Int’l Bodies at Odds on Impact Of GDP Growth

The International Monetary Fund applauded Cambodia’s economic growth and financial re­form this week, but the UN De­velop­ment Program and In­ter­national Labor Organization said such growth is not bringing similar gains in employment and poverty reduction.

The IMF said in a statement Wednesday that Cambodia’s economic growth was “excellent” and that ongoing reforms were improving the government’s cash management and revenue collection.

The IMF estimated GDP growth of around 10.5 percent for last year. It added that government revenue “grew strongly in 2006, reflecting vibrant economic activity and improved tax collection efforts.”

However, even with last year’s tax gains, the government is only collecting 8 percent of the country’s GDP in tax revenue, which is far off the approximately 20 percent seen in many other countries, said John Nelmes, resident representative for the IMF.

“Tax collection needs to be improved…. To be fair, the government recognizes that,” Nelmes said by telephone Thursday.

The figures provided by the IMF are estimates based on data from the Ministry of Planning’s National Institute of Statistics, Nelmes said.

“They are government figures…. They are very reliable,” he said.

Agriculture appears to be diversifying in Cambodia, with cash crops representing a growing percentage of agricultural production, Nelmes said. Rice yields have also been climbing, he said, but he added that they are still below those of neighboring countries.

In a report released Monday, the UNDP’s regional center in Sri Lanka and the ILO offered a more somber view of the country’s economic health.

Although GDP increased at an annual rate of 6.8 percent between 1994 and 2004, it was concentrated in a handful of sectors, so it didn’t directly benefit much of the public, the report said.

Since around 72 percent of Cam­bodians were engaged in agriculture as of 2000, the limited growth in that sector has meant limited economic gains for the population as a whole, the report states.

“We agree that the growth creates employment, but the link be­tween growth and employment was not very substantial,” said Dourng Kakada, a researcher at the Economic Institute of Cambo­dia who provided information for the report.

Dourng Kakada said growth was fueled almost entirely by garment factories, tourism and some construction. It mainly occurred in urban areas and bypassed the rural regions where most of the population lives, he added.

Another reason that growth wasn’t strongly driving poverty reduction was that there was little connection between sectors, he said.

Citing tourism and agriculture, he noted that although hotels may be springing up across the country, they tend to serve imported fruits and vegetables because Cambo­dian farmers cannot supply their needs.

Speaking at an economic conference Thursday, Prime Minister Hun Sen said that “high economic growth has resulted in rapid poverty reduction.”

He also said that the number of people living under the poverty line has declined from 47 percent in 1994 to 34.5 percent in 2004.

The UNDP/ILO report states that those poverty figures are the result of an adjustment of the definition of living in poverty by the World Bank, which changed the poverty definition from those earning less than $1 per day to earning less than $0.50.

“Even if one accepts the adjusted [World] Bank estimate…the rate of poverty reduction must be judged too slow, given that per capita GDP during the period increased by more than half,” the report adds.

The disproportionate growth of certain industries is borne out by the figures provided by Hang Chuon Naron, Ministry of Finance secretary-general.

According to his statistics, garment exports grew by 20 percent in 2006, tourism was up 23.3 percent and construction was up 15.7 percent, but agricultural production was up by only 4.4 percent.

Hang Chuon Naron’s figures state that agriculture expanded much more in 2005—16.6 percent. From 1994 to 2004, the sector grew only 3.4 percent, according to the UNDP/ILO report.

CPP Lawmaker Cheam Yeap said he was proud that the country was able to achieve over 10 percent GDP growth in 2006.

Economic growth was definitely fueling poverty reduction, he said, noting that per capita income rose from $365 in 2005 to $492 in 2006.

If the statistics presented in the UNDP/ILO report were accurate, the government would look to address them, Cheam Yeap said. But he warned that “some [organizations’] reports exaggerate instead of showing facts.”

“You need to check and balance before issuing any figures related to government,” he added.

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