Cambodia falling behind in both tourism and garments

Photo by: Tracey Shelton

A garment factory worker produces goods in a Phnom Penh factory. The Asian Development Bank has warned Cambodia that it must become more competitive in the future if it wants to be economically successful.

via CAAI News Media

Wednesday, 21 April 2010 15:02 Ellie Dyer

Asian Development Bank calls on Kingdom to increase its competitiveness to ensure the future of key sectors, after predicting a 4.5 percent GDP rise for ’10

CAMBODIA is falling behind its competitors in the key garment and tourism sectors, an economist from the Asian Development Bank (ADB) warned Tuesday.

ADB analysts gathered at group headquarters in Phnom Penh to discuss their Asian Development Outlook Report 2010, which was released during Khmer New Year and predicted 4.5 percent GDP growth for the Kingdom this year.

During the press conference, Senior Country Economist Eric Sidgwick said Cambodia must increase competitiveness in the region as it begins to recover from the global economic crisis in order to move to the “next [economic] level”.

ADB estimated the Kingdom’s GDP shrank by 2 percent in 2009.

“Cambodia has had a good start relative to its past performance, but it is still lagging behind its competitors in terms of garments and tourism,” he said, noting that the volume of Cambodia’s garment exports to the US increased by 12 percent in February, compared with the same month last year.

“There are still issues in trade facilitation,” he warned, and declared that both sectors have shown signs of reaching maturity.

Sidgwick advised that the garment industry, which evolved in an environment of international protectionism, needs to become quick, reliable and efficient in order to compete with producers such as Vietnam, and that tourism needs to diversify away from the hub of the Angkor temples.

Cambodia also needs “to get going” on reforms that are already on the table, he said: “If Asia is going to pick up, Cambodia needs to be part of that. It needs to diversify its economic business.”

Sidgwick pointed to agri-business as a key area of development. He recommended the implementation of better product standards, increased irrigation and greater coordination between government departments.

Prudence was also a watchword for the ADB.

“It has become boring to state, but the maintenance of macro-economic stability is key,” said Sidgwick.

He advised the government to cut back on injecting its deposits to bolster fiscal policy, advising draw downs to reach zero by 2011.

He estimated 25 percent of funds were utilized during the crisis last year.

The ADB report warned of the risks associated with such measures, stating: “The government drew down its deposits in the banking system to help fund the budget deficit.

But this large injection of riel liquidity (equivalent to 1.4 percent of GDP) risked undermining macro-economic stability.”

Nevertheless, ADB analysts praised the government’s “appropriate response” to the global economic crisis.