Public Disclosure Authorized
CAMBODIA ECONOMIC UPDATE
Public Disclosure Authorized
SALT
Public Disclosure Authorized
RECENT ECONOMIC DEVELOPMENTS
Public Disclosure Authorized
AND OUTLOOK
SELECTED ISSUE
Investing in Cambodia’s Future:
Early Childhood Health and Nutrition
MAY 2019
CAMBODIA
ECONOMIC
UPDATE
MAY 2019
Recent economic
developments and
outlook
TABLE OF CONTENTS
ACKNOWLEDGEMENTS ................................................................................................................. 1
ABBREVIATIONS................................................................................................................................ 2
EXECUTIVE SUMMARY..................................................................................................................... 3
Recent Economic Developments and Outlook...................................................................................... 9
Recent developments....................................................................................................................................................9
The economy performed better than expected last year....................................................................................9
Key exports burgeoned...........................................................................................................................................9
Rapid growth of investment in travel goods helped boost exports...............................................................10
Upbeat investor confidence underpinned construction boom.......................................................................10
Domestic demand was strong .............................................................................................................................10
The current account deficit was fully financed by FDI inflows .....................................................................11
FDI inflows helped sustain vibrant construction activity ...............................................................................11
The number of Chinese visitors has already reached more than 2 million, a target set for 2020 ............12
Almost a quarter of arrivals from China came for business purposes ........................................................12
Only 5 percent of tourists visiting Vietnam, and 13.5 percent visiting Thailand,
extended their visits to Cambodia ......................................................................................................................12
Weather conditions were less favorable for agriculture production...............................................................13
The EU imposed safeguard measures on rice from Cambodia and Myanmar.............................................14
Poverty reduction continued, but the bottom 40 percent are doing less well than before.........................15
Inflation was subdued as easing of petroleum prices more than offset
food price increases................................................................................................................................................15
FDI inflows underpinned foreign currency deposits.......................................................................................16
There was a recent shift of domestic credit to finance the services sector..................................................17
The recent surge in FDI inflows sustained the construction boom..............................................................18
Revenue is estimated to have reached a new high in 2018...............................................................................18
The next revenue mobilization strategy aims at modernizing administration..............................................19
The public wage bill is estimated to have reached 8.6 percent of GDP in 2018.........................................19
The debt distress level remained low as per the 2018 World Bank/IMF Debt Sustainabilty Analysis.....20
China is the largest creditor, accounting for half of Cambodia’s outstanding debt....................................21
The 2019 budget reflects the authorities’ fiscal consolidation stand..............................................................21
The budgeted wage bill for 2019 is 7.6 percent of GDP................................................................................21
The 2019 budget boosts the subnational administration budget by 30 percent...........................................22
Outlook.........................................................................................................................................................................22
With better-than-expected export performance, the growth outlook has been revised up,
compared to earlier projections............................................................................................................................22
Risks..............................................................................................................................................................................23
Cambodia is increasingly dependent on China to sustain FDI and tourism flows......................................23
Heightened trade uncertainty has intensified the risks.....................................................................................25
Analyzing price elasticity of garment (footwear, milled rice, and bicycle)
exports helps quantify the impact of EBA suspension....................................................................................25
If EBA is suspended, estimated maximum decline of garment exports to
the EU market is 10.4 percent .............................................................................................................................26
Estimated decline of footwear exports to the EU market is 25.2 percent ..................................................26
Cutting production and export costs could help mitigate the impact of EBA suspension.......................27
Lowering macroeconomic vulnerabilities is critical.........................................................................................29
SELECTED ISSUE: Investing in Cambodia’s Future: Early Childhood Health and Nutrition........ 33
1. Introduction.............................................................................................................................................................33
2. Human Capital and Its Contributions to Cambodia’s Economic Development..........................................33
3. The State of Child Health and Nutrition in Cambodia....................................................................................37
4. Drivers of Poor Child Nutrition..........................................................................................................................39
A. Poor Nutrition Behaviors.................................................................................................................................39
B. Low availability and affordability of nutritious foods..................................................................................41
C. Gaps in nutrition services delivered by the health sector..........................................................................42
D. Limited access to improved water supply and sanitation and poor hygiene............................................43
E. Constraints on women’s resources for optimal care....................................................................................44
F. Limited Availability and Efficiency of Public Expenditures for Child Health and Nutrition...............46
5. Policy Options.........................................................................................................................................................49
ANNEX 1: PRICE ELASTICITIES OF GARMENT, FOOTWEAR AND
MILLED RICE IN THE WORLD...................................................................................................... 52
ANNEX 2: CAMBODIA’S KEY INDICATORS................................................................................. 53
REFERENCES.................................................................................................................................... 54
ACKNOWLEDGEMENTS
ACKNOWLEDGEMENTS
The 2019 April Cambodia Economic Update (CEU) was prepared by Sodeth Ly, with
contributions from Miguel Eduardo Sánchez Martín, Runsinarith Phim, Linna Ky, Kimsun
Tong, Anne Marie Provo, Somil Nagpal, Phyrum Kov and Ekaterine Vashakmadze.
Saroeun Bou and Socheat Ath helped with the press release, logistic support, web display,
and dissemination events.
The team worked under the overall guidance of Deepak Mishra. The team is grateful
for the advice and comments provided by Ellen Goldstein and Inguna Dobraja. Several
colleagues provided comments on the draft version including Andrew Mason, Ergys
Islamaj, and Francesca de Nicola.
The team is grateful to the Cambodian authorities, particularly the Ministry of Economy
and Finance and the National Bank of Cambodia for their cooperation and support. The
Cambodia, including its enthusiastic readers and critics.
The CEU, produced biannually, provides up-to-date information on macroeconomic
developments in Cambodia. It is distributed and discussed widely including among
Cambodian authorities, development partners, the private sector, think tanks, civil society
organizations and academia.
For information about the World Bank and its activities in Cambodia, please visit our
website at www.worldbank.org/cambodia.
To be included in the email distribution list of the CEU and related publications, please
contact Socheat Ath (sath@worldbank.org). For questions on the content of this
publication, please contact Saroeun Bou (sbou@worldbank.org).
represent. The World Bank does not guarantee the accuracy of the data included in this
work. The boundaries, colors, denominations, and other information shown on any map in
this work do not imply any judgment on the part of the World Bank concerning the legal
status of any territory or the endorsement or acceptance of such boundaries.
1 CAMBODIA ECONOMIC UPDATE | MAY 2019
ABBREVIATIONS
ABBREVIATIONS
AFTA ASEAN Free Trade Agreement MFI microfinance institution
ASEAN Association of Southeast Asian Nations MOEYS Ministry of Education, Youth and Sport
CEU Cambodia Economic Update MOH Ministry of Health
CDHS Cambodia Demographic and Health MOP Ministry of Planning
Survey NCD negotiable certificate of deposit
CR Cambodian riel NIS National Institute of Statistics
C/S commune/sangkat NPL nonperforming loan
EAP East Asia and Pacific RGC Royal Government of Cambodia
EBA Everything But Arms RMS Revenue Mobilization Strategy
EC European Commission
RS Rectangular Strategy
EMDEs emerging markets and developing
SDR Special Drawing Rights
economies
SME small and medium-sized enterprise
EU European Union
TVET Technical and Vocational Education
FCD foreign currency deposit
Training
FDI foreign direct investment
TEU twenty-foot equivalent unit
GDP gross domestic product
UK United Kingdom
GVC global value chain
UNAIDS Joint United Nations Program on
HIV/AIDS human immunodeficiency virus/
HIV/AIDS
acquired immunodeficiency syndrome
UNICEF United Nations Children’s Fund
HS Harmonized system
US United States
IDP Industrial Development Policy
US$ United States dollar
IMF International Monetary Fund
VAT value-added tax
LPCO Liquidity-Providing Collateralized
Operation WBG World Bank Group
MCH Maternal and Child Health WHO World Health Organization
MDI microfinance deposit-taking institution YTD year-to-date
MEF Ministry of Economy and Finance y/y or yoy year-on-year
CAMBODIA ECONOMIC UPDATE | MAY 2019 2
EXECUTIVE SUMMARY
EXECUTIVE SUMMARY
Recent developments foreign direct investment (FDI). FDI is estimated
to have reached a record high of more than US$3.0
Preliminary estimates show real growth billion or 13.4 percent of GDP in 2018. Burgeoning
achieved a four-year high of 7.5 percent in 2018, exports and strong FDI inflows have contributed to
compared to 7.0 percent in 2017. Driven primarily further accumulation of gross international reserves,
by rapid expansion of exports and robust internal which in 2018 reached US$10.1 billion or about six
demand, the economy performed better-than- months of prospective imports.
expected. Exports burgeoned as external demand,
Three-quarters of the (approved) FDI inflows
especially in the United States and European Union
originated from China. In recent years, foreign
markets, strengthened. Garment and footwear
investment from China has surged, mainly directed
exports which account for more than two-thirds of
towards construction (infrastructure, commercial
total merchandise exports, recorded a five-year high,
and residential real estate), tourism and, to a lesser
rising by 17.6 percent in 2018, up from 8.3 percent
extent, manufacturing and agriculture. The seaside
in 2017.
provincial town of Sihanoukville has emerged as the
Upbeat consumer confidence led to a surge in hotspot of the current construction boom.
imports. Motor vehicles and steel imports, which
Improved confidence in the banking system
gauge domestic consumption and construction
has resulted in rising foreign currency deposits.
demands, rose by 50 percent and 48 percent,
Foreign currency deposits grew 26.5 percent in
respectively.
2018, up from 23.6 percent in 2017. Bank credit
The current account deficit widened to 10.4 to the private sector once again edged up, growing
percent of GDP in 2018, from 9.7 percent of at 24.2 percent in 2018, compared to 19.6 percent
GDP in 2017, but remained fully financed by in 2017. Bank lending to the construction and real
3 CAMBODIA ECONOMIC UPDATE | MAY 2019
EXECUTIVE SUMMARY
estate sectors continues to drive domestic credit logistics costs, availability of a skilled workforce,
expansion, contributing about 40 percent of credit and improved supply chain links will be essential
growth. This is followed by the wholesale and to remain competitive. In the short term, filling
retail sector, which captured one-fifth of domestic the skills gaps is needed, while addressing the
lending growth. human capital deficiency must start now to
underpin Cambodia’s long-term aspirations. Please
Inflation has moderated, underpinned in part by
see the detailed discussion on Cambodia’s skills gaps
a stable exchange rate. The easing of petroleum
and human capital deficiency in the selected issue
prices since the fourth quarter of 2018 more than
section.
offset the increase in food prices. As a result,
inflation declined to 1.6 percent as of December Risks and challenges
2018, from 2.2 percent in 2017. The Cambodian riel
(CR), which is pegged to the US dollar, has remained Heightened uncertainty has intensified the
stable, at CR 4,018 per US dollar at the end of 2018, risks. In February, the EU started the process
compared to CR 4,037 in 2017. that could lead to the temporary suspension of
A rapidly rising public payroll exerted pressures Cambodia’s preferential access under the Everything
on the fiscal position, but better-than-expected But Arms (EBA) scheme. The EU market currently
revenue performance contained the fiscal accounts for more than a third of Cambodia’s key
deficit. In 2018, despite a rising wage bill, together exports, mainly consisting of garments, footwear,
with an initial boost in domestically financed capital and bicycles. Therefore, losing EBA preferences,
spending, the overall deficit remained contained. which currently provide Cambodia duty-free and
The deficit (including grants) is estimated to have quota-free access to the EU, would likely result in
reached 1.9 percent of GDP in 2018, compared slower exports and growth.
with 1.6 percent of GDP in 2017. A slowdown in China and an overextended
Cambodia’s debt distress level remained low, financial sector pose downside risks to
according to the 2018 World Bank/IMF Debt Cambodia’s growth prospects. Given Cambodia’s
Sustainability Analysis. This is due to the concessional heavy reliance on capital inflows and tourists from
profile of the public debt and low deficit in the China, a sharp slowdown in the Chinese economy
past. After several years of fiscal consolidation, the could dampen growth prospects. The prolonged
authorities have accumulated rising government expansion of domestic credit growth, which has
deposits, which stood at 14.9 percent of GDP in been largely behind the construction and real
2018. estate boom, has overextended the financial sector.
As construction and real estate typically are more
Outlook prone to boom and bust cycles, rising domestic
credit going to the construction sector increases the
After experiencing accelerated growth of financial sector’s vulnerability.
7.5 percent in 2018, the economy is expected
It is urgent that measures are taken to mitigate
to return to its long-term potential of about
the potential negative impacts of EBA
7 percent. As exports moderate in line with
suspension. Cambodia ranks at a low 185 out
deceleration in global demand (see box 1), real
of 190 economies globally on ease of starting a
growth is projected to ease to 7 percent in 2019.
business, according to Doing Business 2019.1 Trade
The robust economic growth is expected to result
costs weigh heavily on Cambodia’s export structure
in continued poverty reduction.
and exporting firms’ performance. The contribution
The longer-term outlook, however, depends of transport and logistics to the total exported value
on the country’s ability to productively absorb added reached 14 percent, double the corresponding
rising FDI inflows, while promoting domestic number in Thailand and 3.5 times that of Malaysia
investment. In this regard, cheaper energy and or Vietnam. The supply chain links between foreign
1
See Doing Business 2019, the World Bank.
CAMBODIA ECONOMIC UPDATE | MAY 2019 4
EXECUTIVE SUMMARY
and domestic firms are weak. Addressing these the construction and real estate boom, strengthening
challenges will require embarking on structural oversight capacity and crisis preparedness in the
reforms, especially those that can help improve the financial sector is an important first step. The recent
investment climate, and reducing costs of doing surge in FDI inflows has sustained a prolonged
business, including the introduction of competitive construction boom, while masking the financial
energy prices and lower logistic costs. See box 2 sector’s vulnerability after years of rapid lending
for cost-cutting and trade facilitation measures growth. However, such large foreign capital inflows
introduced in March 2019 by the authorities. may not be sustained, especially in a context of
Authorities could consider introducing increasing global uncertainty and slowdown in
additional macroprudential measures such as China. The drying up of foreign investment in
limiting banks’ exposure to construction and construction sector could result in a collapse in
real estate. Given prolonged expansion of domestic prices and expose financial sector vulnerabilities.
credit growth, which has been largely behind
5 CAMBODIA ECONOMIC UPDATE | MAY 2019
EXECUTIVE SUMMARY
CAMBODIA’S RECENT DEVELOPMENTS AT A GLANCE
Real growth quickly accelerated… … as key exports burgeoned and
Real growth (percent) 35 Garment exports (y/y, percent change)
3535 35
7.5 30
7.4
7.4 7.5 7.5
7.5 3030 3530
7.4
7.3 7.4 35 25
7.37.3 7.3 7.52525 3025
7.4 7.5 30 20
7.4
7.1 7.3 2020 2520
7.3 7.1 25 15
7.1 7.1
7.1 7.1 7.1 7.0
7.1 7.0
7.0 7.0
7.0 7.0 7.0 7.0
7.0 7.0 7.0 1515 2015
7.0 20 10
7.1 7.1
7.1 7.1 7.0 7.0 1010 1510
7.0 7.0 7.0 15 5
7.0
5 5 10 5
10 0
00 50
11
01 12
13 3
14
15 5
1 16
01 7
pr e
re 18 8pr
20 1
20 1
1 8p 201 5
1-1 0
1Dec-c1- -11
c1-3 -12
- 13 3
1 4
1 5
1 6
17 7
-1 8
21
2
54
127 20 0176
e7
e
01 2 20
01 2 20
01 2 20
01 2 20
01 2 20
01 2 20
1 cec ec-1
13Dece-c ec-1
1 D ce-c1ec-1
1 cec c-1
1 D cec c-1
1 D cec1 c-1
18 ec c-1
11
3
4
6
11
11
2011
02
013
14
20 5
16
07
prre
ep 20201
0
11
32
D154
D165
D176
8
0
20 1 201
21
20 3 201
1
20 5 201
21
c
D ce- ec
0
D10
1- DD D1e1
D12
D14
8- D D1e8
D11
2
2
2
128 7 0182
ec 10
c- 2
ec 1-4
- -5
1-6
1-7
-8
20
0
2 20
0
0
0
0
e
e
e
-
ec 0 ec--
-
ec 5 ec--
ec 6 ec--
ec 7 ec--
1
Dec-
0
e
ec 12 ec
ec 4 ec
0- DD
D
3- DD
4- DD
5- DD
6- DD
7- DD
e
e
e
e
e
e
e
2
4
6
D
D
D
2- D
0
121
122
123
124
125
126
8
1
… construction sector expanded… …underpinned by a record high FDI
0p1r
ec
ec
ec
ec
ec
ec
ec
ec
ec
20
20
20
20
-1
-1
-1
-1
-1
-1
-1
-1
-1
D
D
D
D
D
D
D
D
D
ec
ec
ec
20
(change at current prices) (percent of GDP)
D
D
D
D
D
D
D
D
D
14
14 1414
25% 13
25%
25% 25%
1313 1413
14 12
25%
20%
25% 20% 1212 1312
20%
20% 13 11
1111 1211
20%
15% 12 10
20% 15%
15%
15% 1010 1110
11 9
15%
10% 9 9 10 9
15% 10%
10%
10% 10 8
88 98
10%
5% 9 7
10%
5%5% 5% 77 87
8 6
5%
0% 66 76
0%5% 0%
0% 7 5
2011 2012 2013 2014 2015 2016 2017 2018e
2011 2011
20112012 2012
20122013 2013
20142015
20132014 2014 2015
20162017
20152016 2016
2017 2017
2018e
2018e 2018e 5 5 6 5 2011 2012 2013 2014 2015 2016 2017 2018e
0% 6 2011 2011 2012
2013 2013
20122013 2014
20152016
20142015 2015 2016 2017
20172018e
20162017 2018e
2018e
2011 2012 2014
0% 2011 2012 2013 2014 2015 2016 2017 2018e 5
Lending
2011 2012 to 2013
construction
2014 2015 sector
2016 rose
2017 2018e 5 Fiscal expansion
2011 2012 2013 fueled domestic
2014 2015 2016 demand
2017 2018e
2011 2012 2013 2014 2015 2016 2017 2018e
(contribution to credit growth of lending to General government expenditures (percent of GDP)
construction
10% and real estate sector, percentage points) 24
10% 2424 24
10%
10%
8% 22
8%8%10%8% 2222 2422
10% 6% 24
6% 20
6%6%8% 2020 2220
8% 4% 22
4% 18
4%4%6% 1818 2018
6% 2% 20
2%2%4% 2% 16
4% 0% 1616 1816
0% 18
0%0%2% 14
2%-2% 1414 1614
-2%0%
-2% -2% 16
12
0%-4%
-4% 12 1412
12
14
Aug-10
Dec-12
Jan-10
Apr-15
Nov-15
Jun-16
Aug-17
Mar-11
Oct-11
Jul-13
Feb-14
Sep-14
Jan-17
Mar-18
Oct-18 Oct-18
May-12
-4%
-4% -2% 10
Aug-10
Dec-12
Jan-10
Apr-15
Nov-15
Jun-16
Aug-17
Mar-11
Oct-11
May-12
Jul-13
Feb-14
Sep-14
Jan-17
Mar-18
Oct-18
Aug-10
Dec-12
Jan-10
Oct-11
Jul-13
Sep-14
Apr-15
Nov-15
Jun-16
-2%
Mar-11
May-12
Feb-14
Jan-17
Aug-17
Mar-18
Oct-18
Jan-10Aug-10
Dec-12
Jan-10
Oct-11
Jul-13
Sep-14
Apr-15
Nov-15
Jun-16
Jan-17
Aug-17
Aug-10Mar-11
May-12
Feb-14
Mar-18
Oct-18
-4% 10 1210
10
12
01 10
11
12 2
13
14
15 5
6
17 7
18 e
-4%
8e 20 018
20 1
20 1
20 1
020 1
Aug-10
Dec-12
Jan-10
Mar-11
Oct-11
Apr-15
Jun-16
Aug-17
May-12
Jul-13
Nov-15
Feb-14
Sep-14
Jan-17
Mar-18
110
21
43
54
76
e
01 20 20
01 20 20
01 20 20
01 20 20
01 20 20
01 20 20
01 20 20
01 2 20
10
10
3
6
e
11
11
11
11
2010
2002
13
2004
05
16
7
18e
Dec-12
Oct-11
Jul-13
Apr-15
Nov-15
Jun-16
Aug-17
Mar-11
May-12
Feb-14
Sep-14
Jan-17
Mar-18
Oct-18
2
20 7 2018
20 0 201
1
20 2 201
1
01
20 5 201
20 6 201
2
2
2
20 4 22
20
10
1
3
0e1
120
121
122
123
124
125
126
127
128
20
20
20
Sources: Cambodian authorities and World Bank staff estimates and projections.
Note: e = estimates; pre = preliminary.
CAMBODIA ECONOMIC UPDATE | MAY 2019 6
SECTION 1
Recent Economic
Developments
and Outlook
Recent Economic Developments and Outlook
Recent Economic Developments and Outlook
Recent developments Key exports burgeoned
The economy performed better than Exports, the mainstay of Cambodia’s economy,
expected last year burgeoned as external demand strengthened.
Garment and footwear exports accelerated, growing
Preliminary estimates show real growth at 17.7 percent in 2018, up from 8.4 percent in 2017
achieved a four-year high of 7.5 percent in 2018, (figure 2). Cambodia benefited from robust growth
compared to 7.0 percent in 2017 (figure 1). Growth in high-income economies, especially in the U.S.
was driven by both exports and robust domestic U.S. growth picked up in 2018 to 2.9 percent, bolstered
demand. Cambodia was the fastest growing country by fiscal stimulus and deregulation measures.2 U.S.
in East Asia, and among the few countries that retail trade also expanded last year.3 The retail trade
performed better than previous forecasts in 2018 (excluding autos) accelerated to 5.3 percent in 2018,
(along with Mongolia and Vietnam). from 4.5 percent in 2017.4 The expansion of trade
Growth in the developing East Asia and Pacific preferences to cover travel goods, effective since
region remained resilient despite deteriorating June 2016, helped bolster Cambodia’s exports to the
global conditions. The resilience in the region U.S. market. Cambodia’s exports to the EU market
was driven by robust domestic demand, which was slightly strengthened, although Euro Area growth
supported by benign inflationary pressure, strong slowed in 2018 to 1.8 percent, amid weakening
labor market outcomes and, in some cases, fiscal external demand. Thanks to strong retail sales in
stimulus. Poverty continued to fall on the back of the United States, Cambodia’s exports expanded
resilient growth outcomes, which have been largely at 29 percent in 2018, up from 4.6 percent in 2017
driven by exports, albeit at a slower pace than in the (figure 3). Cambodia’s exports destined for the EU
past. However, global economic headwinds from market also rose, growing at 12.9 percent in 2018,
unresolved trade tensions and moderating global compared to 9.3 percent in 2017. The share of the
demand remain. US market for Cambodia’s garments and footwear
FIGURE 1: Contribution to real growth FIGURE 2: Garment and footwear exports by main
(percentage point) destination (US$ million)
8.0 7.5 1,200 25%
7.1 7.0 7.0 7.0 20%
1,000
6.0 15%
800
10%
4.0 600 5%
0%
400
2.0 -5%
200
-10%
0.0 0 -15%
Nov-17
Nov-18
May-17
May-18
Mar-17
Mar-18
Sep-17
Sep-18
Jan-17
Jan-18
Jul-17
Jul-18
2014 2015 2016 2017 2018pre
Agriculture Indus-garment & footwear
Indus-construction Indus-others
Serv-hotels & rests Serv-others Others Japan
Taxes less subsidies GDP growth EU US
Total (YTD, y/y percent change, RHS)
Source: Cambodian authorities. Source: Cambodian authorities.
Note: pre=preliminary. Note: RHS = Right-hand scale.
2
April 2019 East Asia and Pacific Economic Update, the World Bank
3
Monetary Policy Outlook for 2019, Speech by Vice Chairman Richard H. Clarida, Board of Governors of the Federal Reserve System https://www.federalreserve.gov/
newsevents/speech/clarida20190110a.htm
4
Retail Trade, ex Auto: U.S. Total, Not Seasonally Adjusted Sales, US Census Bureau.
9 CAMBODIA ECONOMIC UPDATE | MAY 2019
Recent Economic Developments and Outlook
exports rose to 29.7 percent in 2018, up from 25.0 value of approved investment projects increased
percent in 2017, while the share of the EU market to US$5.8 billion, of which two thirds was FDI.
declined to 39.1 percent, down from 46.0 percent FDI inflows have grown by 24.8 percent, reaching
during the same period. a record high of more than US$3.0 billion, or 13.4
percent of GDP, in 2018 (figure 4).6 In the real sector,
Rapid growth of investment in travel
private investment continued in the construction,
goods helped boost export real estate, and tourism sectors, which together
Rapid increase of projects investing in the accounted for about 60 percent of total (approved)
production of travel goods has been facilitated investment in 2018. Supported by the construction
by duty-free access to the US market. On June boom, key manufacturing activities such as building
30, 2016, the Office of the U.S. Trade Representative material, furniture, metal, and plastic products have
(USTR) announced a major expansion of trade also quickly flourished.
preferences. Under the new changes to the
The non-garment manufacturing sector captures
U.S. Generalized System of Preferences (GSP),
about 20 percent of total investment. Three quarters
Cambodia (and other least developed beneficiary
of the (approved) FDI originated from China.
developing countries) producing travel goods such
as luggage, backpacks, handbags, and wallets will Domestic demand was strong
be able to export those products to the United
Rapidly rising domestic demand was met by
States duty free.5 The expanded GSP by the US has
a surge in imports. Strong consumption demand
boosted (approved) FDI project investments going
fueled household purchases of durable goods. The
to the travel goods sector, amounting to US$120
imports of motor vehicles increased by 52.9 percent
million in the first two months of 2019, up from
in 2018 (figure 5) and was accompanied by soaring
US$50 million in 2018.
fuel imports. Gasoline and diesel imports rose by
Upbeat investor confidence underpinned 30 percent each. Reflecting a rapid expansion of
construction boom construction activity, the imports of steel, cooling
equipment, and other construction materials,
Private investment, largely driven by FDI
skyrocketed, reaching 47.6 percent, 54.3 percent and
inflows, climbed to new highs. In 2018, the
FIGURE 3: U.S. retail sales and Cambodia’s FIGURE 4: Foreign direct investment
exports to the United States (percent of GDP)
14
100% 12%
13
80% 10%
60% 8% 12
40% 6% 11
20% 4% 10
0% 2% 9
-20% 0% 8
-40% -2%
7
Aug-11
Mar-12
Oct-12
May-13
Dec-13
Jul-14
Feb-15
Apr-16
Nov-16
Aug-18
Jan-11
Sep-15
Jun-17
Jan-18
6
Exports to the US (y/y) US retail sales (y/y, RHS) 5
2011 2012 2013 2014 2015 2016 2017 2018e
Source: Cambodian authorities. Source: Cambodian authorities and bank’s staff estimate.
Note: The EU market in 2014 included UK. RHS = Right-hand scale
5
For more detail, see https://kh.usembassy.gov/duty-free-access-travel-goods-made-cambodia/
6
Annual Report, 2018, the National Bank of Cambodia
CAMBODIA ECONOMIC UPDATE | MAY 2019 10
Recent Economic Developments and Outlook
73.0 percent respectively (figure 6). As discussed FDI inflows helped sustain vibrant
above, the construction boom has concentrated construction activity
in the capital city of Phnom Penh and more
recently in the seaside town of Sihanoukville. The In 2018, approved residential and commercial
economy has been increasingly dependent on the development projects (excluding mega projects
construction sector, consequently risks associated of US$1 billion or more) amounted to US$4.6
with construction boom have been rising. billion, or a 14 percent increase. Sihanoukville, the
largest seaside town in Cambodia, has become a
The current account deficit was fully newly emerging high-rise construction hotspot with
financed by FDI inflows bustling construction activities, which are largely
financed by Chinese investors.
The current account deficit is estimated to
have widened to 10.4 percent of GDP in 2018, The most rapid increase in high-rise
compared to 9.7 percent of GDP in 2017. building numbers in the provincial capital of
Healthy exports continued to partly offset the surge Sihanoukville was recorded in 2018 when 238
in import demand. In 2018, merchandize exports buildings were approved, up from 188 buildings
were estimated to have reached US$11.2 billion, in 2017. Sihanoukville, together with Phnom Penh,
while merchandize imports rose to US$13.8 billion. accounts for 1,217 buildings of five stories and
Rising net services was largely boosted by travel above.7 The rising popularity of coastal zones,
service receipts with the expansion of the tourism especially Sihanoukville province, with their share
sector. Current transfers were supported by workers’ of tourists rising to 10 percent of total destination
remittances (net), estimated to reach about US$1.0 arrivals in 2018 (compared to only 5.5 percent in
billion. As a result, the widened current account 2010), boosted by rehabilitation and expansion
deficit remained fully financed by FDI inflows. of a nearby international airport helps drive the
The better-than-expected export performance and construction boom there. In 2018, total approved
record high FDI inflows also allowed the central investment projects for Sihanoukville alone reached
bank to accumulate more international reserves, US$1.03 billion, of which 43 percent is for the
which reached US$10.1 billion by end-2018, manufacturing sector. In addition, to improve
covering about six months of prospective imports. connectivity between Sihanoukville and Phnom
Penh, an expressway costing US$1.87 billion under
BOT is being constructed.8
FIGURE 5: Motor vehicle imports accelerated FIGURE 6: Construction materials and steel imports
(y/y, percent change) (y/y, percent change)
60 100
50 80
40
60
30
40
20
10 20
0 0
-10 -20
-20
-40
-30 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18
Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
Dec-16
Dec-17
Dec-18
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Jun-17
Jun-18
Other materials Steel imports
Cement imports Cooling equipment
Source: Cambodian authorities. Source: Cambodian authorities.
7
2018 Annual Progress Report and 2019 Performance Objectives dated February 7, 2019, Ministry of Land, Urbanization and Construction.
8
For Phnom Penh - Sihanoukville expressway, see http://www.mpwt.gov.kh/kh/public-works/expressways
11 CAMBODIA ECONOMIC UPDATE | MAY 2019
Recent Economic Developments and Outlook
The number of Chinese visitors has a 25 percent increase in 2018 (figure 8). In 2018, the
already reached more than 2 million, a three airports received more than 4 million foreign
target set for 2020 travelers, or 65.8 percent of total international
arrivals, and served 89 destinations of which 57 are
Growth of international tourist arrivals was within China. Of the 65.8 percent, Phnom Penh (35
sustained at 10.7 percent year-on-year in 2018, airlines with 34 international destinations of which
slightly lower than 11.8 percent in 2017, thanks 21 are in China) and Siem Reap (32 airlines with 46
mainly to the rising number of Chinese visitors international destinations of which 29 are in China)
(figure 7). Arrivals from China are number one; its international airports received 31 percent of total
2.03 million visitors account for 32.6 percent of total international arrivals each. Sihanoukville airport (10
visitor arrivals. This means the authorities achieved airlines with 9 international destinations of which
their target two years earlier. Under its China Ready 7 are in China) obtained the remaining 3.8 percent.
strategy, which was issued in 2016, the authorities The three platforms combined serve about 700
targeted receiving 2 million Chinese visitors by 2020. regular flights per week.9
Arrivals from Vietnam, Lao PDR, and Thailand are
next, capturing 12.9 percent, 6.9 percent, and 6.2 Only 5 percent of tourists visiting
percent of total arrivals, respectively. Reflecting Vietnam, and 13.5 percent visiting
increased Chinese investors in Cambodia, a large Thailand, extended their visits to
proportion of Chinese visitors reportedly visited Cambodia
the country for business purposes.
However, substantial untapped potential
Almost a quarter of arrivals from China remains, given that only about 5 percent of tourists
came for business purposes visiting Vietnam and 13.5 percent visiting Thailand,
extended their visits to Cambodia.10 In 2018, while
In 2018, almost a quarter of arrivals from China
Cambodia received 6.2 million foreign tourists
reported coming to Cambodia for business
(a 10.7 percent year-on-year increase), Thailand
purposes (figure 8). Thanks to the rapid increase received 38.3 million (an 8.2 percent year-on-year
in air travel, the three main international gateways increase) and Vietnam 15.5 million (a 20 percent
—Phnom Penh, Siem Reap and Sihanoukville
year-on-year increase).
airports—served more than 10 million passengers or
FIGURE 7: Tourist arrivals to Cambodia, Thailand, FIGURE 8: Air and business visitor arrivals to
and Vietnam (y/y, percent change) Cambodia (y/y, percent change)
35 30 10
30 9
25 25 8
20 7
20
15 6
10 15 5
5 4
0 10 3
-5 2
5
-10 1
-15 0 0
2013 2014 2015 2016 2017 2018
9
0
1
2
3
4
5
6
7
8
-0
-1
-1
-1
-1
-1
-1
-1
-1
-1
ec
ec
ec
ec
ec
ec
ec
ec
ec
ec
Business visitors (percent of total arrivals, RHS)
D
D
D
D
D
D
D
D
D
D
Thailand Cambodia Vietnam Visitor arrival by air (y/y, percent change)
Source: Cambodian authorities. Source: Cambodian authorities.
Note: RHS = Right-hand scale.
9
See https://corp.cambodia-airports.aero/
10
34.7 percent and 31.2 percent of foreign tourists come to Cambodia via Thailand and Vietnam, respectively, according to the 20017 Annual Report of the Ministry of
Tourism.
CAMBODIA ECONOMIC UPDATE | MAY 2019 12
Recent Economic Developments and Outlook
Making inroads into this growing market located Weather conditions were less favorable last year.
at Cambodia’s doorstep may be difficult to tap Production was affected by midseason drought and
and is likely to require more investment and floods in some parts of the country.13 Nevertheless,
improved coordination. Several initiatives have agricultural gross value added (at current prices)
been introduced to improve and upgrade tourism continued to increase at 4.4 percent in 2018,
services such as “clean city-clean resorts-good reaching 21,913 billion riels (or 22.0 percent of
services”, street food standards, public places with GDP). Rice production, which accounts for about
free Wi-Fi, and green belt and smart city initiatives. half of agricultural GDP, grew by 3.5 percent,
However, investing more toward providing sufficient reaching 10.8 million metric tons, lower than the 5.7
and well-functioning public tourism infrastructure, percent growth rate in 2017 (figure 9), of which 2.0
and improving cooperation between commercial percentage points were contributed by dry season
and public entities are needed. rice and 1.5 percentage point by wet season rice
production.
Development and provision of tourism
infrastructure is seen as a prerequisite to become In 2018, the increase in yields accounted for 57
a popular tourist destination. An attractive tourist percent of rice production increase, while the rest
destination not only relies on its natural resources, was due to expansion of harvested land. In 2017,
but also on its available infrastructure, facilities, 93.2 percent of the rice production increase was
and services.11 For instance, Vietnam is spending contributed by land expansion, with better weather
as much as US$24 billion during 2016-20, of which conditions. Thus, in 2018, the improvements
the state budget accounts for 8 to 10 percent, in yields reflect better or more efficient use of
focusing on building and upgrading tourism and agricultural inputs. Yields of wet and dry season rice
transport infrastructure in provinces with key tourist production increased by 1.7 percent and 1.0 percent,
landmarks.12 Tourist arrivals to Vietnam surged respectively.
during the past three years, rising 56 percent, to 15.5
Total rice cultivated area rose to 3.3 million
million in 2018, up from 9.9 million in 2016. Until
hectares or 3.0 percent largely due to the
2015, Vietnam attracted about 6 million tourists a
increase in cultivated area of rainy season rice.
year.
Rainy season rice’s cultivated areas rose to 2.74
Weather conditions were less favorable for million hectares in 2018 (or a 3.4 percent increase),
agriculture production up from 2.65 million hectares in 2017. Dry season
FIGURE 9: Contribution from annual wet season FIGURE 10: Milled rice exports were flat
rice production increased modestly (in thousand tons)
(in million metric tons)
0.6 700
0.4 600
500
0.2
400
0 300
-0.2 200
100
-0.4
2010 2011 2012 2013 2014 2015 2016 2017 2018 -
2010 2011 2012 2013 2014 2015 2016 2017 2018
Total gains Due to land expansion
Due to yield improvements
Source: Cambodian authorities. Source: Cambodian authorities.
11
Abdullah, S., Abdul Razak A., Jaafar M., 2014. Public Tourism Infrastructure: Challenges in the Development and Maintenance Activities.
12
Decision No. 201/QD-TTg of January 22, 2013, approving the master plan on development of Vietnam’s tourism through 2020, with a vision toward 2030.
13
Annual report, 2018 achievements and 2019 targets, Ministry of Agriculture, Forestry and Fisheries, March 2018.
13 CAMBODIA ECONOMIC UPDATE | MAY 2019
Recent Economic Developments and Outlook
rice’s cultivated area, however, remained at 0.59 In contrast, China has increased its import
million hectares, likely reflecting challenges in the quota for Cambodia’s rice to 400,000 tons in
expanding irrigation system for rice production 2019, up from 300,0000 in 2018. In 2018, actual
during dry seasons. milled rice exports to China (which includes the
mainland, Hong Kong SAR, China; and Macau
Official statistics indicate that Cambodia’s
SAR, China), however, reached 170,154 tons, or 27
paddy rice surplus reached 5.8 million metric
percent of total milled rice exports. This is reportedly
tons, or 3.7 million metric tons milled rice
due to the slow process of granting permission (by
equivalent. Cambodia, however, exports its rice
Chinese customs) to export to China. The Chinese
surplus mostly in the form of paddy rice, while
market, like the EU market, bought largely fragrant
milled rice exports accounted for 0.6 million tons
rice from Cambodia.
(or 16.7 percent of total surplus) (figure 10).
Overall, the decline of Cambodia’s rice exports
Cambodia’s fragrant rice exports accounted
to the EU was more than offset by the increase
for about 79 percent of total milled rice exports
in the country’s rice exports to the Chinese
in 2018. White long grain rice accounted for 17
market. In February 2019, when the safeguard
percent and long grain parboiled rice 4 percent.14
measures were fully applied, rice exports to the
The fragrant rice once again won the World’s Best
EU declined by 57.8 percent month-on-month. In
Rice Award in 2018 in the World’s Best Rice Contest
contrast, Cambodia’s rice exports to the Chinese
organized annually by The Rice Trader.15 Since
market grew by 45.6 percent. As a result, Cambodia’s
2009, Cambodian Jasmine rice has been competing
milled rice exports managed to increase by 2 percent
globally, especially against Thai Jasmin rice, for the
during the first two months of 2019. Official data
annual title of World’s Best Rice. So far, Cambodia
show that Cambodia received US$413.5 million
has won four awards, in 2012, 2013, 2014, and 2018,
from its milled rice exports in 2018.17
while Thai rice received five awards. U.S. rice and
Myanmar rice received one award each. During the last decade or so, there has been
some progress on quality differentiation and
The EU imposed safeguard measures on branding. As Cambodia is located within the
rice from Cambodia and Myanmar neighborhood of commodity giants, Malaysia,
The European Commission (EC) imposed Thailand, and Vietnam, the country has been
safeguard measures on Cambodia’s rice. strategically working toward quality differentiation
According to the EC, an investigation confirmed a (rice, pepper), sustainability premiums (“green”),
significant increase in imports of Indica rice from and improved food safety (“clean”), while advancing
Cambodia and Myanmar into the EU that was agroprocessing (cashews, starch). In this regard,
causing economic damage to European producers. authorities have introduced the “Malys Angkor”
In response, the EC decided to re-introduce import rice brand as well as Geographical Indication (GI)
duties, which will be steadily reduced over a period products such as Kampot pepper and Mondulkiri
of three years. Effective January 18, 2019, the EU Coffee. Cassava processing plants are being built.
reinstated the normal customs duties of €175 per However, diversification toward production of
ton in year one, progressively reducing it to €150 animal products and fisheries remains less successful
per ton in year two and €125 per ton in year three.16 despite rising demand and prices. Rising income and
As a result, in February 2019, Cambodia’s milled rice urbanization with a rapid expansion of the tourism
exports to the EU reached only 10,080 tons or a sector is changing household food consumption,
57.8 percent month-on-month decline. Cambodia particularly regarding its consumption of animal
exported 270,000 tons (or 43 percent of total milled products. This is also true for exports as the Asian
rice exports) to the EU market in 2018. middle class, especially in China, expands. In this
14
Report on Cambodian Rice Export Status in 2018, Secretariat for One Window Service for Rice Export.
15
https://thericetrader.com/conferences/2018-WRC-Hanoi/worlds-best-rice/
16
Press release, European Commission, January 19, 2019. See http://europa.eu/rapid/press-release_IP-19-427_en.htm
17
In 2018, the export value was associated with 567,500 tons of milled rice exports (customs data), but Cambodia Rice Federation recorded 626,200 tons of milled rice
exports.
CAMBODIA ECONOMIC UPDATE | MAY 2019 14
Recent Economic Developments and Outlook
regard, a national strategy to promote agricultural there are still many households that are only just
diversification could play a crucial role. above the poverty line and have limited ability to
absorb shocks, even small ones. Any negative shock
Poverty reduction continued, but the bottom
reducing consumption per capita by Cambodian riel
40 percent are doing less well than before
2,000 (US$0.50) would double the poverty rate.
While poverty continues to decline, the drivers
Inflation was subdued as easing of
of poverty reduction are changing. Poverty
petroleum prices more than offset food
estimates for 2015-17 are currently under review by
the authorities, but preliminary indications are that
price increases
poverty continues to decline. Though impressive Inflation has been at four-year low. In 2018,
gains continued to be made, the reduction in inflation moderated as the easing of petroleum
poverty during 2013-17 was less than during 2009- prices since the fourth quarter of 2018 more than
13, mainly because economic growth benefited offset the increase in food prices. Consumer Price
the non-poor more, while urban poverty stagnated Index eased to 1.6 percent in 2018, down from 2.2
compared to the earlier period. Consumption per percent in December 2017 (figure 11), thanks largely
capita for the bottom 40 percent grew at 13 percent to the moderation of the transport component
during 2013-17, while it expanded at 22 percent (subindex) as retail prices of gasoline and diesel
for the top 60 percent. The non-agricultural wage declined, and helped by the easing of international
played a more significant role in reducing poverty oil prices toward the end of 2018. Given the high
during 2013-17, compared to 2009-13 period when level of dollarization in Cambodia, the appreciation
household agriculture was the primary driver of of US dollar in the second-half of 2018 has also
poverty reduction. been a contributing factor to keeping inflation low.
Declining monetary poverty is reflected in In July 2018, to stabilize the retail prices of
improvements of household living conditions. petroleum products against the gradual rise
For example, the ownership of electric fans in international oil prices, the authorities
increased by 37 percentage points during 2013-17, introduced a reduction in a special tax (one of
access to electricity rose by 27 percentage points and four taxes: custom duties, value-added tax, excise
access to improved sanitation rose by 24 percentage and special tax) levied on imported petroleum
points. Access to improved sanitation and electricity products. The special tax on gasoline was cut to 15
increased faster than during2009-13. However, percent (from 35 percent), on diesel to 5.5 percent
FIGURE 11: Contributions to 12-month inflation FIGURE 12: Inflationary pressures have eased
(percent) markedly in major economies…
Headline inflation (end of period year-over-year, percent)
7 8
7
6
5
4
2 3
2
1
0
-1
-3
Jan-2016
Mar-2016
May-2016
Jul-2016
Sep-2016
Nov-2016
Jan-2017
Mar-2017
May-2017
Jul-2017
Sep-2017
Nov-2017
Jan-2018
Mar-2018
May-2018
Jul-2018
Sep-2018
Nov-2018
Jan-2019
Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
Dec-16
Dec-17
Dec-18
Jun-11
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Jun-17
Jun-18
Others Housing & utilities sub-index
China Indonesia Malaysia
Transport sub-index Y/Y
Food sub-index Philippines Thailand Vietnam
Source: Cambodian authorities. Source: April 2019 East Asia and Pacific Economic Update, the World
Bank.
15 CAMBODIA ECONOMIC UPDATE | MAY 2019
Recent Economic Developments and Outlook
(from 15 percent), and on kerosene to 5 percent in 2018, up from 23.6 percent in 2017. It contributed
(from 15 percent).18 The reported revenue forgone 22.1 percentage points of 24.0 percent broad money
is US$30 million a year. While Cambodia imports all growth (figure 13). Reflecting increased dollarization,
petroleum products and has a full inflation “pass- as a share of broad money in 2018, FCD accounted
through” from international oil prices to domestic for 84.8 percent, up from 83.1 percent in 2017.
retail prices, the authorities regularly issue bi-monthly
retail gasoline and diesel prices for compliance by Accumulation of gross international reserves
formal petroleum product retailers. (GIR) decelerated with slower injection of local
currency in the market by the central bank. The
In the East Asia and Pacific region, inflationary central bank purchased US$875 million in 2018, a
pressures were also subdued in the large 9 percent decline from 2017. Consequently, GIR
economies, many of which are Cambodia’s accumulation decelerated to 16.0 percent in 2018,
trading partners. Most of the region’s large down from 30 percent in 2017. Nevertheless, GIR
economies recorded moderating inflation outcomes reached US$10.1 billion or six months of prospective
(figure 12).19 As China, Thailand and Vietnam are imports coverage in 2018. Riel in circulation growth
Cambodia’s main trading partners, so subdued decelerated to 11.5 percent in 2018, down from 28.2
inflation in those countries helped contain percent in 2017 as the local currency was under
inflationary pressure in Cambodia. Many major increased pressures because of rising demand for
regional economies tightened monetary policy imports (figure 14).
in response to exchange rate depreciation and
U.S. monetary policy normalization. Given that However, the riel versus the U.S. dollar
inflation in most of these economies had been well exchange rate, which depreciated in the third
contained, the tighter policy stances kept prices quarter of 2018, stabilized toward the end of
further subdued. 2018. The exchange rate was CR 4,018 per U.S.
dollar in December 2018, compared to CR 4,037 in
FDI inflows underpinned foreign currency 2017. The riel also slightly depreciated against the
deposits Thai baht, but appreciated against the Vietnamese
Although broad money growth remained at dong and Chinese yuan. Against the currencies of
24.0 percent in 2018, foreign currency deposits its main export markets (besides the United States),
(FCD) surged at the expense of riel deposits the riel appreciated against the euro, the Canadian
and riel in circulation. FCD grew at 26.5 percent dollar, and the British pound.
FIGURE 13: Contribution to broad money growth FIGURE 14: Riel in circulation decelerated
(percentage points) (y/y, percent change)
45 50
40 45
35 40
30 35
30
25
25
20
20
15 15
10 10
5 5
0 0
Dec-12
Aug-14
May-13
Oct-13
Mar-14
Jan-15
Jun-15
Nov-15
Apr-16
Sep-16
Feb-17
Jul-17
Dec-17
May-18
Oct-18
-5
Sep-18
Dec-15
Dec-16
Sep-17
Dec-17
Jun-18
Dec-18
Dec-12
Sep-13
Dec-13
Jun-14
Sep-14
Dec-14
Sep-15
Jun-16
Sep-16
Jun-17
Mar-18
Mar-13
Jun-13
Mar-14
Mar-15
Jun-15
Mar-16
Mar-17
Riel in circulation Foreign currency deposits
Foreign currency deposits Riel deposits
Riel in circulation
Source: Cambodian authorities. Source: Cambodian authorities.
18
http://cnv.org.kh/petroleum-price-decrease-0-03-first-july/
19
April 2019 East Asia and Pacific Economic Update, April 2019, the World Bank Group, Washington, DC.
CAMBODIA ECONOMIC UPDATE | MAY 2019 16
Recent Economic Developments and Outlook
Promoting the use of local currency has been lending to the private sector once again
underpinned by the success of the Liquidity- accelerated, after moderating in late 2017 and early
Providing Collateralized Operations (LPCO) of 2018. Credit growth reached 24.4 percent in
introduced in October 2016 to establish a 2018, up from 19.6 percent in 2017. Cambodia has
benchmark rate of local currency borrowing. The experienced a rapid acceleration of bank lending
LPCO facility, which requires negotiable certificates growth, especially during the post-global financial
of deposit (NCDs) as collateral to obtain the local crisis period. This period is associated with the
currency (together with the requirement to increase construction and real estate boom. Cross-country
riel-denominated loans to at least 10 percent of comparison shows that Cambodia’s bank credit as a
the total loan portfolio by the end of 2019) has percent of GDP overtook that of Indonesia and the
allowed the central bank to inject local currency Philippines, despite the country’s nascent banking
while maintaining a relatively stable riel-U.S. dollar sector (figure 15).
exchange rate.20 The introduction has led to a
There was a recent shift of domestic
gradual reduction of the riel lending rate.
credit to finance the services sector
Short-term interest rates continued to gradually
Recently, it appears that domestic credit going to
decline, albeit from an elevated level. The
the services sector has been rising. This includes
weighted average of the U.S. dollar lending rate
wholesale, transports and telecommunications,
of banks dropped to 11.08 percent per year in
and personal consumption purposes (figure 16).
September 2018, down from 11.7 percent per year at
The trend underscores rising consumption and
the end of 2017. However, the average lending rates
construction demands, increasingly catered to by
of microfinance institutions are substantially higher
relatively large wholesale businesses witnessed in the
than of banks. Deposit interest rates remained
surge in imports of durable goods such as motor
largely unchanged. The weighted average of the
vehicles and construction materials. In contrast,
U.S. dollar deposit interest rate (12-month maturity)
domestic credit going to the agriculture sector,
stayed at 4.42 percent per year in September 2018.
manufacturing activities, or retail services (including
Driven by the booming economic activity, the food sector) shrank.
FIGURE 15: Cambodia’s banking sector credit to FIGURE 16: Contribution to domestic credit growth
private sector is relatively high (percentage points)
(domestic credit, percent of GDP, 2017)
35%
180
30%
160
140 25%
120 20%
100
15%
80
60 10%
40
5%
20
0 0%
-5%
ng m
Th ysia
do R
ilip tes
U amb nd
o s
ya a
ar
ea a
M ore
Vi ep.
d ia
La pine
M nesi
or in
In PD
2013 2014 2015 2016 2017 2018
nm
Si etna
te d
C ila
Ph Sta
,R
K Ch
ni o
ap
ala
a
Construction and real estate Personal & credit cards
Transport & telecom Retail (hotels & restaurants)
Wholesale Manufacturing and utilities
Source: World Development Indicators, World Bank. Mining & quarrying Agriculture
Total
Source: Cambodian authorities.
20
See Cambodia Economic Update, April 2018, for a detailed discussion on the introduction of the LPCO under the monetary sector.
17 CAMBODIA ECONOMIC UPDATE | MAY 2019
Recent Economic Developments and Outlook
Total outstanding loans financed by the strengthened monitoring of currency and maturity
banking and microfinance sectors reached mismatches.22 New minimum capital requirements
more than 100 percent of GDP, or 104.2 trillion were fully in place by the first quarter of 2018. The
riels in 2018. Of which 80 percent was provided by central bank conducted stress test which showed
the banking sector and the remaining 20 percent by that banking and financial institutions are resilient,
the microfinance sector. This, however, excludes except for a few institutions that need to be carefully
credit provided by the “shadow banking” system monitored.
introduced by real estate developers, rental and
leasing firms, pawn shops, and informal lenders. Revenue is estimated to have reached a
Therefore, the magnitude of total credit provided new high in 2018
to the economy is much greater. Domestic revenue (including grants) is
Reported nonperforming loan (NPL) ratios estimated to have reached a record high of 22.3
for the banking sector marginally deteriorated. percent of GDP in 2018, thanks improved tax
Reported NPL ratios for the banking sector rose to administration (figure 17). Taxes on goods and
2.8 percent in 2018, compared with 2.3 percent at the services (indirect taxes) continued to be the main
end of 2017.21 NPL in the agriculture sector was the source of domestic revenue, contributing about
highest at 8 percent, followed by construction and half of the total collection last year, of which the
manufacturing at about 4 percent each. Reported VAT and excise taxes (on imports) account for
NPLs for the microfinance sector improved, 70 percent. Meanwhile, direct taxes improved
declining to 1.0 percent in 2018, compared with 2.0 significantly during the past several years, reaching
percent in 2017. Still, the reported NPL ratios need 4.3 percent of GDP in 2018, up from 4.2 percent in
to be carefully interpreted as there are inconsistencies 2017, partly thanks to better revenue administration.
in loan classifications and a continuous rolling over In particular, among other measures, e-tax services
and refinancing of loans.
covering tax returns, tax registrations and e-VAT,
The recent surge in FDI inflows sustained as well as the use of the banking system for tax
the construction boom payments have been introduced.
The recent surge in FDI inflows not only In addition, driven by rising imports, trade
sustained the construction boom further but also tax collection is estimated to have accelerated
masked the financial sector’s vulnerability. The last year, contributing 2.4 percent of GDP, or a
contribution of credit provided to the construction, 20 percent year-on-year increase (figure 18), up
real estate and mortgage sectors accounted for 8 from 2.2 percent in 2017. This happened despite
percentage points, or 40 percent of total domestic the commitment under the ASEAN Free Trade
credit growth. Construction and real estate typically Agreement (AFTA).
are more prone to boom and bust cycles and a
slowdown in FDI inflows may then unmask the A newly introduced initiative to improve
banking sector’s exposure and vulnerabilities. non-tax revenue administration includes the
introduction of a non-tax revenue management
Nevertheless, continued efforts have been made information system (NRMIS). This, together
to maintain the stability of the financial sector, with inter-ministerial Prakases (agreements) and a
while promoting the use of local currency standardized receipting system have helped improve
by trying to make inroads into dollarization. non-tax revenue administration and sustain non-tax
Macroprudential measures have been introduced revenue collection. Non-tax (and others) revenue
including liquidity coverage ratio introduced in 2015 are estimated to contribute 3.7 percent of GDP in
and steadily increasing until 2020, coupled with 2018, up from 3.5 percent in 2017.
21
2018 Annual Report, the National Bank of Cambodia.
22
Annual Reports for 2017 and 2018, the National Bank of Cambodia
CAMBODIA ECONOMIC UPDATE | MAY 2019 18
Recent Economic Developments and Outlook
The next revenue mobilization strategy a month by 2018. Further expansion of the wage
aims at modernizing administration bill is not likely to be sustainable in the long run,
and there is a need to accelerate the critical tasks
The authorities are planning to introduce on public administration reforms to improve
the next Revenue Mobilization Strategy (RMS) public service delivery. As the country embarks on
covering 2019-23, targeting modernization of structural reforms, those critical tasks, which include
tax and customs administration and policy. This improving the investment climate, reducing costs
largely consists of income and consumption tax of doing business, introducing competitive energy
reforms. The new RMS will identify new source prices and lowering logistic costs require enhanced
of revenues for optimum revenue collection, public sector productivity and more efficient public
promoting innovation and ensuring level playing service delivery. This is also crucial to underpin
fields and equity. Revised tax incentives are expected private sector development role in driving growth
to support capital acquisition and innovation, while and reducing poverty.
the introduction of a personal income tax helps
ensure equity. Excises will be designed to address While last year’s fiscal expansion boosted public
externalities and unfair competition. While the investment, exceptional revenue performance
2014-18 RMS targeted an increase of 0.5 percent of contained fiscal deficit. Fiscal deficit (including
GDP in (current) revenue collection per year, initial grants) marginally rose to 1.9 percent of GDP in
discussions show that the new RMS aims at a lower 2018, compared to 1.6 percent in 2017. The deficit,
target, an additional 0.3 percent of GDP revenue however, remained to be fully financed external
increase per year. funds. Fiscal expansion in 2018 served as a stimulus,
partly underpinning robust consumption growth.
The public wage bill is estimated to have Public outlay is estimated to have increased to 24.2
reached 8.6 percent of GDP in 2018 percent of GDP in 2018, up from 23.1 percent in 2017
The public sector wage bill is estimated to (figure 21). Despite the authorities’ fiscal expansion
have increased to 8.6 percent of GDP in 2018 last year, government’s overall fiscal position
(figures 19 and 20). This represents a tripling of civil remains strong. After years of fiscal consolidation,
servants’ minimum wage, compared to the level in government has accumulated substantial deposits
2013, having reached the target of 1 million riels at the central bank. The deposits, which currently
stand at 14.9 percent of GDP, can be used by
FIGURE 17: Main components FIGURE 18: Trade tax collection accelerated last
(percent of GDP) year (y/y, percent change)
25 30%
25%
20
2.7 20%
2.6
2.6 2.4
15 2.2 15%
2.5
10%
10 10.8
9.7
8.8 5%
5 0%
3.6 4.2 4.3 -5%
- 2011 2012 2013 2014 2015 2016 2017 2018e
2016 2017 2018e
Taxes on international trade Total revenue
All other revenues Non-tax revenues
Taxes on international trade Taxes on goods and services
Direct taxes
Source: Cambodian authorities. Source: Cambodian authorities.
Note: e = estimates. Note: e = estimates.
19 CAMBODIA ECONOMIC UPDATE | MAY 2019
Recent Economic Developments and Outlook
the authorities as a fiscal buffer (figure 22), given that of US$6.79 billion (or 28.6 percent of GDP)
the monetary policy continues to be constrained by of which 0.04 percent is public domestic debt.24
Cambodia’s highly dollarized economy.23 Overall, the borrowing terms remained highly
concessional, with a (weighted average) interest rate
The debt distress level remained low as of 1.37 percent, a maturity of 25.5 years, and a grace
per the 2018 World Bank/IMF Debt period 8 years. By major currencies, outstanding
Sustainabilty Analysis debt in US dollar, Special Drawing Rights (SDR)
According to official data, by mid-2018, and Chinese Yuan are 43.2 percent, 28.1 percent and
Cambodia had a total public debt outstanding 16.1 percent, respectively.
FIGURE 19: General government expenditure: FIGURE 20: Public sector wage bill
Main components (percent of GDP) (percent of GDP)
25
9.0 8.6
7.9
8.0 7.2
20 6.8 8.2
7.3 7.0 6.5
0.4 0.4 6.0 5.7
15 0.4 5.0
5.0 4.4 4.3 4.6
7.9 7.1
10 7.3 4.0
3.0
5 2.0
7.2 7.9 8.6
1.0
- -
2016 2017 2018e 2010 2011 2012 2013 2014 2015 2016 2017 2018e
Capital expenditure Expenditure on goods and services
Interest payment Wages and compensation Wages and compensation
Expenditure on goods and services
Source: Cambodian authorities. Source: Cambodian authorities.
Note: e = estimates. Note: e = estimates.
FIGURE 21: The general government fiscal deficit FIGURE 22: Government deposits at the banking
remained almost unchanged in 2018 thanks to good system
revenue collection (percent of GDP) (percent of GDP)
24 16
21.5
19.6 14
18.4
19 16.8 17.6
15.0 14.5 12
14 12.7 12.8 10
9 8
6
4
4
-1 2
-6 0
Dec-05
Nov-06
Oct-07
Sep-08
Aug-09
Jul-10
Jun-11
May-12
Dec-16
Oct-18
Apr-13
Mar-14
Feb-15
Jan-16
Nov-17
2010 2011 2012 2013 2014 2015 2016 20172018e
Total revenue Overall balance (including grants)
Total expenditure
Source: Cambodian authorities. Source: Cambodian authorities.
Note: e = estimates.
23
As of June 2018, 31 percent of government deposits at the National Bank of Cambodia were in U.S. dollars.
24
“Cambodia Public Debt Statistical Bulletin,” Volume 6, September 2018, Ministry of Economy and Finance.
CAMBODIA ECONOMIC UPDATE | MAY 2019 20
Recent Economic Developments and Outlook
China is the largest creditor, accounting improved revenue collection, while containing
for half of Cambodia’s outstanding debt public outlay.
Cambodia’s external debt owed to China The budgeted revenue (including grants) for the
accounts for 48.4 percent of the total 2019 budget is conservative. Although domestic
outstanding debt as of the first half of 2018. The revenue is budgeted to increase to 19.3 percent of
second- and third-largest creditors are multilateral, GDP in 2019, up from 18.6 percent of GDP in
namely the Asian Development Bank and the World 2018 budget, it remains below the estimated revenue
Bank, covering for 19.3 percent and 8.0 percent of collection of 21.5 percent of GDP achieved for
total outstanding debt, respectively. The fourth-and 2018 (figure 24). Public outlay is budgeted to be
fifth-largest creditors are the Republic of Korea contained at 23.9 percent of GDP in 2019, only
and Japan, accounting for 5.1 percent and 4.4 slightly lower than 24.0 percent of GDP in 2018
percent of total outstanding debt, respectively. Old budget (and the estimated public outlay).
debts (under negotiations) account for 9.1 percent.
Cambodia’s debt distress level remained low as per The budgeted wage bill for 2019 is 7.6
the 2018 World Bank/IMF Debt Sustainability percent of GDP
Analysis, thanks mainly to the authorities’ principle For the 2019 budget, the wage bill (under
of borrowing only on concessional terms. chapter 64 of the budget classification) has been
The 2019 budget reflects the authorities’ corrected (split). In 2019, the corrected wage bill
fiscal consolidation stand accounts for 7.6 percent of GDP (figure 25) under
chapter 64 (personnel), while 0.8 percent of GDP,
Indicating the authorities’ fiscal consolidation representing general government expenditures for
policy, the deficit of the 2019 budget is targeted social security benefits (which had been part of
to narrow to 4.6 percent of GDP, compared to 4.8 the wage bill until 2018) is now reclassified under
percent in the 2018 budget. The deficit, however, social security benefits (chapter 62) under the non-
is substantially higher than 2018’s estimated deficit wage category. Chapter 62 finances social security
of 1.9 percent of GDP (figure 23). To reduce the benefits for both civil servants and veterans.
2019 budget deficit, this year the authorities target
FIGURE 23: Fiscal balances and financing for the FIGURE 24: Budgeted revenue for the 2019 budget
2019 budget (percent of GDP) (percent of GDP)
6 25
4
20
2.7
5.3 2.6
2 4.5 2.5
3.7 3.6 3.9 3.3 3.7 2.6 2.4
2.4 2.8 3.2 15 2.2
2.5 2.2
0
10 10.8
-2 9.7 9.2
8.8
5
-4
3.6 4.2 4.3 3.9
-6 -
2016 2017 2018e 2019b
All other revenues Non-tax revenues
Domestic financing Amortization Taxes on international trade Taxes on goods and services
External financing Overall balance (including grants) Direct taxes
Source: Cambodian authorities. Source: Cambodian authorities.
Note: e = estimates and b = budget. Note: e = estimates and b = budget.
21 CAMBODIA ECONOMIC UPDATE | MAY 2019
Recent Economic Developments and Outlook
The 2019 budget boosts the subnational TABLE 1: Rising subnational budget in 2019
administration budget by 30 percent
Sub-national
The allocated budget for the subnational budget (in 2018 2019 Change
administration increases by 30 percent in the millions of budget budget (%)
2019 budget, up from a mere 5 percent increase riels)
in the 2018 budget, of which the municipal and
provincial administration budget experiences the Total 1,684,674 2,199,636 30.6%
largest increase, at 39.3 percent. The city and district Municipal
administration budget increases by 24 percent, while and provincial 1,060,233 1,476,946 39.3%
the Commune and Sangkat budget expands by 20 administration
percent (table 1). o/w transfer
The 2019 budget sets the (external) borrowing from the central 148,814 83,808 -43.7%
ceiling at SDR1.4 billion, which is SDR114 administration
million lower than the borrowing ceiling allowed City and district
under the 2018 budget. The 2018 budget’s (external) 160,400 198,890 24.0%
administration
borrowing ceiling was initially set at SDR1 billion
o/w transfer
but it was amended in the 2019 budget to increase
from the central 155,015 192,060 23.9%
by SDR514 million, effectively bringing the total
administration
borrowing ceiling for the 2018 budget to SDR 1.514
billion. Commune
and Sangkat 434,041 523,800 20.7%
Outlook administration
With better-than-expected export o/w transfer
performance, the growth outlook has been from the central 434,041 523,800 20.7%
revised up, compared to earlier projections administration
The growth outlook has been revised up for the Source: 2018 and 2019 Budget Laws, Cambodian Authorities.
short term, compared to the previous projections
made in October 2018 (table 2). This is due to better-
FIGURE 25: Budgeted expenditures for the 2019
than-expected export performance, expansion of
budget (percent of GDP)
consumption and construction. Yet, as exports
moderate in line with deceleration in global demand
(see box 1 for the global and regional economic 25.0
outlook and risks), real growth is projected to ease
to 7 percent in 2019, while remaining near 7 percent 20.0 6.8 8.2 7.6
7.3
in the short term. After experiencing accelerated
15.0
growth of 7.5 percent in 2018, the economy is
7.9 7.1 8.2
expected to return to its long-term potential of 10.0 7.3
about 7 percent. The robust economic growth is
expected to result in continued poverty reduction. 5.0 8.6
7.2 7.9 7.6
The longer-term outlook, however, depends on the
country’s ability to productively absorb FDI inflows, -
2016 2017 2018e 2019b
while promoting domestic investment. There is
potential to maintain growth at a healthy pace in the
years ahead, but addressing structural bottlenecks is Capital expenditure Wages and compensation
a must. Expenditure on goods and services
Source: Cambodian authorities.
Note: e = estimates and b = budget.
CAMBODIA ECONOMIC UPDATE | MAY 2019 22
Recent Economic Developments and Outlook
Risks TABLE 2: Improved macro outlook in the short and
medium term, compared to earlier projections
Main risks include the concentrated FDI
inflows, originating mainly from China and Percent of GDP unless
2019 2020 2021
financing a few sectors, and the potential specified otherwise
temporary withdrawal of EBA. In addition, October 2018 projections 6.8 6.8 -
weather shocks are a risk to agricultural production.
The authorities’ efforts to promote the use of local GDP growth (%) 7.0 6.9 6.8
currency is undermined by rising foreign currency
Domestic demand 9.8 8.9 10.5
deposits.
(% change y/y)
Cambodia is increasingly dependent on
Inflation 3.3 3.0 3.1
China to sustain FDI and tourism flows
(% change, average)
Chinese FDI inflows account for a large
Overall fiscal balance -3.8 -3.2 -2.7
proportion of the recent surge in the inflows
(figure 26). A slowdown or reversal of FDI inflows, Government debt 30.0 30.1 31.1
especially Chinese FDI, will significantly impact
private investment and growth. As FDI inflows are Export growth (% change) 9.0 8.6 8.1
coming largely from China, risks are associated with Import growth (% change) 7.6 7.1 6.8
an abrupt slowdown in Chinese FDI. In addition,
spillovers from a large economy, such as China, can Current account -9.5 -9.1 -9.2
occur both through trade and financial channels. FDI 10.4 9.3 9.2
The channels, namely FDI and tourism through
which growth spillovers from large economies, such Gross international 6.6 6.2 6.0
as China, can affect Cambodia growth rate. reserves (months of imports)
Cambodia has been able to sustain tourist Source: World Bank/IMF DSA and World Bank staff estimates and
projections.
arrival growth, thanks to rising Chinese visitors. Note: Government debt is projected to edge up slightly due to rising
Without the contribution of Chinese tourists, borrowing ceiling.
FIGURE 26: Chinese FDI have recently increased FIGURE 27: Tourists arrival from China has
Approved FDI continued to increase
(y/y, percent change) Tourist arrivals (y/y, percent change)
600
500 60
400 50
40
300
30
200 20
100 10
0
0
-10
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
-100
2014 2015 2016 2017 2018
Total FDI Y/Y % change Total tourist arrivals
Total FDI (excl. China), Y/Y % change Total arrivals excluding Chinese tourists
Source: Cambodian authorities. Source: Cambodian authorities.
23 CAMBODIA ECONOMIC UPDATE | MAY 2019
Recent Economic Developments and Outlook
Box 1
Global and Regional Economic Outlook and Risks1
Global growth is expected to stabilize in 2020-21 recovering 21, reflecting weaker global growth and remaining high
from a temporary dip in 2016. The global economic growth global policy uncertainty. Global financing conditions
rate is projected to slow to 2.6 percent in 2019, reflecting are expected to remain volatile, even if generally more
a broad-based weakness in advanced economies and major supportive. This reflects a more accommodative monetary
Emerging Market and Developing Economies (EMDEs) at policy stance adopted by the major central banks in the
the start of the year, before stabilizing at 2.8 percent on near term due to the deteriorating global growth prospects.
average during 2020-21. Growth in advanced economies Despite the recent recovery of EMDE markets from the
is projected to moderate from 2.1 percent in 2018 to 1.7 2018 correction episode, there is still a considerable risk
percent on average during 2019–21 toward its potential rate, of “monetary shocks” associated with the global policy
as capacity constraints become more apparent and labor uncertainty. Financial market volatility will continue to have
markets tighten. Growth in EMDEs is projected to slow the strongest impact on countries with high vulnerabilities,
to 4.0 percent in 2019 before recovering to 4.5 percent on weak growth prospects, and elevated policy uncertainty. Oil
average during 2020-21 assuming the recovery in a few large prices are expected to average US$64/barrel (bbl) in 2019
economies (for example, Argentina, the Islamic Republic of and US$65/bbl in 2020, with high uncertainty around the
Iran, Turkey) (figure B1.1).2 outlook. Despite weaker demand prospects, metals prices
Global economic conditions are expected to remain are anticipated to stabilize in 2019 and 2020 due to modest
challenging over the forecasted period. Barring a renewed supply growth and low inventory levels. Agricultural prices
escalation of trade tensions, global trade growth is projected are expected to remain broadly flat over the next two years
to moderate towards 3.3 percent on average during 2019- (figure B1.2).
FIGURE B2.1: Real GDP FIGURE B2.2: World commodity price forecast FIGURE B2.3: Regional growth
growth (percent) (Index=nominal U.S. dollars, 2010=100)
8 8
6 110
4 6
2
60 4
0
-2 2
-4 10 0
2007-08
2009
2010
2011-17
2018e
2019-20f
2021f
Mongolia
Cambodia
Lao PDR
Vietnam
Myanmar
China
Malaysia
Thailand
1980
1985
1990
1995
2000
2005
2010
2015
2020
World Advanced economies
Energy Metals Agriculture
Emerging and developing economies 2018 2019
Source: Global Development Finance, January 2019 (forthcoming).
After moderating from 6.3 percent in 2018 to 6.0 percent especially in China, Thailand, and Vietnam; demographic
in 2019, EAP growth is projected to remain around this developments are projected to be broadly neutral for growth
rate during 2020-21. The outlook is predicated on a gradual in the rest of the region (figure B1.3).
moderation in global growth and more rapid deceleration
in global trade, alongside broadly stable commodity prices Risks continue to be on the downside. There is considerable
and supportive global financing conditions, especially in uncertainty around the outlook for the global economy
the near term. The baseline also assumes that there will and the balance of risks remains firmly on the downside.
be a constructive resolution of trade disputes between Although unlikely in the near term, the simultaneous
China and the United States, and that Chinese authorities occurrence of a sharper-than-expected slowdown in China,
successfully calibrate their policy response to any headwinds Euro Area, and the United States could trigger a significant
to activity. Growth in China is projected to slow to 6.2 downturn in global activity. The re-escalation of trade
percent in both 2019 and 2020 and to moderate further to tensions could be highly disruptive to global activity amid
6.0 percent in 2021 amid continued domestic and external the presence of complex value chains. The risk of severe and
rebalancing. Growth in the rest of the region is projected broad-based financial stress adversely affecting the outlook
to remain broadly unchanged at around 5.2 percent a year for EMDEs remains high amid elevated debt levels in many
during 2019-21. Resilient domestic demand is expected to countries. Policy uncertainty and geopolitical risks remain
offset the negative impact of slowing exports. While growth high and could negatively impact confidence and investment
in the region is projected to remain robust in the near term, in both affected countries and globally. Policy uncertainty is
underlying potential growth—which has fallen considerably particularly elevated in a number of European countries—
over the past decade, in large part reflecting slowing potential including in the United Kingdom as it transitions out of the
growth in China—is likely to decline further over the long European Union, and in Italy where fiscal slippages have led
term, largely owing to deteriorating demographic trends, to a market reassessment of country risk.
1
Prepared by Ekaterine T. Vashakmadze, Senior Country Economist, World Bank.
2
These are working assumptions, published in the World Bank’s January 2019 Global Economic Prospects.
CAMBODIA ECONOMIC UPDATE | MAY 2019 24
Recent Economic Developments and Outlook
total arrivals would have declined in 2018 (figure year starting from January 18, 2019, €150 per ton in
27). As discussed above, arrivals from China are the second year, and €125 per ton in the third year.27
number one, accounting for 32.6 percent, or 2.03
Garment exports account for roughly 80
million visitor arrivals. Any interruption of Chinese
percent of Cambodia’s total exports to the
tourist inflows, for example by a sharp slowdown
EU market. It is therefore crucial to estimate the
of the Chinese economy, will significantly impact
impact of EBA suspension on Cambodia’s garment
Cambodia’s tourism sector and growth.
exports. As presented in table 4, main categories
Heightened trade uncertainty has of Cambodian-made garments are subject to 12
intensified the risks percent tariff, except harmonized system (HS) code
6104 products which are subject to a tariff of 6.5-8
As discussed above, effective January 18, 2019,
percent.
the EU reinstated the normal customs duties of
€ 175 per ton in year one, progressively reducing it Analyzing price elasticity of garment
to €150 per ton in year two and € 125 per ton in year (footwear, milled rice, and bicycle)
three.25 In addition, in February, the EU started the exports helps quantify the impact of EBA
process that could lead to the temporary suspension suspension
of Cambodia’s preferential access under the EBA
The EU’s tariffs, if EBA is suspended, will
scheme.26 According to the EU, EBA preferences can
increase the prices of Cambodia’s products
be removed, if beneficiary countries fail to respect
exported to the EU market. Therefore, the size
core human rights and labor rights. The process
of the price elasticity is important from a policy
(starting February 2019) includes a six-month period
perspective. If, for example, the export demand
of intensive monitoring and engagement with the
for this product is price elastic (that is if the price
Cambodian authorities, followed by another three-
month period for the EU to produce a report based TABLE 3: Cambodia’s main exports and EU tariff
on the findings. After a total of twelve months rates
(February 2020), the European Commission will
conclude the procedure with a final decision on Harmo- Main Share Value* Tariff/
whether or not to withdraw tariff preferences. The nized exported (%) (US$ safe-
Commission will decide the scope and duration of system products million) guard
the withdrawal. Any withdrawal would come into code
effect after a further six-month period (August (HS)
2020). 61+62 Garment 77.6 4,206.3 12%
A summary of the EU’s tariffs, if EBA were 64 Footwear 13.1 729.2 16%
suspended, on Cambodia’s key products 87 Bicycle 6.1 331.7 10%
exported to the EU market is presented
10 Milled 3.2 169.6 Beginning
under the tariff/safeguard column in table 3.
rice with
Cambodia’s main products exported to the EU
€175/ton
market include garments, footwear, bicycles and
milled rice. Overall, the EU’s tariffs on garments, Note: * estimated figures for 2018 as only first 11 months of 2018 data
available..
footwear, and bicycle products are 12 percent, 16
Source: UN Comtrade website https://comtrade.un.org/ and
percent and 10 percent, respectively. The EU has Schedule of customs duties, Official Journal of the European
already imposed safeguards on Cambodia’s milled Union (see https://eur-lex.europa.eu/legal-content/EN/TXT/
PDF/?uri=OJ:L:2017:282:FULL&from=EN)
rice —€175 (or about US$200) per ton in the first
25
Press release, European Commission, January 19, 2019.
26
The EBA scheme was adopted by resolution of the EU Council No. 416/2001 dated 28 February 2001. It is an EU initiative to allow the importation of all kinds of
goods from least developed countries except arms into EU countries both duty free and quota free. EBA is part of EU generalized system of preferences which entered
into force on 5 March 2001 with no time limit. Cambodia is among 48 least developed countries that enjoy this preferential treatment.
https://trade.ec.europa.eu/doclib/press/index.cfm?id=1981&title=Cambodia-EU-launches-procedure-to-temporarily-suspend-trade-preferences
27
According to the EC’s decision, as of 18 January the European Union reinstated the normal customs duty on this product of €175 per ton in year one, progressively
reducing it to €150 per ton in year two, and €125 per ton in year three. See http://trade.ec.europa.eu/doclib/press/index.cfm?id=1970
25 CAMBODIA ECONOMIC UPDATE | MAY 2019
Recent Economic Developments and Outlook
elasticity is greater than 1), then any increase in (reported in Annex 1), the estimated decline of
the price of the product resulting from EBA Cambodia’s garment product exported to the
suspension, all other things remaining unchanged EU market ranges from 8.7 percent (columns
(for example, there is no corresponding increase 5 of table 5) to 10.4 percent (column 6), if EBA
in the price of the commodity by other exporting is suspended and importers pass all tariffs on the
countries), will lead to a substantial reduction in the garment products to EU consumers. In volume
quantity exported and have negative implication for terms, using Cambodia’s garment export volume in
the garment industry in Cambodia. Alternatively, if 2018, the estimated decline ranges from 0.02 million
the export demand for Cambodian products is price (column 8) to 0.03 million metric tons (column
inelastic (i.e. if it is less than one), then there may be 9). In value terms, the estimated garment exports
less concern about EBA suspension with regard to decline is between US$320.0 million (column 11)
its impact on Cambodia’s garment exports. and US$381.4 million (column 12).
If EBA is suspended, estimated maximum Estimated decline of footwear exports to
decline of garment exports to the EU the EU market is 25.2 percent
market is 10.4 percent
Similarly, the estimated decline of footwear
Applying elasticities found in the existing studies export is 25.2 percent (column 6). Cambodia’s
TABLE 4: Cambodia’s main garment product export categories and the EU’s tariff rates
duties rate
customs
% Share
million,
(in US$
2018*)
(2017)
Value
EU
HS code Main garment products
6110 Jerseys, pullovers, cardigans, etc. 20.7 837.4 12%
knitted or crocheted
6104 Women's suits, dresses, skirts etc. & 15.6 642.5 6.5-8%
short, knit/crocheted
6109 T-shirts, singlets and other vests, 9.9 414.9 12%
knitted or crocheted
6204 Women's suits, jackets, dresses skirts 12.1 536.5 12%
etc. & shorts
6203 Men's suits, jackets, trousers etc. & 7.7 315.3 12%
shorts
6205 Men's shirts 2.2 84.8 12%
6108 Women's slips, panties, pyjamas, 3.2 134.5 12%
bathrobes etc., knitted/crocheted
6102 Women's overcoat, cape, etc., knitted/ 2.7 102.8 12%
crocheted, o/t of hd 61.04
6112 Track suits, ski suits and swimwear, 2.8 120.6 12%
knitted or crocheted
6103 Men's suits, jackets, trousers etc. & 3.2 146.2 12%
shorts, knitted/crocheted
Total (top 10 garments products) 80.2 3335.4
Source: UN Camtrade website, https://comtrade.un.org/ and schedule of customs duties, Official Journal of the European Union (see https://eur-lex.
europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:L:2017:282:FULL&from=EN).
Note: * estimated figures for 2018 as only first 11 months of 2018 data available.
CAMBODIA ECONOMIC UPDATE | MAY 2019 26
Recent Economic Developments and Outlook
footwear export volume and value are the estimated February 2019.28 The actual decline, therefore, falls
to decline by 0.01 million metric tons (column 9) within the estimated range of decline. In volume
and US$128.5 million (column 12), respectively. terms, using Cambodia’s milled rice export volume
Therefore, estimated decline of Cambodia’s in 2018, the estimated decline ranges from 0.10
garment and footwear export combined, if EBA million (column 8) to 0.21 million metric tons
is suspended is US$510 million, or 5.4 percent of (column 9). In value terms, the estimated milled rice
Cambodia’s total garment and footwear exports. export decline is between US$65.1 million (column
Last year, Cambodia exported US$9.5 billion of 11) and US$144.1 million (column 12). For bicycle
garment and footwear products. The EU market products, the elasticity is not found in any studies.
share accounts for 33 percent. Therefore, estimated decline is not discussed there.
With the imposition of EU safeguards, the Cutting production and export costs
estimated decline of Cambodia’s milled rice could help mitigate the impact of EBA
exported to the EU market ranges from 36.6 suspension
percent (column 5) to 81.2 percent (column 6).
Measures to improve competitiveness will
As discussed earlier, the actual milled rice export
decline was 57.8 percent month-on-month in mitigate the potential negative impacts of EBA
TABLE 5: Estimated decline in exports to the EU market, if EBA is suspended
Elasticities Estimated Volume (in millions Value (in US$ million)
of demand declines in of metric tons)1
(from existing quantity
studies) 3
demanded (%)
1 2 3 4 5=2x3 6=2x4 7 8=5x7 9=6x7 10 11=5x10 12=6x10
(2018)
Impact
Exports
Estimated
min decline
Estimated
(2018)
of EBA
suspension on
rate (%)2
max decline
Exports
Estimated
min decline
Estimated
Min
Max
Min
Max
max decline
EU tariff
Garment 12.0 -0.73 -0.87 -8.76 -10.44 0.27 -0.02 -0.03 3,653.4 -320.0 -381.4
Footwear 16.0 -1.58 -25.28 0.04 -0.01 508.1 -128.5
Milled 26.2 -1.40 -3.10 -36.68 -81.22 0.26 -0.10 -0.21 177.5 -65.1 -144.1
rice
Subtotal 4,339.0 -513.6 -654.0
Bicycle4 10.0 1.52 331.07
Total 4,670.1
Source: Authors’ estimates using the data from the authorities, EU’s schedule of custom duties, and the elasticities reported in Annex 1.
Note:
1
Garment, footwear, and milled rice exports are in millions of metric tons, while bicycles are in million units.
2
For Cambodia’s milled rice exports, it represents EU safeguard.
3
See annex 1 for elasticities reported by different studies.
4
For bicycle, elasticity is not found in any studies.
28
Cambodian premium rice is sold from $950 to $960 per ton while normal rice – or Indica rice – is sold at about $420 per ton see https://en.vietstock.vn/2019/02/
kingdom-sees-minimal-change-in-rice-exports-between-2016-2018-41-348482.htm.
27 CAMBODIA ECONOMIC UPDATE | MAY 2019
Recent Economic Developments and Outlook
Box 2
Measures to facilitate trade and lower the cost of doing business introduced
in March 2019
During the Public-Private Sector Forum on March 29, 2019, • Electricity cost reduction will be discussed to respond
a range of measures to facilitate trade and reduce the cost to the growing short- and medium-term needs in the
of doing business were announced by the authorities. The country.
measures are:
• The government announced policies to support small
• Withdrew the inspection role of the Cambodia Import- and medium-sized enterprises (SMEs), which include
Export and Fraud Repression Directorate General establishment of an SME bank with initial capital of
(Camcontrol) at the international gateways, which US$100million, entrepreneurship funds with a budget
include border crossings such as checkpoints, seaports, of US$5 million a year, and SME tax incentives for
special economic zones, and other export and import six priority sectors, related to agro-industry and food
inspection zones in Cambodia. production and processing.
• Abolished the (state-owned) Kampuchea Shipping • Trade facilitation measures under customs include a
Agency and Brokers (Kamsab). Prakas on customs automated and transparent receipted
fees and charges. Effective April 1, 2019, container
• Ceased issuing Certificates of Origin (CO) for the scan fees are reduced by 50 percent, declining to US$10
export of goods unless importing countries need from US$20 for 20-foot containers, and to US$16 from
one (Inter-ministerial Prakas No. 1627 between the US$32 for 40 foot containers, and implementation of
Ministry of Economy and Finance and the Ministry of risk-based container scanning.
Commerce).
• Measures under tax administration include online VAT
• Reduced logistics costs including loading costs and refunds and VAT credits, a tax audit review period
services fees at both the Phnom Penh and Sihanouk going back three years (instead of 10 years), while
Ville Autonomous ports. Those fees include the the late tax payment penalty has been reduced to 1.5
Terminal Handling Charge (THC) which was reduced percent a month from 2 percent a month.
by US$5/twenty-foot equivalent unit (TEU); and the
Container Imbalance Charge (CIC) which was reduced • Reduced the number of observed holidays by seven
by US$20 (to US$100 from US$120) for 20-foot days, starting 2020. Now, there are from 28 to 30
containers, and US$40 (to US$200 from US$240) for official holidays a year. This is estimated to result in a
40 foot containers. The Ocean Freight Charge (OFC) 0.5 percent gain in economic growth.
was reduced by 50 percent (SITC Logistics Cambodia • Consolidated factory inspections (by various agencies)
agreed). The Emergency Bunker Charge (EBC) was into one team and once a year.
eliminated. It was US$15, US$30, and US$30 for 20-,
30-, and 40- foot containers, respectively. Lift-on/lift- • Accelerated the amendment to the Law on Investment
off (LoLo) fees at Sihanoukville port were reduced and the finalization of the draft Law on Special
by 10 percent, while bonus was reduced to US$5/ Economic Zones, expected to be ready in the first half
box down from US$7.5/box with shifting is now free of 2019. In principle, incentives are to be moved from
of charge. Phnom Penh port is considering reducing the Law on Investment to the Budget Law.
the Stevedoring Charge, the Gate Fee, the Export
Container fee, and the LO-LO scan fee. • Projected the E-commerce law will be finalized by mid-
2019.
Source: 18th Public- Private Sector Forum, March 29, 2019.
CAMBODIA ECONOMIC UPDATE | MAY 2019 28
Recent Economic Developments and Outlook
suspension. It is a priority to embark on structural is essential, while addressing the human
reforms, especially those that can help improve capital deficiency must start now to underpin
investment climate, and reduce costs of doing Cambodia’s long-term aspirations. Focusing
business, including by introducing competitive on the role of early childhood health and nutrition
energy prices and lower logistic costs. See box 2 is a priority. See the detailed discussion on
for recent measures to facilitate trade and lower the Cambodia’s skills gaps and human capital deficiency
cost of doing business recently introduced by the in the selected issue section entitled “Investing in
authorities. Foreign investors confirm that low labor Cambodia’s Future: Early Childhood Health and
costs, high tax incentives and preferential access Nutrition” in the selected issue section below.
to key export markets are the reasons for their Lowering macroeconomic vulnerabilities
investment in Cambodia. With wages rising rapidly is critical
and Cambodia facing the potential suspension of the
EBA, the country’s attractiveness is likely to erode. Considering further macroprudential measures
The current cost of doing business in Cambodia such as bank limits in terms of exposure
to construction and real estate to lower the
does not encourage enough domestic investment
banking sector’s vulnerabilities to construction
and entrepreneurship. Cambodia ranks 185th out
boom. Given prolonged expansion of domestic
of 190 economies globally on ease of starting a credit growth, which has been largely behind the
business. Trade costs weigh heavily on Cambodia’s construction and real estate boom, and strengthening
export structure and exporting firms’ performance. oversight capacity and crisis preparedness in the
The contribution of transport and logistics to the financial sector, is the way forward. The recent
total exported value added from Cambodia reached surge in FDI inflows may have helped sustain the
14 percent, double the contribution of these construction boom further, while masking the
sectors in Thailand and 3.5 times that in Malaysia financial sector’s vulnerability after years of rapid
or Vietnam.29 The current quality and intensity of lending growth. However, it is unlikely that such
supply chain linkages between FDI and Cambodian large FDI inflows currently biased toward the
firms is low. In the short- to medium-term, given construction sector will be sustained, given that
its large FDI stock, the long-standing policy goal underpinning FDI inflows requires improvements
to facilitate backward linkages for local firms— in external competitiveness which may only be
to improve productivity and capture knowledge achieved in the longer term. A significant slowdown
spillovers—needs to be implemented earnestly.
in FDI inflows may then unmask the banking
Also in the short term, filling the skills gaps sector’s exposure and vulnerabilities.
29
See box 1 — Cambodia Investment Climate Review — lessons for future competitiveness, October 2018 Cambodia Economic Update for more details.
29 CAMBODIA ECONOMIC UPDATE | MAY 2019
Recent Economic Developments and Outlook
CAMBODIA ECONOMIC UPDATE | MAY 2019 30
SECTION 2
SELECTED ISSUE: Early
Childhood Health and Nutrition:
A Smart Start for Cambodia’s
Economic Growth and Prosperity
SELECTED ISSUE: Investing in Cambodia’s Future: Early Childhood Health and Nutrition
SELECTED ISSUE:
Investing in Cambodia’s Future: Early Childhood
Health and Nutrition30
1. Introduction wealth (estimated at $1,143 trillion in 2014). Produced
capital (buildings, machinery, and infrastructure) and
A child born today in Cambodia will enter the labor natural capital (agricultural land, forests, protected
market around 2040, perfectly aligned to accompany areas, minerals, oil, coal, gas reserves) have long been
Cambodia on the ambitious goal of reaching high-
income country status. The time is right to ask the it is only recently that global wealth accounting
questions: will she be prepared for the economy has included human capital, or the sum total of a
of the future? Will improvements in education be population’s skills, health, knowledge, and resilience,
enough to stimulate this readiness? And, if not, what as an explicit contributor to the overall assets and
other changes are essential to enhance the quality economic health of a country.31
of the labor force and favorably bend Cambodia’s
Improving the quality of Cambodia’s human
economic development curve? Grounded in the
capital is at the core of the country’s aspirations
wide body of evidence on the early foundations of
to reach upper middle-income country status by
education and skills formation, this report aims to
2030 and high-income country status by 2050.32
answer these questions by: (i) summarizing what is
Human capital wealth increases in importance as
known about Cambodia’s human capital acquisition
countries climb the income ladder: whereas human
and economic progress, focusing on the role of
capital wealth accounted for 51 percent of total
early childhood health and nutrition; and (ii) drawing
wealth in lower-middle-income countries, this share
rose to 70 percent among high-income OECD
key challenges and opportunities to improve early
countries.31 The ability of the labor force to interact
childhood nutrition and maximize the readiness
with and transform natural and produced capital
of Cambodia’s future labor force to advance the
is necessary to increase economic output, and
country’s development aspirations.
therefore Cambodia’s ability to achieve upper-
2. Human Capital and Its middle income status.
Contributions to Cambodia’s However, Cambodia trails regional and
Economic Development economic comparators in human capital wealth
acquisition (table S1). Cambodia has made
Growing evidence highlights the investments in
people are needed to drive economic progress mid-1990s. However, at 43.3 percent of total per
and sustainable development. While building capita wealth, Cambodia’s human capital wealth
human capital has many intrinsic and private is well below the average for low middle-income
countries (50.6 percent) and the East Asia and
of economies. Recent estimates indicate that human
capital accounts for over two thirds of total global
30
Thi note was prepared by Anne Marie Provo and Somil Nagpal
31
Lange GM, Wodon Q, Carey K, eds. 2018. The Changing Wealth of Nations 2018: Building a Sustainable Future. Washington, DC: World Bank. Note: Human capital wealth estimated
as the present value of future earnings for the labor force.
32 See Fourth Rectangular Strategy, Royal Government of Cambodia, September 2018, p. 44.
33 CAMBODIA ECONOMIC UPDATE | MAY 2019
SELECTED ISSUE: Investing in Cambodia’s Future: Early Childhood Health and Nutrition
The World Bank introduced the Human Cambodia performs slightly better than
Capital Index (HCI) in October 2018 as a expected for a lower middle-income country on
metric designed to forecast a country’s human
capital (Box S1). The HCI captures the impact of to attain human capital levels of regional and
investments in children today on future productivity economic comparators. Overall, Cambodia ranks
and long-term economic growth. The HCI provides 100th out of 157 countries on the HCI, far behind
countries with a mechanism for understanding the countries such as Vietnam and Thailand but ahead
quantity and quality of their human capital, helping of neighboring Lao PDR (table S2).
them to determine priorities for developing these
Cambodia performs well on child and adult
assets.
survival and test scores
Cambodia’s HCI score demonstrates gaps in but underperforms relative to
health, early childhood nutrition, education, other countries in the region and lower middle-
and skills which constrain the productivity of income group with respect to school attainment
the future labor force. Cambodia has an overall and childhood stunting (panel
HCI value of 0.49, meaning that—based upon One-third of Cambodia’s future labor
the status of health and education outcomes—a force experiences childhood stunting, a sign of poor
child born today will be 49 percent as productive nutrition, care, and health in early life; high stunting
when she grows up as she could be if she enjoyed is a sign of children growing up in an inadequate
complete education, good health, and a well- environment.34 Quality in education is a concern,
nourished childhood.33 and when years of schooling are adjusted for quality
of learning, learning gap is 2.7 years.
TABLE S1: Human capital wealth per capita as TABLE S2: Human Capital Index score and rank,
a share of total wealth per capita, Cambodia and Cambodia and regional and economic comparators
comparator countries
Country Total Human Human
Wealth Capital Capital as Country HCI Score HCI Rank
Share of
Total (%) Vietnam 0.67 47th
Bangladesh 12714 7170 56.4
Thailand 0.60 65th
Cambodia 16933 7337 43.3
Philippines 0.55 84th
Guatemala 43140 25450 59.0
Nicaragua 0.53 92nd
Lower middle- 25,948 13117 50.6
income
Cambodia 0.49 100th
140,042 84334 60.2
Bangladesh 0.48 106th
Nicaragua 37084 16698 45.0
Philippines 30823 17790 57.7 Guatemala 0.46 109th
Vietnam 27368 13740 50.2 Lao PDR 0.45 111th
Source: Lange et al. 2018. Note: Estimates are in 2014 U.S. dollars per Source: World Bank, 2018.
capita at market exchange rates.
33
World Bank. 2018. Human Capital Index: Cambodia Country Brief. Available online: https://databank.worldbank.org/data/download/hci/HCI_ 2pager_KHM.pdf.
34
population and dividing by the SD of the standard population (4). In a healthy population, ~2.5% of all children have a HAZ <–2SD. A higher percentage <–2SD is
Perspective: what does stunting really mean? A critical review of the evidence. Adv Nutr. 2019;10:196–204; doi: https://doi.org/10.1093/advances/nmy101.
CAMBODIA ECONOMIC UPDATE | MAY 2019 34
SELECTED ISSUE: Investing in Cambodia’s Future: Early Childhood Health and Nutrition
Box S1
The Human Capital Index
The Human Capital Index (HCI) is a component children in some countries learn far less than
of the World Bank’s Human Capital Project and those in other countries, despite being in school
a metric of countries’ investments in the human for a similar amount of time.
capital of the next generation. The HCI aims to
forecast the joint effects of health and education on 3. Health. This component uses two indicators for
future productivity, defined as the human capital a a country’s overall health environment: (1) the
child born today can expect to attain by the end of rate of stunting of children under age 5; and (2)
secondary school given the risks of poor health and the adult survival rate, defined as the proportion
education that exist at the time of the child’s birth. of 15-year-olds who will survive until age 60. The
The HCI is built upon three main ingredients: first indicator reflects the health environment
experienced during prenatal, infant, and early
1. Survival. This component reflects the fact that childhood development. The second reflects
children born today need to survive until the the range of health outcomes that a child born
process of human capital accumulation through today may experience as an adult.
formal education can begin. Survival is measured
using the under-5 mortality rate. The resulting index ranges between 0 and 1. A
country in which a child born today can expect
2. Expected years of learning-adjusted school. to achieve both full health (no stunting and 100
Information on the quantity of education a child percent adult survival) and full education potential
can expect to obtain by age 18 is combined with (14 years of high-quality school by age 18) will score
a measure of quality: how much children learn in a value of 1 on the index. Therefore, a score of 0.70
school based on countries’ relative performance signals that the productivity as a future worker for
on international student achievement tests. a child born today is 30 percent below what could
This combination produces the expected years have been achieved with complete education and
of learning-adjusted school. By adjusting for full health.
quality, this component reflects the reality that
SURVIVAL SCHOOL HEALTH HCI
Children who Contribution of Contribution of Productivity of
don’t survive X quality-adjusted health (average
X of = a future worker
don’t grow up to years of school adult survival (relative to
become future to productivity of rate and benchmark of
workers future workers stunting) to complete
productivity of education and
future workers full health)
Source: “World Bank. 2018. The Human Capital Project. World Bank, Washington, DC..
https://openknowledge.worldbank.org/handle/10986/30498
35 CAMBODIA ECONOMIC UPDATE | MAY 2019
SELECTED ISSUE: Investing in Cambodia’s Future: Early Childhood Health and Nutrition
Promoting educational attainment and care, and repeated infections are associated with
improving the quality of education are key poor child growth, or linear growth faltering. The
priorities for promoting human capital growth evidence is well-established that stunting—a marker
and ensuring the future employability of the of undernutrition and measure of the severity of
Cambodian labor force. Cambodia’s employers linear growth faltering—are associated with lower
are affected more by inadequately skilled labor than cognition and motor development in early childhood
neighboring countries and returns to primary and and later life learning, health, and ultimately, adult
earnings potential.35
Access to primary education has improved, with a
From an early age, the dimensions of human
net enrollment rate of 93 percent and completion
capital complement each other. Adversities,
of 79 percent (2017-2018). However, the quality
when experienced, accumulate from pre-conception
is inadequate, as demonstrated by poor learning
and continue throughout prenatal and early life.
outcomes. According to the 2018 International
These adversities can disrupt brain development,
Student Assessment for Development, PISA-D,
health, and early learning; developmental delays
Cambodia has a high proportion of students
who performed below the baseline in all the three
childhood, and continue throughout life.36 On the
domains—92 percent in reading, 90 percent in
other hand proper nutrition in utero and in early
mathematics and 95 percent in science. Access
childhood improves children’s physical and mental
to secondary school remains a challenge; in 2017-
well-being. Evidence from a multi-country study in
2018 gross enrollment for lower secondary was
Southeast Asia found that both underweight and
only 56.8 percent and drop-out rates were still high
obese children had lower IQ scores than healthy-
at 15.4 percent. A well-educated and highly skilled
weight children.37 Early abilities make it easier to
population is needed to drive innovation and income
generation, and subsequently economic growth and
motivation to learn more.
poverty reduction in the ‘knowledge economy’.
Smart investments in the nutrition, physical,
However, the foundations human capital,
cognitive, social, and emotional development
education, and skills development are set long
of children -- starting before birth until they
transition to primary school – are critical to
days between conception and a child’s second
set in motion human capital formation. Early
birthday are critical period of physical and
cognitive development. Poor nutrition, inadequate
and likelihood of success of later investments
FIGURE S1: Cambodia’s employers are affected FIGURE S2: Low rate of return to education
more by inadequately skilled labor force than other
countries All
25 23
1
20 18
16
8
16
14
Percent
15
11
Percent
10
6
10
10 8
4
5
2
0
6)
Ph mar 5)
ne 16)
sia 5)
Ba ia & 5)
c
)
La ia ( )
)
13
11
PD 016
cifi
0
01
01
1
1
20
20
20
20
0
Pa
(2
(2
2
(2
Years of schooling
s(
(
Sr sh (
(
R
m
Ca ka
d
na
e
an
e
bo
pi
lad
-2
n
n
et
As
iL
do
ya
ilip
m
o
Vi
ng
M
In
st
Ea
1 3 6 9 12 College+
Source: Enterprise Survey, 2016. Note: Percent of employers reporting Source: World Bank. 2019. Future jobs in Cambodia. Note: Percent returns
inadequately educated workforce as a barrier to firm operation. to wages by year of schooling..
35
Sudfeld CR, Charles-McCoy D, Danaei G, et al.. 2015. Linear growth and child development in low- and middle-income countries: a meta-analysis. Pediatrics;135:e1266.
36
Black MM, Walker SP, Fernald LC, et al. 2017. Early childhood development coming of age: science through the life course. Lancet; 389: 77–90.
37
Sandjaja BK, Poh N, Rojroonwasinkul B, et al. . 2013. Relationship between Anthropometric Indicators and Cognitive Performance in Southeast Asian School-Aged
Children.British Journal of Nutrition;110 (supplement 3): S57–S64.
CAMBODIA ECONOMIC UPDATE | MAY 2019 36
SELECTED ISSUE: Investing in Cambodia’s Future: Early Childhood Health and Nutrition
in education and skills building. On the other Millennium Development Goals for both maternal
hand, nutritional, physical, and socioemotional and child mortality.38
deprivations that emerge early in life are difficult—
Despite progress in many health areas, child
if not sometimes impossible—to remedy later in life.
undernutrition remains an impediment to
3. The State of Child Health and Cambodia’s human capital formation. Child
undernutrition—including stunting, wasting,
Nutrition in Cambodia underweight, and micronutrient deficiencies—are
Cambodia has made remarkable progress in of concern in Cambodia. Child stunting declined
health outcomes over the past three decades. from 59 percent in 1996 to 32 percent in 2014 (figure
Emerging from widespread poverty in the 1990s, S4), but is still considered ‘high’ according to global
Cambodia’s health outcomes improved rapidly and standards.39 At nearly 10 percent, child wasting (a
the country has surpassed several better-off countries form of acute malnutrition) is also considered ‘high’.40
in reductions in mortality and improvement in life Maternal undernutrition poses risks to a
expectancy (table S3). Cambodia was one of only woman’s own health and productivity and also
four Countdown to 2015 countries to achieve the impacts the nutrition of her child: undernutrition
FIGURE S3: Cambodia’s overall performance on the human capital index is about as expected as compared
to other low middle-income economies, though years of schooling, adult survival, and child stunting remain
key issues
A: Human Capital Index B: Probability of Survival to Age
5
Lower Middle Income 0.48
Lower Middle Income 0.96
East Asia & Pacific 0.61
East Asia & Pacific 0.98
Cambodia 0.49 Cambodia 0.97
Upper Middle Income 0.58 Upper Middle Income 0.98
0.0 0.2 0.4 0.6 0.8 1.0 0.0 0.5 1.0
C: Adult Survival Rate D: Harmonized Test Scores
Lower Middle Income 0.81 Lower Middle Income 391
East Asia & Pacific 0.87 East Asia & Pacific 451
Cambodia 0.83 Cambodia 452
Upper Middle Income 0.86 Upper Middle Income 428
0.0 0.2 0.4 0.6 0.8 1.0 0 100 200 300 400 500 600
E: Expected Years of Schooling F: Fraction of Children Under 5
Not Stunted
Lower Middle Income 10.4 Lower Middle Income
East Asia & Pacific 11.9 East Asia & Pacific 0.73
Cambodia 9.5 Cambodia 0.78
0.68
Upper Middle Income 11.7 Upper Middle Income
0.87
0.0 2.0 4.0 6.0 8.0 10.0 12.0 0.0 0.5 1.0
Source: The World Bank.
38
Countdown to 2015 countries include 75 countries that accounted for more than 95% of maternal, newborn, and child deaths globally in 2005. For more information see:
UNICEF and WHO. 2015. A decade of tracking progress for maternal, newborn, and child survival. The 2015 report. Geneva: World Health Organization.
39
According to the World Health Organization (WHO) public health thresholds.
40
Notably, little progress was made in reducing wasting between 2005 and 2014. The high prevalence of wasting is of particular concern given Cambodia’s relatively low
levels of absolute poverty and food insecurity.
37 CAMBODIA ECONOMIC UPDATE | MAY 2019
SELECTED ISSUE: Investing in Cambodia’s Future: Early Childhood Health and Nutrition
during pregnancy and lactation can result in TABLE S3: Human Development Indicators,
Cambodia (2000–2014)
development of the fetus. Among Cambodian Indicator 2000 2014
women of reproductive age (15–49 years), 14 percent
are underweight and nearly half (45 percent) suffer
from anemia. These high levels of undernutrition Total population 12,152,354 15,270,790
contribute to low birth weight births (11 percent),
which can signal both linear growth faltering during Total fertility rate 3.8 2.7
gestation and pre-term births. Importantly, up to 20
percent of stunting in children ages 1 to 5 years can Life expectancy 65.6 68.3
be attributed to small for gestational age births.41
83 35
Overall, Cambodian children in poor households rate (deaths per
(located in the rural areas) are more vulnerable 1,000 live births)
to undernutrition than their wealthier peers
Stunting prevalence in the poorest Infant mortality rate 80 29
wealth quintile (42 percent) is more than double that (deaths per 1,000
live births)
relatively high prevalence of maternal and child Neonatal mortality 37 18
undernutrition among the richest households is a rate (deaths per
sign that undernutrition in Cambodia is not solely 1,000 live births)
a function of poverty. Interestingly, Cambodia’s
stunting prevalence among children in the wealthiest Maternal mortality 437 170
households remains three times higher than that of ratio (deaths per
100,000 live births)
Vietnam,42 highlighting the importance of non-
income causes of undernutrition in the country. Source: CDHS 2000 and 2014.
FIGURE S4: Child (<5) undernutrition prevalence, FIGURE S5: Geographic Distribution of Stunting
Cambodia, 2000-2014 and Wasting among Children (<5)
60 50
45
50
40
40 35
Percent
30
30
Percent
25
20 20
10 15
10
0
5
2000 2005 2010 2014
0
Stunting Wasting
Stunting Underweight Wasting Severe Wasting Urban Rural Total
Source: Cambodia DHS 2014 Source: Cambodia DHS 2014
41
Christian P, Lee SE, Donahue AM, et al. 2013. Risk of childhood undernutrition related to small-for-gestational age and preterm birth in low- and middle-income
countries. International Journal of Epidemiology;42: 1340–55.
42
According to the 2011 Multiple Indicator Cluster Survey in Vietnam, stunting prevalence was 6.1 percent among children in the highest wealth quintile.
CAMBODIA ECONOMIC UPDATE | MAY 2019 38
SELECTED ISSUE: Investing in Cambodia’s Future: Early Childhood Health and Nutrition
The prevalence of stunting in Cambodia is The UNICEF framework is a well-established
similar to regional comparators, yet the country conceptual model for assessing the drivers of
needs to accelerate progress to catch up with undernutrition in a given context (Figure S8).
aspirational peers such as Malaysia, Thailand, Reducing the burden of child undernutrition in
and Vietnam (Figure S7). Notably, child stunting Cambodia will require interventions to: (a) improve
remains a widespread challenge in ASEAN the immediate drivers of undernutrition by improving
countries: in Indonesia, Philippines, Lao PDR, and nutrition intake, care, and disease; (b) prevent and
Myanmar roughly one third of children are stunted reduce undernutrition through improvements in
according to the most recent estimates. maternal health, care, and nutritional status; and (c)
simultaneously addressing underlying drivers (food
Cambodia’s burden of undernutrition carries
insecurity; poor care for women and children; low
short and long-term effects for individuals
access to health services; and poor access to water,
and society. Undernutrition was estimated as an
sanitation, and hygiene [WASH]).
underlying cause over 60 percent of Cambodia’s
child mortality in 2010. For surviving children, the A. Poor Nutrition Behaviors
consequences of early childhood undernutrition
Improving the diet of women and children is at
range from delayed cognitive development to lower
the core of achieving better nutrition outcomes
school achievement, lower adult earnings, increased
in Cambodia. The Cambodian diet is heavily rice-
health expenditures, and higher probability of adult
based, and there is little evidence that women
noncommunicable chronic diseases. Nationally, the
enhance dietary quality or quantity to accommodate
overall costs of undernutrition43 were estimated at
the needs of pregnancy.45 On the contrary, qualitative
US$ 250-400 million annually in 2010, or 1.5 - 2.5
analysis demonstrates that pregnant women often
percent of gross domestic product.44
display one or more of the following poor behaviors:
4. Drivers of Poor Child Nutrition skipping meals to avoid gaining weight and maintain
physical appearance as well as have an easy delivery;
The causes of undernutrition in Cambodia skipping meals to avoid chanh (morning sickness);
are multiple, interacting, and multisectoral. and eating excess sugar and sugary snacks.46
FIGURE S6: Undernutrition in Children Under- FIGURE S7: Stunting prevalence over time in EAP
Five by Wealth Quintile, 2014, Cambodia Countries
45 70
40 60
35
50
30
40
25
Percent
Percent
20 30
15 20
10
10
5
0
0
Lowest Second Middle Fourth Highest 1990 1995 2000 2005 2010 2015
Wealth Quintile Cambodia China Indonesia
Lao PDR Malaysia Myanmar
Lowest Second Middle Fourth Highest Philippines Thailand Vietnam
Source: Cambodia DHS 2014 Source: World Development Indicators.
43
44
Journal of Clinical Nutrition. 23(4); 524-31.
45
In fact, recent analysis indicates that based upon current levels of rice consumption, achieving requirements for fats and select B vitamins is not possible without
exceeding acceptable levels of caloric intake. For more information, see: World Food Program. 2017. Fill the Nutrient Gap: Summary Report. Rome: World Food
Program.
46
MOH, UNICEF, HKI, iDE, and Melon Rouge. 2017. The 1000 Day Feeding Journey of Infants and Young Children in Cambodia. Phnom Penh: iDE.
39 CAMBODIA ECONOMIC UPDATE | MAY 2019
SELECTED ISSUE: Investing in Cambodia’s Future: Early Childhood Health and Nutrition
Breastfeeding practices47 in Cambodia are The use of formula milk—which puts children at
high relative to comparators (panels A and B, risk of inadequate nutrient intake and disease—
figure S9) but show signs of deterioration over is rapidly expanding across ASEAN countries.
time (panels C and D, figure S9). Breastfeeding Factors associated with its increased use are include:
is a critical source of early life nutrients and decreased time for breastfeeding, particularly
has significant impacts on children’s health and as women return to work, convenience, lack of
development independent of the relationship with social support, and the status imparted by its use.49
linear growth. Children who are breastfed longer Recent studies have found widespread promotion
have lower rates of disease and death and higher of formula milk within public and private health
intelligence than do those who are breastfed for facilities despite regulation against this practice; the
shorter periods, or not breastfed, with the impacts pervasive marketing has shifted the perceptions
persisting until later in life.48 Growing evidence also and recommendations of health professionals, who
suggests that breastfeeding might protect against often promote formula milk rather than providing
overweight and diabetes later in life. quality lactation support.50
The decline in breastfeeding is most pronounced The complementary feeding period (6-24
among urban and wealthy Cambodian mothers. months of age) is particularly critical for
FIGURE S8: Conceptual framework for identifying the causes of malnutrition
Intergeneration consequences
Non-communicable Sub-optimal adult
diseases, reproductive Mortality, morbidity height, cognitive ability,
Consequences health, premature from infectious economic/work
mortality, disability, diseases, disability productivity,
social isolation reproductive outcomes
Overnutrition/unbalanced intake Maternal and child undernutrition
Immediate causes
Physical inactivity Poor dietary intake (quality and/or quantity) Disease
Sedentary Insufficient Inadequate CARE and Poor water, sanitation
Underlying causes
lifestyle and access to FEEDING practices food safety and inadequate
at household/
behaviours healthy FOODS and behaviours HEALTH services
family level
Access to natural capital (land, water, clean air), markets, education,
support networks, social protection, infrastructure and transportation, employment,
Basic causes at income, technology, information, marketing
social level
Culture and social norms; gender; fiscal and trade policies; legislation and regulations;
agriculture; food systems; urbanization; climate change; pollution;
political stability and security
Source: ASEAN, UNICEF, and WHO. 2016. Regional Report on Nutrition Security in ASEAN: Volume 2. Bangkok: UNICEF.
47
The initiation, duration, and exclusivity of infant and young child breastfeeding plays an important role in establishing the child’s early life nutritional status and preventing
infant mortality (Black et al. 2008). The WHO recommends the early initiation of breastfeeding within one hour of birth, exclusive consumption of breastmilk through
six months of age, and continued breastfeeding through 24 months.
48
Victora CG, Bahl R, Barros AJ, et al. 2016. Breastfeeding in the 21st century: epidemiology, mechanisms and lifelong effect. Lancet; 387: 475–90.
49
Pries AM, Huffman SL, Mengkheang K, et al. 2016. Pervasive promotion of breastmilk substitutes in Phnom Penh, Cambodia, and high usage by mothers for infant and
young child feeding. Maternal & Child Nutrition; 12(Suppl. 2): 38–51.
50
MOH, UNICEF, HKI, iDE, and Melon Rouge. 2017. The 1000 Day Feeding Journey of Infants and Young Children in Cambodia. Phnom Penh: iDE.
CAMBODIA ECONOMIC UPDATE | MAY 2019 40
SELECTED ISSUE: Investing in Cambodia’s Future: Early Childhood Health and Nutrition
children’s nutrition and growth. Similar to global adequate complementary feeding at 6-24 months
trends, there is a near doubling in the prevalence in addition to breastmilk. The quantity and quality
of stunting among Cambodian children around of complementary foods52 in Cambodia is poor.
the introduction of complementary foods: 16 Few infants and young children consume a diet of
percent of infants under 9–11 months are stunted appropriate minimum diversity (48 percent) and
compared with 34 percent of children age 18–23 this is low relative to peers such as Indonesia (52.6
months.51 This trend is largely attributed to: poor percent) and Vietnam (59 percent) (figure S10).
quality, quantity, and hygiene of complementary Cambodia also experiences significant disparities
foods; consumption of unsafe water; and increasing are between the dietary diversity of children in
exposure to infection and illness as children become the wealthiest households (69 percent) compared
mobile (particularly in unhygienic environments). to the poorest (33 percent).53 Importantly, a third
Improvements in complementary feeding of Cambodia’s richest young children are not fed a
practices are necessary to ensure Cambodian minimally diverse diet.
children have adequate nutrient intake.
B. Low availability and affordability of
Children need timely, safe, appropriate, and age-
nutritious foods
FIGURE S9: Breastfeeding practices in Cambodia and Comparator Countries
A: Early Initiation of Breastfeeding (within one hour B: Infants not receiving any breastmilk, by age group
of birth)
80 30
70
25
60
50 20
Percent
Percent
40 15
30
10
20
10 5
0 0
R
s
am
a
sia
sia
R
a
ar
s
d
am
ne
di
ne
PD
di
an
PD
nm
ne
bo
N
ne
pi
bo
N
pi
ail
do
ilip
m
do
et
o
ya
ilip
m
et
o
Th
La
Vi
Ca
In
La
M
Vi
Ca
In
Ph
Ph
0-1 month 2-3 months 4-5 months
C: Early initiation of breastfeeding (within one hour D: Exclusive breastfeeding (infants 0-5 months),
of birth), Cambodia, 2000-2014 Cambodia, 2000-2014
70 80
60
50 60
Percent
Percent
40
40
30
20 20
10
0 0
2000 2005 2010 2014 2000 2005 2010 2014
51
National Institute of Statistics, 2015. Cambodia Demographic and Health Survey 2014.
52
Beyond the first 6 months of age, the frequency of feeding, the diversity of diet, and nutrient composition of complementary foods has an impact on infants’ and young
children’s nutritional status and has been strongly associated with stunting. See: Bhutta et al. 2013.
53
Minimum dietary diversity represents the percentage of children age 6–23 months who receive foods from at least four food groups in the previous day. For breastfed
children, the minimum meal frequency is solid or semisolid food at least twice a day for infants 6–8 months per day least three times per day for children 9–23 months. For
non-breastfed children, the minimum meal frequency is solid or semisolid food or milk at least four times a day for children 6–23 months.
41 CAMBODIA ECONOMIC UPDATE | MAY 2019
SELECTED ISSUE: Investing in Cambodia’s Future: Early Childhood Health and Nutrition
Cambodia’s large increases in food availability twice as high as the national average ($3.62). Thus,
(e. an estimated 66 percent of households in Northeast
accompanied by only small improvements in provinces could not afford a nutritious diet.56
food access (namely geographic and economic
access to a diverse, nutrient rich diet). Severe
evidence points to a rising exposure of the
food insecurity remains a challenge only in select
Cambodian and population to food safety
areas (largely poor and remote). Most agricultural
hazards. Cambodia’s food system is ‘transitioning’,
households can meet their staple food (rice) needs
where growing food safety challenges will
but rely on income and foraging to obtain nutrient-
increasingly strain, if not overwhelm, existing
dense foods. Geographic access to markets is not a
country capacity.57 Foodborne disease is associated
widespread concern: most households can access a
with poor population health and illness, though
market within 30 minutes and these markets have,
on average, 270 foods available.
understood. Cambodia’s food safety challenges
On the other hand, the affordability of nutrient range from institutional (weak policy, prioritization,
dense foods poses a common challenge. Recent and data availability) to individual (inappropriate
estimates suggest 21 percent of households can’t and unhygienic food vendor locations; lack of
afford a nutritious diet 54 and poor agricultural knowledge on temperature control, which is
households are the most food insecure. The national especially problematic when delays between food
average daily cost of the staple-adjusted nutritious preparation; poor personal hygiene practices, either
diet55 in Ratanakiri/Mondulkiri ($6.06) is nearly due to low knowledge or lack of nearby facilities).58
C. Gaps in nutrition services delivered by
FIGURE S10: Complementary feeding practices the health sector
among children age 6-23 months, Cambodia and
comparator countries
of essential maternal and child health and nutrition
100
90
80 There are a number of high-
70 impact, evidence-based nutrition interventions
60 that—when delivered at 90 percent coverage—can
Percent
50
40
contribute to a 20 percent reduction in stunting.59
30 According to the 2014 DHS, only two-thirds (65
20 percent) of children receive all basic vaccinations
10 by age 12 months. Over one quarter of children
0
age 12-23 months are not fully vaccinated, and
sh
sia
R
s
am
ua a
ala
ilip r
a
ne
di
many of these reside in ‘high-risk communities’,
PD
nm
de
ne
m
bo
N
pi
la
te
do
ya
m
et
o
ng
La
M
Vi
Ca
In
Ph
Ba
G
Minimum dietary diversity Minimum meal frequency remotely-settled urban and rural populations, and
Minimum acceptable diet children of migrant families. Only about half (59
percent) of children receive bi-annual deworming
Source: UNICEF Infant and Young Child Feeding Indicators Database. medication and 70 percent receive bi-annual vitamin
Most recent available year by country.
A supplementation.60
54
World Food Programme. 2017. Fill the Nutrient Gap Summary Analysis, Phnom Penh, WFP.
55
The staple-adjusted nutritious diet is modeled using linear programming to identify the least expensive nutritious diet for a household including nutritionally vulnerable
people should eat, but is instead based upon identifying how the macro-/micro-nutrient needs of individuals within a household can be met at the lowest cost based upon
the foods available in local markets and small adjustments for local preferences.
56
World Food Programme. 2017.
57
World Bank. 2019. The Safe Food Imperative: Accelerating Progress in Low- and Middle-Income Countries. Washington, DC: World Bank.
58
DC: World Bank.
59
Bhutta ZA, Das JK, Rizvi A, et al. 2013. Evidence-Based Interventions for Improvement of Maternal and Child Nutrition: What Can Be Done and at What Cost? The
Lancet 382: 452–77.
60
National Institute of Statistics, 2015. Cambodia Demographic and Health Survey 2014.
CAMBODIA ECONOMIC UPDATE | MAY 2019 42
SELECTED ISSUE: Investing in Cambodia’s Future: Early Childhood Health and Nutrition
FIGURE S11: Coverage of essential maternal and child health and nutrition services by wealth quintile,
Cambodia, 2014
100
90
80
Percent
70
60
50
Facility delivery Skilled birth ANC by skilled Full Vitamin A
attendence provider immunization supplementation
(children 6-59
months)
Highest Fourth Middle Second Lowest
Source: CDHS 2014.
There are several bottlenecks to improving S12), and open defecation is associated with
the delivery of nutrition services through
the health sector, including: (i) limited quality S13). Open defecation within a community is
of services in facilities, with a need to improve associated with harms to the physical and cognitive
professional standards and skills related to nutrition development of children, even children living in
counselling, growth promotion, and behavior change households that use toilets themselves. Children
interventions for maternal, infant, and young child living in unhygienic environments (with repeated
nutrition; (ii) low availability of nutrition services exposure to and ingestion of human and animal
in communities and through outreach; (iii) limited feces) can experience impaired gut health, diarrhea,
demand for and awareness of the importance of malnutrition, stunted growth.
preventive and promotive nutrition services.61
Access to improved water supply and sanitation in
D. Limited access to improved water
supply and sanitation and poor hygiene though clear disparities persist alongside a growing
need to focus on quality of services. Cambodia
Access to water supply and sanitation appears
achieved 75 percent access to improved water
supply and 49 percent access to improved sanitation
FIGURE S12: Access to improved water supply and sanitation and HCI
Improved Sanitation and HCI Improved Drinking Water and HCI
0.9
0.9
0.4 0.5 0.6 0.7 0.8
0.5 0.6 0.7 0.8
Human Capital Index
Human Capital Index
0.4
0.3
0.3
20 40 60 80 100 40 50 60 70 80 90 100
Percentage of Improved Sanitation Percentage of Improved Drinking Water
Source: World Bank staff estimates using 2018 Human Capital Index and World Development Indicator data.
61
World Bank. 2019. Preliminary Findings: Cambodia Health Financing System Assessment.
43 CAMBODIA ECONOMIC UPDATE | MAY 2019
SELECTED ISSUE: Investing in Cambodia’s Future: Early Childhood Health and Nutrition
in 2015.62 E. Constraints on women’s resources for
the average for lower middle-income economies (90 optimal care
and 52 percent, respectively). In urban areas, access
Cambodia’s high female labor force participation
rates for improved water supply were 78 percent
outpaces other countries in the region
for the poorest and 99 percent for the richest, while
and facilitated the growth of manufacturing. An
estimated 80 percent of Cambodian women age
100 percent, respectively.63 Despite good progress,
15-64 worked for at least an hour in the previous
proportion of people practicing open defecation
week, compared to an average of 66 percent for
EAP women. Nearly 23 percent of Cambodian
region. Only 24 percent of the population has
women worked in the manufacturing sector in 2015,
access to safely managed water supply in 2015.64, 65
as compared to 21 percent in Thailand and 19
Overcoming water supply and sanitation challenges
percent in Vietnam.66 Manufacturing has driven the
could be an important factor contributing to human
rise in wage labor: 42 percent of working women
capital development in the country.
in 2016 held paid occupations, almost half of
FIGURE S13: Growth faltering (height-for-age which were in the garment sector. There have also
z-score) for households with and without a toilet for
different levels of open defecation (2010)
services and construction sectors between 2011 and
-1.2
5).
height-for-age z-score
-1.4 Cambodian women working in the garment
managing the balance between work and
-1.6
caregiving roles, despite Labor Law provisions.
Most garment and footwear workers cannot afford
-1.8 to have children living with them due to the high
0 0.2 0.4 0.6 0.8 1 cost of accommodation and childcare expenses.
open defecation in child’s locality
household does not openly defecate Garment workers with children typically spend
household does openly defecate about 50 percent more than single workers do on
Source: Vyas S, Kov P, Smets S, Spears D. 2016. Disease externalities and
net nutrition: evidence from changes in sanitation and child height in FIGURE S15: Female wage employment by sector in
Cambodia, 2005-2010. Economics and Human Biology; 23:235-45. Cambodia
FIGURE S14: Cambodia’s female labor force 50%
participation relative to peers. 45%
40%
Cambodia
35%
Lao PDR 30%
Vietnam 25%
Thailand 20%
15%
Myanmar 10%
Indonesia 5%
Malaysia 0%
de
s
re
n
g
ice
in
io
ltu
a
ur
ct
Tr
Philippines
rv
icu
tr u
ct
Se
a
r
ns
uf
Ag
0 10 20 30 40 50 60 70 80 90
Co
an
M
Percent 2011 2016
Source: CSES 2011 and 2016. In: Gavalyugova, Dimitria and Wendy
Source: ILO Modeled Estimates 2016. Cunningham. 2019. “Gender Analysis of the Cambodian Labor Market.”
World Bank. In progress.
62
WHO/UNICEF Joint Monitoring Program (JMP) 2017 (Updated July 2017). Note: Improved sanitation refers to improved sanitation which is not shared. If shared
63
WHO/UNICEF JMP 2015.
64
disposed in situ or transported and treated off-site.
65
WHO/UNICEF JMP 2017. Note that the estimate for safely managed sanitation is not available.
66
Gavalyugova, Dimitria and Wendy Cunningham. 2019. “Gender Analysis of the Cambodian Labor Market.” World Bank. In progress.
CAMBODIA ECONOMIC UPDATE | MAY 2019 44
SELECTED ISSUE: Investing in Cambodia’s Future: Early Childhood Health and Nutrition
their children’s living and educational expenses.67 periods. There are concerns regarding the quality of
Moreover, factory non-compliance with childcare these caregivers in providing for optimal care and
and breastfeeding provisions is pervasive: 72 percent child development, particularly grandmothers, who
of surveyed factories were in noncompliance with have expressed low skills and bandwidth to take care
the provisions to have both an accessible nursing of young children.70 According to the 2014 DHS
room and functioning day care center.68 one in ten children under five in Cambodia are left
in inadequate care.71
Even so, many of Cambodia’s working women
are not covered under provisions of the labor law. There is growing evidence to scrutinize the
Though women have been most visible as the engine role of care for women and children as a driver
of the formal garment industry, their participation of undernutrition. The persistence of traditional
is growing in private wage employment in services gender roles and weak social systems to provide care
(such as hospitality and education), agriculture, and and feeding for children (both formal and informal),
construction that in the large part remains informal. may contribute to unforeseen impacts on infant
For instance, more than 500,000 women workers and young child feeding and nutritional outcomes.
are in the informal wage employment sector in Recent analyses suggest there are tradeoffs between
the services and construction sectors.69 Women in women’s productive and reproductive roles: that
these informal sectors lack the formal protections benefits accrued from additional income may result in
afforded to workers in large garment factories, such reduced breastfeeding but improved complementary
as maternity protection, workload burden, wage, feeding. Among all children age 0-5, mother’s work
breastfeeding, childcare, and others. and year-round work are both associated with better
anthropometric and infant and young child feeding
Thus, Cambodian women experience growing
(IYCF) outcomes; however, these two variables
constraints on the time available for care of young
are associated with poorer outcomes (wasting,
children. Due to the high cost, inconvenience, and
underweight, and height-for-age) among children
lack of safety inherent in relocating or commuting
under 2 as compared to all children under 5 (figures
with their mothers, young children are often
S16 and S17). Moreover, significant improvements
left in the custody of secondary caregivers (e.g.
in IYCF practices disappear when limited to women
grandmothers, neighbors, siblings) for extended
working in non-agriculture sector (figure S16).
FIGURE S16: Infant and young child (0-23 months) feeding outcomes associations with mother’s work force
participation, 2014
0.15
0.10 0.07 * 0.06 *** 0.07 ***
0.05 *** 0.06 ***
0.04 * 0.05 ** 0.04 * 0.03 ** 0.03 ** 0.04 **
Standard deviation
0.05
0.00
0.04 *
-0.05
-0.05 ***
-0.10 -0.08 *
-0.11 ** -0.10 ***
-0.15
ly
o
or
r
ty
d
l
al
d
k
na
to
or
un
e
m
on
nt
ali
ct
oy
r
ec
sio
W
e
r re
ro
2
se
qu
as
oy
pl
gs
t1
as
se
ge
cu
em
Ag
ar
pl
las
oc
-a
ye
m
k
in
k
on
lf-
or
re
or
k
in
rn
k
Se
or
W
N
or
W
fo
d
Ea
W
W
ke
k
or
or
Exclusive breastfeeding MAD MDD MMF
W
W
Source: Authors’ calculations from CDHS 2014. MAD: Minimum Acceptable Diet; MDD: Minimum Dietary Diversity; MMF: Minimum Meal Frequency. *
p< 0.10, ** p < 0.05, *** p < 0.01.
67
See the selected issue on the Garment Sector in Perspective, October 2016 Cambodia Economic Update, the World Bank.
68
International Labour Office (ILO). 2018. Better Factories Cambodia: Towards Gender Equality - Lessons from factory compliance assessments. Geneva: ILO.
69
See the selected issue on Future Jobs in Cambodia, April 2018 Cambodia Economic Update, the World Bank.
70
See for instance: World Bank and Planète Enfants & Développement. Results of consultations on the concept of community-based childcare for garment factory
workers. In progress.
71
Defined as being left alone or in the care of a child under the age of 10 years.
45 CAMBODIA ECONOMIC UPDATE | MAY 2019
SELECTED ISSUE: Investing in Cambodia’s Future: Early Childhood Health and Nutrition
F. Limited Availability and Efficiency of historically driven by macroeconomic growth rather
Public Expenditures for Child Health and than a prioritization of the sector (figures S20 and
Nutrition72 S21).
Cambodia spends more on health (about 6-7% High out-of-pocket spending and reliance
of GDP) relative to regional comparators, on external financing are challenges in the
(figure S18), but the public expenditure on sustainable financing for universal health
health is relatively low (1.3% of GDP in 2015). coverage. Health expenditures are largely financed
Public expenditure accounts for 22 percent of total through out-of-pocket spending. Among sectors,
health expenditure, and government share of per Cambodia’s health sector receives the largest share
capita health expenditure remains low relative to of grant financing from overseas development
other countries in the region at $16 (figure S19). assistance, but external financing has been declining
Increases in public expenditure on health have been since 2011; by 2017 it was nearly halved from 2002
(figure S22).
FIGURE S17: Infant and young child (0-23 months) anthropometric outcomes associations with mother’s work
force participation, 2014
0.15
0.10
0.05**
Standard devation
0.05
0.00
-0.05
-0.10 -0.05** -0.05**
-0.07***
-0.15
ly
o
or
r
k
d
l
al
d
r
ty
na
to
e
or
un
e
m
on
nt
ali
oy
ct
oy
ec
sio
W
rre
ro
2
se
qu
as
pl
pl
gs
t1
as
m
se
ge
cu
em
Ag
ar
las
oc
-a
re
ye
k
in
k
on
lf-
or
fo
or
k
in
rn
k
Se
or
W
N
or
W
d
k
Ea
W
W
or
ke
W
or
W
Stunting Wasting Underweight
Source: Authors’ calculations from CDHS 2014. *p < 0.10, ** p < 0.05, *** p < 0.01
FIGURE S18: Cambodia’s total health expenditure is FIGURE S19: Though Cambodia’s public health
high relative to regional peers expenditure per capita is lowest among regional peers
Total health expenditure share of GDP, 2015 Public expenditure for health per capita, 2015
500 2,500 10,000
25
Low income
Low income
Lower middle income
Lower middle income
10 15
Upper middle income
Upper middle income
High income High income
Percentage (%)
Ca
Vi mb
US dollars
od
Ph Ch etna ia Ma C
ilip ina m Th l h
pin aila aysia ina
Ind Thai es nd
5
on l a nd
La e sia Vi
100
oP In et
DR La don nam
o
Ca P esia
mb DR
od
ia
25
2
5
1
Source: WHO Global Health Expenditures Database. Source: WHO Global Health Expenditures Database.
72
Due to the importance of nutrition-specific interventions for improving child nutrition and growth, this section draws heavily upon preliminary findings from the
following report led by Emiko Masaki: World Bank. Cambodia Health Financing System Assessment. In Progress. It focuses on trends in public expenditure in the health
sector as sectoral home of nutrition service delivery.
CAMBODIA ECONOMIC UPDATE | MAY 2019 46
SELECTED ISSUE: Investing in Cambodia’s Future: Early Childhood Health and Nutrition
Despite the slow increase in public health progress in integrating this financing into the
expenditure, innovations in health financing domestic budget: While the national maternal and
and service delivery have improved productivity child health program73 received 6-7 percent of the
and efficiency of underlying investments overall Ministry of Health budget in 2016-2018, the
in health to enable improvement in several National Nutrition Program received less than one
population health and nutrition outcomes. percent (annual average US$ 127,000) of the MCH
Specifically, the expansion of the Health Equity Fund program budget (Figure S24). The bottlenecks in
and service delivery grant systems have: (i) mobilized service delivery identified above are to be expected.
resources to frontline provides; (ii) improved health Domestic financing potential for early
worker motivation and accountability; (iii) enabled childhood health nutrition exists within the
systematic and structured supervision; (iv) created commune/Sangkat fund, yet this potential
data systems of growing transparency; and (v) remains unrealized. Under the commune/sangkats
improved the citizen-centeredness and responsivity general mandate, local authorities have the flexibility
of public services. to support investments in social services and social
Unfortunately, these mainstream systems of protection, including maternal and child health
health financing and service delivery have and nutrition. The annual C/S fund allocation rose
addressed nutrition only to a limited extent. incrementally by 2 percent since 2003 and reached
Health sector investments in nutrition have a total of US$93 million in 2017. However, only
historically been low, fragmented, and dominated about one-third of the total allocation (averaging
by external financing (Figure S23). Cambodia’s US$63,000 per C/S) is available for development
National Nutrition Program has long operated as activities.74 Thus, despite remarkable increases in
a vertical program with ad hoc interaction with the total funding, the development investment per
mainstream public health service delivery and capita is relatively low (US$2.37 in 2017) and has
frontline providers. plateaued since 2013.75 However, the commune
investment planning process and the complex
As with the wider health sector, the nutrition procurement procedures often limit C/S investment
program has been experiencing an external in local social services/development projects.
financing transition. There has been slow
FIGURE S20: Per capita public health expenditure FIGURE S21: Cambodia’s strong economic growth
has increased over the past decade is not being translated into commensurate public
investments in health
70 18 12
public health spending per capita (%)
45
Public health spending per capita
16 10 degree
Real annual per capita growth,
60 line
14 8 Lao PDR
Share of Central Government
Thailand
(KHR thousands)
50 6 Indonesia
12 Philippines
Mongolia
40 10 4 Vanuatu Malaysia
Expenditure
2 Micronesia Fiji
30 8 Tonga Solomon Is.
0 Palau
6 Tuvalu Marshall Is.
20 -2 Cambodia
4 Kiribati Cambodia
10 2 -4 Pacific Island
countries
-6 PNG East Asia
0 0
2000 2003 2006 2009 2012 2015 -2 0 2 4 6 8 10
Year
Public health spending per capita (KHR thousands) Real annual per capita growth, GDP per capita (%)
Share of Central Government Expenditure
Source: Authors’ estimates. Source: IMF World Economic Outlook, WHO Global Health
Expenditures Database.
73
Including sub-programs for reproductive health, maternal and newborn care, child health (including immunization), and nutrition.
74
Until 2013, it was a legal requirement that the cost of administration not exceed one-third of all total funding. By 2017, the cost of administration reached 61 percent of
total costs. This raises potential allocative efficiency issues, as the opportunity costs of high salaries is reduced development spending on capital projects and, by extension,
reduced effectiveness of SNAs.
75
World Bank. 2018. Cambodia’s Cross-Cutting Public Financial Management, Decentralization, and Public Administration Reforms: Achievements, Coordination,
Challenges, and Next Steps. Phnom Penh: World Bank.
47 CAMBODIA ECONOMIC UPDATE | MAY 2019
SELECTED ISSUE: Investing in Cambodia’s Future: Early Childhood Health and Nutrition
FIGURE S22: Composition of health financing in Cambodia and comparator country groups
Cambodia Low Income
1% 5%
19% 22% 21%
0% 33% 1%
40%
58%
Low Middle Income Upper Middle Income
4% 8%
3%
12%
37% 39%
33%
40%
6%
17%
Public SHI/CPS OOP External Other
Source: Source: WHO Global Health Expenditures Database 2017. SHI: Social Health Insurance. CPS: Contributory Pension Scheme. OOP: Out-of-Pocket.
FIGURE S23: Health Spending by Program and FIGURE S24: Maternal and Child Health* Program
Sources (latest available year) Budget by Sub-Program, Ministry of Health, FY 2016-
2018
100 30
9
80 25
67
60 77 20
83
Percent
95
Million USD
86
15
40
10
20
33
17 23
5
0 5 5
2)
)
8)
)
5)
17
15
0
01
01
01
20
20
(2
(2
(2
n(
S(
2016 2017 2018
n
TB
ia
tio
ID
io
r
ala
rit
iza
/A
ut
M
Activities at provinces and cities Reproductive health
un
IV
N
m
H
Child health Nutrition
Im
Government External Other Maternal and newborn care
Sources: UNAIDS, Global AIDS Monitoring Database 2018; WHO, Source: General Department of Budget, MEF, Budget In Brief for Fiscal
World Malaria Report 2017; WHO, World Tuberculosis Report 2018; Year 2016, 2017, 2018.
WHO/UNICEF, JRF, 2018.
Note: other includes OOP and Health Insurance.
CAMBODIA ECONOMIC UPDATE | MAY 2019 48
SELECTED ISSUE: Investing in Cambodia’s Future: Early Childhood Health and Nutrition
5. Policy Options will need to be done specifically to: (i) prioritize
nutrition within existing sector resources; and (ii)
Without dedicated effort and attention to address focus on improved quality to enhance the efficiency
the foundations of early childhood health and of underlying public expenditures.
nutrition, Cambodia will struggle to have its
2. Leverage mainstream health financing
human capital formation keep pace national
and service delivery reforms to improve
development aspirations. In addition to rapid
the coverage and quality of maternal
poverty reduction combined with robust economic
and child health and nutrition services
growth, at least three achievements have likely
delivered through public facilities. A first
contributed to Vietnam’s rapid reduction in child
priority will be to ensure the availability and
stunting: prioritization of nutrition by the national
government, policies designed to improve infant quality of nutrition-specific services such
and child feeding practices, and efforts to reduce as maternal nutrition counselling (especially
micronutrient deficiencies.76 through antenatal care), well-child visits
including immunization and infant and young
Increasing the magnitude and efficiency of the child feeding promotion, and management
investments from individuals, public sector, and the and treatment of acute malnutrition are critical
private sector can help ensure that children get off to first steps to improving nutrition outcomes.
a smart start, preparing them with the foundations Small investments in building the capacity and
to maximize their education and skills development. resources of the National Nutrition Program
These investments will further help the country can enable the use of mainstream health system
to take advantage of the country’s demographic platforms to dramatically increase the quantity,
dividend and maximize its produced and natural quality, performance and efficiency of health
resources. Policy makers can take several actions to sector spending on nutrition.
contribute to accelerated progress in this area:
3. Engaging the subnational administration
1. Develop a comprehensive human capital (commune/sangkats) to increase the
master plan that begins in the early years to
efficiency of domestic resources at local
guide domestic investments. Immediate steps
level and create community awareness of
can be taken to initiate the development of a
the importance of early childhood nutrition.
strategic vision for human capital improvement
that will simultaneously: (i) meet the needs for Subnational finances and platforms can be
short-term skills-building alongside medium- redirected to contribute to nutrition, even
term improvements in the quality of education; within the existing resource envelope. Proposed
and (ii) support long-term investments in the increases to the C/S Fund allocation present
health, nutrition, and development of young opportunities to improve the magnitude and
children. These two strategies should be quality of expenditure on nutrition. This can
undertaken in parallel in order to avoid the loss best be achieved through: (i) dedicated staff
of early childhood potential that would result if support at C/S level to manage and administer
these investments are only undertaken one after social funds; (ii) clear guidelines and capacity
the other. As will be outlined below, the agenda building (technical and fiduciary) to manage such
is not for the public sector alone: progress can funds at the local level; and (iii) close interaction
be augmented by linking sectoral programs and with the health sector to provide guidance and
interventions and engaging the private sector quality assurance and support for community-
and families. level health and nutrition promotion.
Sector Specific Strategies
4. Support social and behavior change through
To close gaps in early life nutrition outcomes, more a multi-component communication strategy
76
Keefe M. On the Fast Track: Driving Down Stunting in Vietnam. In: Nourishing Millions - stories of change in nutrition. Eds: S Gillespie, J Hodge, S Yosef, and R
Pandya-Lorch. Washington, DC: IFPRI.
49 CAMBODIA ECONOMIC UPDATE | MAY 2019
SELECTED ISSUE: Investing in Cambodia’s Future: Early Childhood Health and Nutrition
and engagement with private sector. The 6. Expand the breadth and depth of social
Cambodian government’s role in improving protection and labor policies to enable
child health and nutrition extends beyond service Cambodia’s families invest in the next
provision. The public sector can also invest in generation. Women’s participation in
interventions to shape social norms and provide Cambodia’s labor force has intrinsic and
information that can shape individual decisions instrumental value and should be maintained.
for long term behavior change and sustainability. A medium-term policy agenda can include
Experience in Vietnam and Bangladesh strengthening formal and informal social
demonstrated that a national mass media support systems can minimize women’s
campaign combined with counselling at health tradeoffs between work and care for children
facilities and/or community mobilization could and improve child nutrition and development
successfully improve complementary feeding outcomes. Options include:
practices.7778 A similar approach is warranted in
Cambodia to influence individual behaviors and a. Leverage the maternal and child cash transfer
longer-term social change related to maternal, to stimulate demand and remove access
infant, and young child nutrition and household barriers to health and nutrition service
and food hygiene behaviors. Facilitating the utilization and improved dietary behaviors.
entry of private sector actors (food processors, As the program moves toward roll-out, care
sanitation providers, and water operators) can must be taken to maintain the integrity and
leverage their expertise in developing marketing confidence in public health system to deliver
solutions, thus reducing consumer barriers to quality services. Investing in a system to
product uptake and increase perceived product easily, consistently, and transparently transfer
benefits. promised benefits can help ensure there are
no failed promises.
5. Improve the availability and affordability of
nutrient-rich foods and complementary food b. Further expand and refine maternity
products. A nutrition-sensitive value chains protections to enable women’s full
approach can contribute to increasing the supply participation in the labor force. Developing
of nutrient-rich foods and food processing that viable options for expanding the breadth
enhances the nutritional value of food products. (duration of protection) and depth (possible
Efforts are underway to improve agricultural beneficiaries) of maternity protection is
productivity and diversification: intensifying needed to cover more women regardless of
the focus of agricultural investments on research, sector of work. Contributory schemes may
inputs, extension, and domestic market creation be explored to support such expansion.
for nutrient-rich foods (e.g. fruits, vegetables, c. Improve the availability and affordability
animal-source protein, and whole grains) can of child care options. While the labor law
help enhance the quality of the Cambodian diet.
mandates the provision of on-site childcare,
Targeted public-private partnerships can support
this may not be feasible or desirable in the
manufacturers of commercially produced,
Cambodian context, particularly for garment
fortified complementary food products to
workers. Expanding models of community-
enhance their availability and affordability.
based and private child care, accompanied
These efforts need to be complemented by
by strong quality standards and capacity
stronger regulation and enforcement of private
building, can improve the quality of care
sector companies marketing unhealthy foods/
provided to children of working mothers.
beverages and breastmilk substitutes, along
with stronger private sector engagement in d. Create social support and pressure to fully
self-regulation. involve fathers in child care. Given the finite
77
Rawat R, Nguyen PH, Tran LM, Hajeebhoy N, Nguyen H Van, Baker J, Frongillo EA, Ruel MT, Menon P. Social franchising and a nationwide mass media campaign
increased the prevalence of adequate complementary feeding in Vietnam: a cluster-randomized program evaluation. J Nutr 2017;147:670–9.
78
Menon P,Nguyen PH, Saha KK,Khaled A, Sanghvi T, Baker J,Kaosar A, Haque R, Frongillo EA, RuelMT, et al. 2016. Combining intensive counseling by frontline
workers with a nationwide mass media campaign has large differential impacts on complementary feeding practices but not on child growth: results of a cluster-
randomized program evaluation in Bangladesh. J Nutr;146(10):2075–84.
CAMBODIA ECONOMIC UPDATE | MAY 2019 50
SELECTED ISSUE: Investing in Cambodia’s Future: Early Childhood Health and Nutrition
nature of women’s time, efforts to improve The requirement is much greater than what
care and feeding for young children can be the public sector alone can afford, and thus
maximized through greater involvement of options of leveraging private sector financing
fathers in childcare. and household investment should be explored.
A focus should be on creating the regulatory
7. Mobilize investment in water supply and
environment to ensure the quality and safety of
sanitation to expand services to unserved
drinking water, and also strengthening support
population. Achieving universal coverage
for improved household hygiene environment,
for water supply and sanitation by 2025
particularly in rural areas.
would require US$211 million per year.79
Photo credited : Igor Dashevskiy
79
World Bank. 2015. Service Delivery Assessments for Water Supply and Sanitation in Cambodia: Turning Finance into Services for the Future.
51 CAMBODIA ECONOMIC UPDATE | MAY 2019
ANNEX 1: PRICE ELASTICITIES OF GARMENT, FOOTWEAR AND MILLED RICE IN THE WORLD
ANNEX 1: PRICE ELASTICITIES OF GARMENT, FOOTWEAR AND
MILLED RICE IN THE WORLD
Author Article Methodology Price Elasticity
Rice
Wen S. Chern, Kimiko Analysis of food consumption Heckman -1.8 (Japan)
Ishibashi, Kiyoshi behaviour by Japanese
Taniguchi, Yuki households
Tokoyama (2002)
Erkan Erdil Demand systems for Rotterdam and AIDS -2.9 (Italy)
(2006) agricultural products models -3.1 (Netherland)
in OECD countries -1.5 (Norway)
-1.4 (Portugal)
-2.0 (Sweden)
Noel D. Uri, The price elasticity of export Export Function -0.6 (USA)
Jonathan D. Jones demand for US agricultural
(1989) commodities reconsidered
Garment
Donatella Baiardi, The price and income Export Function -0.92 (China)
Carlucci Bianchi, elasticities of the top clothing -0.73 (France)
Eleonora Lorenzini exporters: evidence from a -0.75 (Germany)
(2015) panel data analysis -0.96 (Hongkong)
-0.74 (Hongkong)
-0.72 (Netherland)
-0.87 (UK)
-1.25 (USA)
Nadezhda Ivanova Estimation of own-and Demand Function -1.13 (Russia)
(2005) cross-price elasticities of
disaggregated imported and
domestic goods in Russia
Footwear
Nadezhda Ivanova Estimation of own-and Demand Function -1.01 (Russia)
(2005) cross-price elasticities of
disaggregated imported and
domestic goods in Russia
Jan Kemper Cross-cultural differences in Demand Function -1.58 (EU)
(2018) online price elasticity
Garment and Footwear
Jan Kemper Cross-cultural differences in Demand Function -1.07 (Austria)
(2018) online price elasticity -0.97 (Belgium)
-1.76 (France)
-2.74 (Germany)
-1.22 (Netherland)
-0.48 (Sweden
CAMBODIA ECONOMIC UPDATE | MAY 2019 52
ANNEX 2: CAMBODIA’S KEY INDICATORS
ANNEX 2: CAMBODIA’S KEY INDICATORS
2016 2017e 2018e 2019f 2020f 2021f
Output and Economic Growth
Real GDP (% change, yoy) 7.0 7.0 7.5 7.0 6.9 6.8
Exports, GNFS 1/ 61.3 60.7 63.3 63.6 64.9 65.8
Imports, GNFS 65.7 64.1 66.6 65.3 65.1 65.7
Domestic demand (% change, yoy) 9.9 8.5 10.0 9.9 8.9 10.5
GDP per capita (US$, nominal) 1,264.9 1,375.8 1,476.8 1,640.3 1,789.9 1,951.9
Money and Prices
Inflation, consumer prices (annual %, period average) 3.5 3.1 3.2 3.3 3.0 3.1
M2 (% of GDP) 70.9 79.4 88.8 96.0 103.2 110.4
Domestic Credit to the Private Sector (% of GDP) 69.5 74.5 82.8 91.1 100.2 110.2
Nominal Exchange Rate (local currency per USD) 4,058.0 4,062.0 4,067.0 4,075.0 4,050.0 4,030.0
Real Exchange Rate Index (2010=100) 104.9 105.2 108.6 110.3 111.2 113.7
Short-term interest rate (% p.a.) 11.9 11.7 11.3 11.0 11.0 11.0
Fiscal
Revenue (% of GDP) 20.7 21.4 22.3 21.2 21.6 22.0
Expenditure (% of GDP) 22.1 23.1 24.2 23.9 23.6 23.6
Overall Fiscal Balance (% of GDP) -1.4 -1.6 -1.9 -2.6 -2.0 -1.6
Primary Fiscal Balance (% of GDP) -1.0 -1.2 -1.5 -2.1 -1.5 -1.1
General Government Debt (% of GDP) 29.1 30.3 30.6 30.0 30.1 31.1
External Accounts
Export growth, f.o.b (nominal US$, annual %) 8.6 5.3 5.3 9.0 8.6 8.1
Import growth, c.i.f (nominal US$, annual %) 8.6 4.0 4.1 7.6 7.1 6.8
Merchandise exports (% of GDP) 45.5 45.2 46.8 46.8 47.5 47.7
Merchandise imports (% of GDP) 56.9 55.6 57.6 56.6 56.6 57.4
Services, net (% of GDP) 7.0 7.0 7.4 8.1 9.0 9.9
Current account balance (current US$ millions) 2/ -2,040.2 -2,155.5 -2,502.9 -2,540.7 -2,702.1 -3,012.4
Current account balance (% of GDP) -10.2 -9.7 -10.5 -9.5 -9.1 -9.2
Foreign Direct Investment, net inflows (current US$ 2,164.4 2,381.0 3,238.6 2,835.8 2,802.4 3,044.6
millions)
Foreign Direct Investment, net inflows (% of GDP) 10.8 10.8 13.4 10.4 9.3 9.2
Gross international reserves (millions US$) 6,730.8 8,757.9 10,143.7 10,650.9 11,183.5 11,742.7
(prospective months of imports of g&s) 5.7 6.6 6.3 6.6 6.2 6.0
1.187 1.301 1.158 1.050 1.050 1.050
Memo: Nominal GDP (millions US$) 20,019.0 22,109.6 23,720.4 26,749.3 29,619.2 32,753.4
Sources: Cambodian authorities, IMF and World Bank staff estimates and projections
e = estimates
f = forecast
p = projection
1/
Goods and Non-Factor Services (GNFS)
2/
Excluding transfers.
53 CAMBODIA ECONOMIC UPDATE | MAY 2019
REFERENCES
REFERENCES
Annual Reports (2013–18), Ministry of Agriculture, Forestry and Fisheries
Annual Reports (2016–18), National Bank of Cambodia
Balance of Payment Statistics (2018), National Bank of Cambodia
Banking Supervision Reports (2016–17), National Bank of Cambodia
Budget Law (2018), Royal Government of Cambodia
Cambodian National Accounts Statistics (2017), National Institute of Statistics, Ministry of Planning
Cambodia Tourism Statistics (2017–18), Ministry of Tourism
Cambodia Public Debt Statistical Bulletin, Volume 6, September 2018, Ministry of Economy and Finance
Cambodia Socioeconomic Surveys (2004–17), National Institute of Statistics, Ministry of Planning
Cambodia Doing Business Ranking (2018), World Bank
Cambodia Enterprise Survey (2016), World Bank
Cambodia Investment Climate Assessment (2018), World Bank
Donatella Baiardi, Carlucci Bianchi, Eleonora Lorenzini (2015): The price elasticity of export demand for US
agricultural commodities reconsidered, 38, 14-30, https://doi.org/10.1016/j.asieco.2015.03.003
East Asia and Pacific Economic Update (April 2019), World Bank
Erkan Erdil (2006): Demand systems for agricultural products in OECD countries, Applied Economics
Letters, 13:3, 163-169, DOI: 10.1080/13504850500393386
IMF Article IV Staff Report (2018), International Monetary Fund
Jan Kemper (2018): Cross-cultural differences in online price elasticity. http://ecis2018.eu/wp-content/
uploads/2018/09/2016-doc.pdf
Logistic Performance Index (2016), World Bank
Monetary Statistic Bulletin (2018), National Bank of Cambodia
Nadezhda Ivanova (2005): Estimation of own-and cross-price elasticities of disaggregated imported and
domestic goods in Russia. http://siteresources.worldbank.org/INTRANETTRADE/Resources/Topics/
Accession/elasticities_NIvanova_sep2005_eng.pdf
Noel D. Uri, Jonathan D. Jones (1989): The price elasticity of export demand for US agricultural commodities
reconsidered, Agricultural Systems, 28:4, 273-297, https://doi.org/10.1016/0308-521X(88)90071-6
Wen S. Chern, Kimiko Ishibashi, Kiyoshi Taniguchi, Yuki Tokoyama (2002): Analysis of food consumption
behaviour by Japanese households. http://www.fao.org/3/a-ae025t.pdf
CAMBODIA ECONOMIC UPDATE | MAY 2019 54
The World Bank
Cambodia Country Office
Exchange Square Building
Floor 10th IBRD and 11th IFC
Streets 51-61 and Streets 102 -106
Sangkat Wat Phnom, Khan Daun Penh
Phnom Penh, Cambodia
Website: www.worldbank.org/cambodia