The Economic Institute of Cambodia’s new economic forecast to be released Monday predicts just over 3-percent growth for each of the next four years, down from an average 6 percent during the last decade.
The report, based on extensive surveys, also predicts an explosion in unemployment, adding up to 1 million unemployed to the current figure of about 700,000.
“I would not call it a pessimistic report, but a realistic one,” Sok Hach, EIC’s director said Thursday. “We are more optimistic than several international organizations on growth this year because we do not see as steep a decline in the garment sector. In the medium term, we do not think it will be easy for the government to carry out its reform project.”
Surveys of garment manufacturers indicate that about half remain “optimistic” about Cambodia—a sign, the EIC says, that the effect of the end of the quota system will not be as steep as some economists have predicted. But it does not see tourism delivering significantly more money into the hands of ordinary Cambodians.
The Asian Development Bank said in recent months that growth in tourism would help the government achieve 4.7-percent growth in gross domestic product by 2007 after 2.3-percent growth this year. On Wednesday, the World Bank predicted 2.6-percent growth in 2005, but it has said that the government’s anti-corruption campaign could spark high growth.
“Administration is so weak in Cambodia, that even if there is political will to reform, there is no one to carry it out,” Sok Hach said.
He blamed low civil servant wages for widespread corruption, which deters new investment and decreases the competitiveness of existing businesses.
Sok Hach suggested increasing wages for Finance Ministry and Justice Ministry officials as a first step. Once these tax- and law-enforcing civil servants are no longer motivated to take bribes, the rest of the system would follow, he said.
The EIC report says that politicking ahead of elections in 2006, 2007 and 2008 will impede reform.
Sok Hach also recommended a fairer distribution of land.
“Studies have shown that if you give a Cambodian 5 hectares of land, he becomes ‘rich’,” he said.
“If you give a big company 10,000 hectares concession, that will on average create 200 jobs.” But, he said, “If you break it up into 5-hectare parcels, you create jobs for 2,000 families.”
The EIC’s report predicts that poverty will worsen as a result of the increase in the number of jobless and that the Millennium Development Goals will not likely be met. The increase in unemployment is attributed to the 1980s baby boom, Sok Hach said.
“With 3-percent growth it is impossible to accommodate the
4-percent growth in young job seekers,” he said.
Unemployment, however, will not lead to political revolution, he said. “For Cambodians, surviving is enough of a change.”