4. Achieving the AEC 2015: Challenges for Cambodia and its Businesses

Abstract

Cambodia's Economic Development Over the past decade, Cambodia enjoyed high annual economic growth of around 8 per cent on average (Figure 4.1). More impressive, for four consecutive years (2004–07), the real gross domestic product (GDP) grew at a two-digit rate. The growth impetus chiefly came from the industry sector, which was supported by substantial increases in the garment and construction subsectors, and from the services sector. The services sector saw substantial increases in tourism and real estate until the impact of the global financial crisis and economic downturn. At times, the agriculture sector also contributed significantly to growth, and this had largely been driven by weather conditions. Cambodia's agriculture accounted for about 30 per cent of GDP and employed more than half of the labour force from 2004 to 2007 (Table 4.1). The real value-added of this sector expanded by 6.2 per cent and contributed 1.1 percentage points to the overall GDP growth over the same period. In general, the growth rate of the agriculture sector remains highly variable, marked by peaks and troughs, reflecting the high reliance on adequate rainfall, which is erratic. However, it increasingly plays a significant role in supporting rural people, where most still rely on paddy cultivation for subsistence. The industrial sector, which constitutes only about a quarter of GDP, given its small base, exhibited very high growth at an annual rate of 13.9 per cent from 2004 to 2007. The mining subsector, the manufacturing (mostly garments), the electricity, gas, and water, and the construction subsectors increased by 18.3 per cent, 13.4 per cent, 16.4 per cent, and 15.3 per cent, respectively. The services sector, which accounts for about 45 per cent of GDP, rose by 11.6 per cent over the golden period of 2004–07, thanks to the expansion in trade, real estate business, hotels and restaurants, and other services. These subsectors, which directly benefited from tourism growth, infrastructure development, and the overall boom in the economy, grew by 7.7 per cent, 17.3 per cent, and 16.4 per cent, respectively. The transport and communications subsector increased by 8.3 per cent, reflecting the increase in the number of tourists visiting Cambodia from 2004 to 2007.