In 1989, the state of Cambodia had reformed some policies that had effectively transformed the Cambodian economic system to an open market. Various private property rights and state-owned enterprises are implemented and privatized. The focus is also moved to regional and international economic blocs that can include the association of South East nations and the World trade organization. The introduction of this policy triggered the economical growth along with the national GDP growth at an average of 6.1% prior to the domestic unrest in 1997. In 1999, the condition improved a little bit and the Cambodian economy still grows at an average pace of approximately 6-8% per annum.
Foreign aid
For the Cambodian economy, rice milling is very important and required for the Cambodia’s emerging democracy. Not only this, the international support is also very important for the economical growth. Around $1.72 billion is spending on the stability, security and democratic rule of the country. Most of the official donors pledge to the economic assistance and donate around $880 million at the ministerial conference for the rehabilitation of Cambodia in 1992. When 1993 came, around $119 million was pledged to be added in the above figure at the international committee. While in 1994, the figure reaches to $643 million.
By coming to 2005, Cambodia experienced a shortfall in the foreign aid. The reason behind this is the government’s failure in following the anti-corruption laws and opening a single import/export window. Another reasons are increase in the amount spend on education and complying with the policies of good governance. To correct the entire thing, the government accepted the national strategic development plan for 2006 -10. Basically, the plan generally focused on –
- Speeding up of the economical growth at an annual rate of 6-7%.
- Process of eradicating the corruption.
- Developing different public structures to achieve the quality i.e. based on the education, training and healthcare over rapid population growth.
Recent developments
In 2007, it was found that the Cambodia’s gross domestic product generally grew up to a rate of 18.6%. The garment industry also showed an increase of almost 8%, which tourist arrivals increased nearly 35%. As the exports decreased, the GDP in 2007 growth depends on investment and consumption. At that time, the foreign direct investment reaches up to US $600 million that is slightly more than what the country received. Most of the private sector drive the domestic investment and accounted for 23.4% of GDP. In late 2007, it was found that the export growth, especially to the US started decreasing. Because of the stiff competition that increases the risk. At that time, the US companies was considered as the fifth largest investor in Cambodia having more than $1.2 billion.
The 2008 came who hit the Cambodia and went through economic crisis and the economic sector. The garment industry mainly suffered a drop of around 23% in exports to the USA and Europe. Because of this, 60,000 workers were laid off and in quarter of 2009 and early 2010, the condition started to improve. The Cambodian economy started improving and they exported $2.49 billion to the US for the first 11 months of 2012. It has been shown that there was around 1% growth every year. The export to the US increased up to 26% for that period and reaches $213 million. There was another factor that affected the Cambodia economy and become the reason of fall of poverty.
Industries affected
1. Garment industry
The Cambodia’s manufacturing sector includes garment industry as the most important one that accounts for around 80% of the country’s export. In 2012, the export started growing to $4.61 billion up 8% over 2011.the garment industry reported the export of about $1.56 billion in the first half of 2013. At that time, the sector employed around 335,400 workers and 91% of them are female. A country with a GDP of just $13 billion, Cambodia became a place where the sector operates largely on the garment industry. The production involves the conversion of yams and fabrics into garments. There was a fear of multi fiber arrangement in the year 2005 and threaten the Cambodia’s garment industry.
2. Tourism industry
It was 1960 when a Cambodia became a prominent tourist destination in the Southeast Asian Region. The tourist industry was close to non-existent at the time of protracted periods of civil war, genocidal regime and insurgencies. When it was late 1990s, the tourism started growing and became the second largest industry after garment.
3. Gambling industry
No doubt, the gambling industry greatly supports the tourism industry and is concentrated around the Siem Reap province. The industry was created by the introduction of the Casino on the border cities and contributed to the generation of employment and attract a large revenue. Along with this, the corruption that is related to the gambling industry also affected. A big growth in the gambling industry is the result of the proximity to Thailand.
4. Construction industry
The tourist industry has also seen a big growth and because of this the construction industry also started developing. Siem Reap had also seen a boom in several years and witnessed a great increase in the real estate sector. There were various planned projects in the pipeline, but did not start because of the reduction in the foreign investment. The Cambodian government allows the foreigners to own the condominiums and that helps in attracting the real estate investors from Thailand, Malaysia, Singapore and some other countries. It was 2012, when the tourist industry attracted around $2.1 billion that shows basically 72% rise as compared to 2011.
5. Oil and Natural Gas industry
In 1950s, the Cambodia discovered oil seeps by the Chinese and Russian geologists. Undoubtedly, the development of the industry was delayed because of the Vietnam and Cambodian civil wars and political uncertainty. The Cambodia production possibilities also grown because of the oil and natural gas deposits offshore discovery. That created an interest in the Cambodia’s production by several merchants. By the 2013, the US Company Chevron, Japanese Jogmec and several international companies that created the production sites. The Chevron industry itself invested around 160 million USD and drilled around 18 wells. Approximately 70% of the revenues are collected from this industry and the GDP will increase up to 5 folds in 2030. In the Gulf of Thailand, there is about 1000 square miles offshore in addition that has the capability to hold around 12-14 trillion cubic feet of natural gas and oil. This thing is still the topic of dispute in between Cambodia and Thailand.