The economy of Cambodia is to suffer the effects of two hard blows in the 
coming months and years. The first is the European Commission's announced 
intention to scale back its "Everything But Arms" (EBA) preferential trade 
arrangement with Cambodia and the second is the novel Coronavirus (COVID-19) 
pandemic.

These events are laying bare the structural weaknesses of Cambodia's economy, 
which is over-reliant on the European Union for market access and on China for 
production capacity, investment and tourist inflow. Cambodia's most vulnerable 
citizens, particularly women who work in the garment industry, low-skilled 
workers and those who have just been lifted from poverty, will feel the brunt 
of the fallout.

The Asian Development Bank and the World Bank have each warned policymakers of 
the precarious state of the "near poor" in Cambodia. According to official 
estimates, the current poverty rate is below 10 percent (compared to 47.8 
percent in 2007). Although the nation has achieved great success in its fight 
against extreme poverty, more than 70% of Cambodians still live on less than 
US$3.20 a day.

The Royal Government introduced short-term measures in late February of 2020 to 
help employers sustain their operations, to help workers who have lost their 
jobs or whose work has been suspended and to support small and medium 
enterprises which are the backbone of the economy. The Royal Government is to 
be commended for this. The protection of livelihoods is tantamount to the 
protection of human rights.

The measures include tax holidays, direct support, training programs, customs 
facilitation and the reduction of government expenditures. For example, owners 
of factories that suspend production due to a shortage of raw materials will be 
expected to pay 40% of wages while the government will pay an additional 20%.

An enhanced set of reforms and mid to long term measures are to be announced by 
the government at the 19th Government-Private Sector Forum on April the 1st, 
2020. In the interim, The Asian Vision Institute (AVI) wishes to appeal to the 
government to take the following points into consideration.

Measures to support the diversification of markets, of sources of foreign 
direct investment, of industrial bases and of domestic start-ups and SMEs 
should be made more visible. To that end, a clear set of key performance 
indicators (KPI) should be formulated to evaluate and to enhance the 
performance of line ministries and agencies.

Secondly, more robust internal government reforms are needed to address 
fundamental challenges that existed well before the arrival of the pandemic and 
the EBA adjustments. These reforms should focus on areas of weakness as 
outlined by the World Bank's "Ease of Doing Business" score assessment for 
Cambodia: starting a business, dealing with construction permits, connecting to 
the power grid, registering property, obtaining credit, paying taxes, trading 
across borders, enforcing contracts, resolving insolvency and others. More 
consideration should be given to Cambodia's scoring in the World Economic 
Forum's "Global Competitiveness Report".

Thirdly, additional incentive schemes that target specific industrial sectors 
should be formulated to support diversification.

Finally, regular progress reviews must be conducted to ensure the effective 
implementation of measures and reforms. Each ministry and line agency should 
favour a bottom-up approach and take ownership of their technical reforms and 
measures to enhance and support the economic resilience and competitiveness of 
Cambodia.

Cambodia has enjoyed a period of peace which is unprecedented in her modern 
history. To make the most of the dividends at hand, it is imperative that 
measures and reforms be bold, be decisive and be undertaken swiftly, for the 
good of all.

The Asian Vision Institute (AVI) 
https://c212.net/c/link/?t=0&l=en&o=2752293-1&h=2557919455&u=https%3A%2F%2Fwww.asianvision.org%2F&a=https%3A%2F%2Fwww.asianvision.org%2F 
is an independent think tank based in Cambodia.

For further information: Dr Chheng Kimlong, Phone: +855-6121-1800, Email: 
admin@asianvision.org

SOURCE: Asian Vision Institute