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Continued Growth Not Reaching Poor, Economist Says

Mr. Chan Sophal, an economist and spokesman of the Cambodian Economic Association, joins VOA Khmer's Hello VOA radio call-in show to talk about the possible pros and cons of Cambodia's entering into the ASEAN Economic Community at the end of 2015, Thursday, December 4, 2014. (Lim Sothy/VOA Khmer)

Editor’s note: Cambodia’s economy is likely to continue to grow at a fast pace, but an economist says that will widen the gap between rich and poor. Chan Sophal, director of the Center for Policy Studies, says a growth rate of 7 percent can be expected over the next several years. However, thanks to unfair distribution of wealth, much of that growth will not be distributed evenly. He recently discussed Cambodia’s growing economy, its pitfalls and potential with VOA Khmer.

Can you tell us about the trend of economic development in the last few years?

In recent years, economic development in Cambodia has been improving, which means it is growing by 7 percent per year. This is considered a high growth rate among developing countries that are similar to Cambodia. Based on the predictions of large institutions like the World Bank, [the International Monetary Fund] and the Asian Development Bank, Cambodia’s economy will continue growing by 7 percent per year in the next few years, which is an interesting growth.

What factors are contributing to this growth?

Four factors are still essential. Firstly, it is the export of clothes in the textile sector. Secondly, it is buidling, or it can be called the construction sector. Thirdly, it is the tourism sector. The number of tourists keeps increasing from one year to another. In 2014, there were more than 4 million tourists. Fourthly, it is the agricultural sector, which is also growing, but not that much. This sector will continue to grow, as the products of rubber, pepper, rice and other farming goods, including animal raising, are going up 4 to 5 percent per year.

Economic development has increased to 7 percent, But how are the benefits distributed among the people?

If we talk about the distribution of growth from economic development, we can conclude that it is not fairly distributed. Generally, it is normal in the first stage of economic growth that the rich become richer and richer. The poor are stilll poor, or we can say that they have a little improvement. There is a national census focusing on an expediture gap. The income cannot be measured, but expeditures can be. If we talk about the income or the properties people own, such as houses and vehicles, the gap is wide.

Considering the tourism and agricultural sectors, Cambodia’s historical trend to depend solely on exports has somehow changed. To continue this growth, in what fields should Cambodia diversify?

Actually, there are recommendations from the Asian Development Bank, as well as development partners, and there is also an acknowledgement by the government that Cambodia still has potential to develop other sub-sectors, which go beyond the four big sectors I have just mentioned. For example, in the industrial sector, we have the potential to increase goods or agricultural products processing. We can say that there are other sectors besides this textile sector, which take place through investment from Japan, such as the creation of small electronic gadgets, machines and plastic materials. For tourism, it also has potential to create other tourism development sites, apart from Siem Reap and beaches. Cambodia still has other places to be developed, and the agricultural sector also has a lot of potentia—in fish farming and growing vegetables instead of the importing vegetables from Vietnam and Thailand.

But in the first stage like this, there are always problems in all fields and sectors. This is because our electricity prices are two or three times higher than in neighboring countries, which is the main obstacle to use machines in other industrial sectors and other enterprises that need electricity. We hope that in the future, the government will lower the price of electricity, which we can get from hydrodam electricity. In so doing, it will facilitate smooth diversification in industrial sectors, as well as the agricultural sector.

There are concerns related to the impacts on natural resources, as we have seen in some economic land concession. What impacts has this had on natural resources?

In the past, the government has provided economic land concessions of more than 1 million hectares, according to online statistics. Based on other reports, it can be more than this, if we include land concessions for underground mining. This could amount to more than 2 million hectares. Most of the land concessions are on public land, which is covered by forest. In the past 30 or 20 years ago, we have statistics saying that the forest accounts for 70 percent. Thus, those public lands that are given as economic land concession have difficulty avoiding forest areas and development, in terms of rubber or industrial farming, requires land clearing. Also, the concession usually lasts for 70 years or more. When we increase agricultural and industrial sectors, they demand a lot of land and eventually reduce the number of forest.

Seven percent economic growth includes foreign aid, loans and grants of more than $1.3 billion dollars annually. If we count from 2011, is there a balance between expenditure and real development or could there be more economic development with proper management?

Based on my understanding and personal conclusions, so far Cambodia has used capital from foreign loans, while grants from one year to another gradually increase, which plays a role in building big infrastructure, easing road traffic for business and commercial activities. This has boosted the economy to 7 percent this year. If you ask whether there is a balance between what has been achieved and the loan and grants spent, it is a difficult question, but based on my personal idea, it contributes to the development. Whether it is more effective or not, it might be, in cases where the government carefully controls the quality of infrastructure that is built with the foreign aid or loans and controls the price of the infrastructure or other projects. If there were good care, it might be much more effective than this.