SECTORS

Agriculture

Agriculture generates 32% of GDP and employs 4.75 million workers out of a labour force of eight million. The sector has grown quickly since the early 1990s in comparison with other countries, at just under 4% a year.

Though productivity levels are still lower than other Southeast Asian countries, the potential for growth in Cambodia’s agricultural sector is tremendous. The employment of new technology and the addition of capital will produce rapid growth and significant gains. Cambodia has a productive natural resource base, including forests, fisheries, a range of ecological zones suited to a wide variety of crops and livestock as well as rich biological resources that have yet to reach their full productive potential. The Government of Cambodia also provides generous incentives for foreign investors in the area of agricultural production to further encourage growth in this sector

Strengths:

Cambodia has reasonably good arable land and low cost labour.

Cambodia can produce crops at low unit costs, but only due to very low wage labour and spending little on inputs from off the farm, such as manufactured fertiliser, crop protection chemicals, high-quality seed and machinery.

Cambodia has two rapidly growing neighbours and is close to China, potentially the world’s largest market for agricultural surpluses

Textile

The textiles and clothing industry (T&C) contributed around 12% of GDP in Cambodia in 2007 with 4% of the Cambodian labour force employed in the industry. The garment industry is predominantly foreign owned, as is also the case for other types of light manufacturing for export.

Although growth has slowed, the value of exports has continued to increase. In 2007, the aggregate value of Cambodian garment exports increased to almost $2.8 billion. In 2006, the value of exports was US$2.6 billion, which was 21% higher than in 2005. According to the US Apparel import statistics, imports from Cambodia rose 13.5% in 2007.

Strengths:

Cambodia is located within a world manufacturing hub

Skills were not considered to be a major constraint to the assembly businesses that were consulted, but higher wage management positions are largely held by foreigners

Lead times are low in Cambodia given the short shipping distances from other ASEAN partners

Good access to policy makers through the private sector working groups was ranked highly by the garment manufacturers surveyed, as was the favourable investment climate

Tourism

The tourism sector has been an important and very dynamic engine of growth and generator of foreign exchange revenues since the cessation of conflict in Cambodia. Many developing countries will look at the pace of tourism development in Cambodia with envy. International arrivals have increased from a very low number in the mid-1990s to about 2.1 million arrivals in 2008. Rich cultural assets, such as Angkor Wat, give Cambodia a comparative advantage. Cambodia has both improved its source market diversification, which should lower vulner¬ability, as well as enhanced its image as a safe travel destination.

As the domestic economy rapidly develops, there has also been an increase in domestic tour­ism. As a result of both domestic and international tourism, tourism receipts are making a significant contribution to the national economy. Tourist spending on hotels, restaurants and transport accounts for just under one-tenth of the Cambodian economy. Taking into account the impact of tourist spending beyond the tightly defined ‘tourism’ sector − for instance in the retail and construction sectors − some suggest that tourism constitutes about one-fifth of the country’s economy. The role of tourism as a pioneer sector, better able than other sectors to cope with the challenges posed by economies in transition, has been demonstrated in Cam­bodia. Investment in tourism has accounted for nearly a third of the FDI flows to Cambodia since the mid-1990s.

Particularly significant has been the recent growth of the tourism trade with Cambodia’s neighbours in Viet Nam, Thailand and Malaysia. This diversity of source markets is important because it reduces the vulnerability of the tourism sector to external shocks emanating from any one country.

Energy

The Royal Government has been making great efforts to rehabilitate, and develop the country, including the energy sector. Currently, the Cambodian energy sector is in a very nascent stage. Less than 15% of the population has access to electricity and Cambodia has the highest cost of electricity in Southeast Asia and the lowest level of consumption. Electricity costs range from US$ 0.09 per kWh to US$ 0.53/kWh for government services, and can be much higher for mini-grids serviced by rural electricity enterprises (REEs). The largest provider of electricity is Electricité du Cambodge (EDC), the state-owned electric utility company, although its coverage is limited to Phnom Penh, and three other major provincial capital cities. Outside of the EDC's coverage area, small independent power generators provide electricity. Some 600 REEs operate small diesel-powered mini-grids to supply electricity to an estimated 60,000 customers. An additional 8,000 battery-charging shops provide services to rural communities. The REEs are usually small, locally owned businesses that consist of a diesel engine and generator with low-voltage distribution lines. These small power suppliers generally have a lack of safety and technical standards, high system losses, and rudimentary equipment. Furthermore, electric service by local suppliers is limited to a few highly profitable areas at the expense of more economically depressed regions.

Aside from biomass, Cambodia has few conventional energy sources available within the country and even fewer that are currently exploitable. Wood accounts for more than 80% of total national energy consumption. The country relies almost entirely on the importation of fossil fuels, mainly diesel and heavy oil, for electricity production. Offshore surveys of oil and natural gas have been conducted over the past ten years with various successes and failures. A recent study concluded that the most promising sustainable energy projects in Cambodia are in the Areas of hydropower, biomass, and energy efficiency. In particular, small-scale projects, which may be also eligible for simplified methodologies under the Clean Development Mechanism (CDM) of the Kyoto Protocol, will have good potential for contributing to rural sustainable energy development.

The development of Cambodia’s energy sector may be critical if the country is to achieve its targets for poverty reduction. Sustainable energy can play an important role in this development by enhancing energy security and providing local economic benefits through job creation and reducing imports of fossil fuels. The benefits of distributed generation from renewable sources are especially valuable in Cambodia where there is the Challenge of providing energy services to a rural population with minimal existing infrastructure. The CDM presents a clear opportunity for Cambodia to develop sustainable energy solutions, rather than only those with the lowers initial capital cost.

Oil, Gas and Minerals: 

Oil and gas exploration recommenced in Cambodia in 1991 and have already produced promising results. 12,000 line kilometers of high quality seismic data have been obtained and indicate the potential for substantial oil and gas generation. Three major oil companies with 30 year contracts have already begun drilling.

Cambodia also has significant potential in the areas of gold, gemstone, phosphate, limestone, bauxite, clay, gravel and granite mining. Exploration for gold by three companies has already commenced.