World Bank Praises Growth, Warns of Inequality

The World Bank on Thursday praised Cambodia’s overall economic growth over the last 10 years, but warned of an increasing divide between rich urban centers and poor rural communities.

During a conference marking the 10th anniversary of the 1997 economic crash in Asia, World Bank Country Manager Nisha Agrawal said that the overall growth of Cambodia’s GDP—estimated at around 10.5 percent for 2006—should translate into better living standards. “But as important as the level of growth, is the equality of growth,” she said.

According to World Bank economist Huot Chea, data indicates that Cambodia’s poor have hardly benefited from the nation’s economic growth over the past decade.

While the Cambodian population spent on average 32 percent more in 2004 compared to 1994, the country’s poorest 20 percent con­sumed only 8 percent more, though consumption by the weal­thiest jumped 45 percent, World Bank data shows.

Economic growth between 1994 and 2004 led to a 1-percent de­crease each year in the number of people below the poverty line, a pace expected to be maintained over the next 10 years, Huot Chea said.

Overall, he said, “growth and living conditions of people is getting better. We see positive growth trans­lating into a reduction in the poverty rate.” However, 35 percent of the population still remained under the poverty line in 2004.

According to a World Bank report “Ten Years After the Crisis” handed out at the conference, Cambodia’s economic growth continues to be fueled by garment exports, tourism, construction and agricultural expansion.

“The garment sector, which ac­c­ounts for 14 percent of GDP, ex­pand­ed further, with exports rising by 20 percent in 2006,” the report states. “At the same time 20 percent growth in tourist arrivals resulted in a 26-percent jump in tourism receipts.”

Agrawal said that economic growth in the tourism sector needs to have stronger links to rural areas, and the government has “to make tourism more pro-poor.”

“Policymakers need to focus on how to bring tourists in, but also how to benefit Cambodia more,” she said.

During the conference, Sok Hach, director of the Economic Institute of Cambodia, said, “The government has to prepare a strategy for good governance [for oil and gas revenue] for the next three to five years.” If the government properly prepares for oil and gas revenues, the nation will continue its double-digit GDP growth, he said.

Kim Phalla, acting director for the economic and public finance policy department of the Finance Ministry, said the government’s strategy for income from gas and gas products will be put into education, health and the irrigation sectors.




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