decade, more work needed to be done, and the government should ensure that future growth is inclusive.

“Cambodia has made huge progress…. It has moved from 50 percent of the population being poor in 2004 to 20 percent now,” Ms. Lagarde said.

“Yet too many people still live today in extreme poverty and we know that poverty and inequality are bad for sustained growth…. So everybody has to be lifted together and the inequality gap has to be reduced,” she said.

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