Nov – Dec 2016
CAMBODIA SYSTEMATIC
COUNTRY DIAGNOSTICPublic Engagement
Contents
• Objectives of the Engagement
• Country Context
• Main research questions
I. What are the challenges to sustaining economic growth?
II. What can be done so that the benefits of economic growth are more
widely shared?
III. What can be done to improve environmental sustainability?
• Identifying priority areas for development
• Next Steps
Objectives of the Engagement
World Bank Group in Cambodia
The current World Bank Group (WBG) support to Cambodia is guided by the
Country Engagement Note (CEN) for 2016-2017.
The focus areas of the CEN are:
Reducing
VulnerabilityImproved
Business
Environment
Enhanced
Connectivity and
Improved
Competitiveness
Improving
Service Delivery
Cross-Pillar Engagement: Setting Out WBG Medium Term Engagement
What is the Systematic Country
Diagnostic (SCD) ?
The SCD is a study conducted by the
WBG, based on empirical evidence, to
identify key challenges and
opportunities for poverty reduction
and inclusive, shared growth and
development in Cambodia (not limited
to areas of WBG engagement).
Country Context
Country Context
An overview over the past two decades of Cambodia:
Economic Growth
Status
Very strong
Evidence
3rd in the world in
1994-2014,
7.7% growth
Poverty reduction
Status
Very strong
Evidence
Extreme poverty declined
from around 7 million in 2004
to 1.6 million in 2013
Human Development
Status
Moderate gains
Evidence
Cambodia ranks 143 out
of 188 in the Human
Development Index
HDI increased from 0.386
to 0.555 since 1990
Country Context
Distinguishing features of Cambodia’s
development:
• Civil conflict left the country’s fragile
social, human, institutional, and physical
capital devastated
• Large share of rural population (79% of
total as of 2015, 14th in the world)
• Highly open and market oriented
economy (merchandise trade at 146% of
GDP in 2015, 8th in the world)
• High foreign aid, investment, and
financing. Substantial dollarization
I. What are the challenges to sustain
strong economic growth?
Changing winds affecting agriculture
Strong performance in agriculture up to 2011 was explained by three factors:
• International commodity price boom
• Land expansion
• Improvements in agriculture productivity
Going forward, Cambodia is expected to be able to grow largely due to productivity gains and cannot rely on further land expansion or a continued commodity price boom
Source: World Bank staff calculations using National Accounts.
0
1000
2000
3000
4000
5000
6000
19
61
19
64
19
67
19
70
19
73
19
76
19
79
19
82
19
85
19
88
19
91
19
94
19
97
20
00
20
03
20
06
20
09
20
12
Pa
dd
y Y
ield
Kg
/Ha
Rice Productivity gains
Vietnam Bangladesh
Phillipines Thailand
Cambodia
High export concentration in garments with some
nascent diversification…
• Over the last decade,
products and markets have
concentrated in textile and
clothing (representing 70%
of exports in 2014)
• Cambodia’s garment
exports are cheaper than
average
• Export sophistication is
low, although some value
addition and some
diversification beyond
garments is observed
0%
20%
40%
60%
80%
100%
1994 1999 2007 2014
Cambodia (% total merchandise exports)
Textiles & Clothing Footwear Vegetable
Transportation Mach/Elec Wood
Plastic / Rubber Other
Source: COMTRADE
0
10
20
30
40
50
60
70
80
90Starting a business
Dealing with construction
permits
Getting electricity
Registering property
Getting creditProtecting minority
investors
Trading across borders
Enforcing contracts
Resolving insolvency
Doing business in Cambodia, distance to frontier
Cambodia 2016 Vietnam 2016
Source: Doing Business, the World Bank Group
…but there are challenges to the business
environment
0%
5%
10%
15%
20%
25%
30%
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
/p
Pe
rce
nta
ge
of
GD
P
Composition of investment Cambodia
Durable Equipment
Construction
Investment is gearing towards construction, & fast
credit growth poses macro-financial risks
• Capital formation averaged 18 percent of GDP in 1994-2014. Vietnam and Thailand have been in the 30-40%
• Capital has increased in recent years, but mostly going to construction
• The investment savings gap increased from 2 to 10 percent of GDP since 2009
• Credit growth booming at 30-40 percent growth rates, with MFI lending saturation
Source: National accounts of Cambodia
II. What can be done so that the
benefits of economic growth are
more widely shared?
Cambodia’s performance in shared prosperity has
been outstanding…
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
2004 2007 2008 2009 2010 2011 2012 2013
Poverty incidence under national line
Source: WB Staff estimates from CSES 2004 – 2013 and the Global Monitoring report, 2016.
1.5%
1.7%
4.5%
4.7%
4.9%
6.5%
0.00% 2.00% 4.00% 6.00% 8.00%
2007-2012
2006-2012
2010-2014
2009-2014
2008-2013
2008-2012
Lao
PD
RP
hili
pp
ine
sV
ietn
am
Nic
ara
gu
aTh
aila
nd
Ca
mb
od
ia
Per capita consumption growth, bottom
40%
… but the economically vulnerable population
remains large.
• Poor and economically
vulnerable population
together still represent 65%
of the total population
• Slowdown in agriculture may
expose the economically
vulnerable
• At 70% of total health
expenditure, out-of-pocket
expenditure in Cambodia is
among the highest in the
World
16.7 14.4 4.2 2.7 1.7
35.0 31.9
21.4 19.6 17.8
31.7 32.5
41.6 48.5 46.2
15.7 19.0
30.4 27.8
32.6
0.8 2.2 2.4 1.4 1.6
0
10
20
30
40
50
60
70
80
90
100
2004 2007 2009 2011 2012
Sh
are
of
the
po
pu
latio
n
Economic mobility in Cambodia
Extreme poor Moderatetly poor
Economically Vulnerable Economically secure
Middle class
Source: WB Staff estimates from CSES.
Nutrition problems are still prevalent across quintiles (42% stunting for children
under 5 for first quintile), and partly related to limited access to sanitation
Nutrition problems still prevalent…
0 10 20 30 40 50 60 70
Vietnam (2010)
Cambodia (2014)
Philippines (2013)
Bangladesh (2014)
Guatemala (2014)
Prevalence of stunting, height for age (% of children under 5)
Q5 Q1
Source: World Development Indicators.
• Cambodia secondary completion rates (45% for lower secondary) are inferior to
lower MICs (72% completion rate), partly due to access issues.
• Lack of human capital limits mobility and prospects for economic upgrading
… and secondary completion rates are low
0 20 40 60 80 100
Philippines
Vietnam
Nicaragua
Bangladesh
Guatemala
Lower-MICs
Cambodia
School completion, 2013
Primary Completion Rate Lower Secondary Completion Rate
Source: GIS and EMIS, from Ministry of Education, Youth and Sports, and JICA.
Governance challenges impair the quality of
public service delivery
Sources: World Governance Indicators, World Bank Group.
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
Voice and
Accountability
Political Stability
and Absence of
Violence/Terroris
m
Government
Effectiveness
Regulatory
Quality
Rule of Law
Control of
Corruption
Governance indicators (-1.5 to 1.5 scale)
Cambodia 2014 Cambodia, 2005
L-MICs, 2014 ASEAN-5, 2014
• Low effectiveness of the
bureaucracy affects public
service delivery
• Corruption affects the cost of
firm operation, as well as access
to public services
• Weak rule of law has resulted
in disputes around land
• Lack of sufficient voice and
accountability could eventually
lead to social instability
Gender equality and social challenges
Sources: Enterprise Surveys, World Bank Group. Note: latest available year
• Cambodia is a country with one of the highest female labor force participation (85% in the garment sector)
• Cambodia stands out in % of firms with a female in top management, but only 18.8 percent of non-production jobs are done by women
• Women earned 22% less than men after controlling for all other socioeconomic and geographic characteristics
• Domestic violence and discrimination remain serious problems for women, LGBTI people, and people with disabilities
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
Pe
rce
nt
Gender equality in the enterprise
Percent of firms with a female top manager
Proportion of permanent full-time production workers that are
female (%)
Proportion of permanent full-time non-production workers that
are female (%)
III. What can be done to improve
environmental sustainability?
Rapid natural resource degradation is heightened by
high exposure to environmental risks.
• Forest cover decreased by
28% between 2000 and
2014, driven largely by
agricultural development,
and 45% of original, natural
wetland area has been lost
• Climate change (a 2°C rise
by 2050) could reduce
Cambodia’s GDP by 1.5%
in 2030 and 3.5% in 2050
• Cambodia is ranked 145th
out of 178 countries on
the 2014 Environmental
Performance Index
0
10
20
30
40
50
60
70
80
90
100
Environmental
Health
Ecosystem
Vitality
Exposure Vulnerability
Environmental sustainability indexes
Cambodia Lower-MICs World
Source: World Risk Index, 2015. United Nations University –Institute for Environment and Human Security.
Identifying priority areas for
development
How can Cambodia achieve lasting strong, inclusive,
and sustainable growth?
I. What are the challenges to sustaining strong economic growth?
Fostering economic diversification by improving the business environment,
building infrastructure, and supporting public and private sector investment and
savings in a sustainable manner
II. What can be done so that the benefits of economic growth are more
widely shared?
Cambodia has lagged behind in some human capital dimensions, and would need
to enhance the provision of public services need to build human assets
III. What can be done to improve environmental sustainability?
Improved natural resource management and infrastructure to keep pace with
strong growth and rapid urbanization
Initial ideas: Competitiveness and
Diversification
To increase economic competitiveness and diversification, Cambodia can:
1. Reduce the cost to firm establishment
and operation
Including business environment, informal
fees, electricity cost...
2. Improve public investment
management
To boost infrastructure in an effective and
sustainable way
3. Boost domestic savings and private
investments
Into tradable sectors
Rationale: Sustain growth rates and create jobs
4. Modernize agriculture
To unleash its export potential
5. Strengthen regulation and
supervision of financial sector
1. Invest in early years
2. Foster attainment of
secondary education and
above
3. Build safety nets and
shield households from
shocksNutrition and pre-
primary education
Rationale: Facilitate economic mobility and shared prosperity
Initial ideas : Build Human Assets
4. Public administration
reform
For improved service
delivery
Initial ideas : Improved
natural resource management
2. Enhance forest and aquatic
ecosystem management
1. Mitigate negative
urbanization externalities
Rationale: Improve the sustainability of the economic model given increasing food and
energy needs
Next Steps
Results from the SCD is expected to help inform:
• Diagnosis of development challenges and selection of policy
priorities
• A wide number of stakeholders (government, private sector,
international donors, civil society, academia)
• The planned Country Partnership Framework of the World
Bank Group with Cambodia that will follows this SCD
Questions for discussion
• How do you see Cambodia's development achievements to
date and its development challenges and goals for the future?
• In your view, what are the three most important development
priorities for Cambodia to focus on and address over the next
5-10 years?
A summary of recommendations and participant list from this meeting will be sent to you
and posted on the WBG Website
Suggestions or comments should be sent to: [email protected]
There is an online survey available on the World Bank Cambodia website:
www.worldbank.org/en/country/cambodia
Thank you!
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