Staple Industries Reaching Limits, ADB Says

While Cambodia’s key industries—garments, agriculture, tourism and construction—have been vital to the country’s economic expansion, the sectors are reaching their limits and diversification is crucial to sustainable growth, according to a new Asian Development Bank (ADB) report.

Cambodia—dubbed an “Olympian of Growth” by the World Bank for its average annual growth rate of 7.7 percent over the past two decades—must move beyond the industries that have so far powered its economy, says the ADB report, “Cambodia: Diversifying Beyond Garments and Tourism Country Diagnostic Study,” released Friday.

“Cambodia’s export basket is rudimentary and has not changed much during the last decade. Diversifying into higher-value products and services will help the country avoid being caught in a low-wage, low-technology equilibrium,” the report says.

Even if the country’s staple industries are developed further, their potential is limited, it says.

“A key challenge is the extent to which additional growth can be squeezed from a limited number of subsectors,” it says. “Additional foreign garment factories engaged in ‘cut-make-trim’ production, increased production of unprocessed rice, and more short tourism trips to key temple sites will support growth to an extent, but the potential growth from these sources is limited.”

The report says Cambodia’s chronic problems need to be dealt with before the country can take on higher-value industries.

“Both the low levels of human capital and limited access to decent employment must be addressed before Cambodia will be able to provide higher-value products and services,” it says, adding that substandard infrastructure and weak governance are also forestalling diversification.

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