Cambodia may face tougher challenges than some of its ASEAN counterparts as it rebuilds its economy from the impact of the Coronavirus because it has fewer fiscal resources, meaning the social safety net is not as strong as some other Southeast-Asian nations, according to Jayant Menon, a visiting fellow at the ISEAS Yusof Ishak Institute in Singapore.
However, he says there are also several factors which work in its favour, including a young population, which is likely to have suffered less from the effects of Covid-19. It also has a large agricultural sector, which has been providing something of an economic buffer as farming is less affected by the social distancing and lockdown problems that have affected manufacturing and other city-based jobs.
He said the country’s poor are likely to have been affected more by previous viruses than their wealthier counterparts, which could make them more resistant to Covid-19. On the other hand, he said, malnutrition can affect physical development and immune response, leaving them vulnerable to the virus.
Agriculture is a mainstay of the Cambodian economy, contributing about 31 percent to gross domestic product (GDP) in 2021, rising from 21 percent in pre-pandemic 2019. In 2019 around 3 million people worked in agriculture and that number is likely to have increased in the past two years as people who lost their jobs in factories and the tourism industry took up farming.
However, surveys carried out by the Centre for Development Economics and Trade (CDET) at the Cambodia Development Resource Institute show that the benefits have not been significant.
“It seems that in 2020, although growth in the agriculture sector did not contract, the growth was not something remarkable,” CDET Research fellow and Director Roth Vathana said.
Tourism is also a big contributor to economic growth, or was until Covid-19 forced border closures, keeping foreigners out of the country, and travel restrictions limited domestic tourism.
In 2019 the servicers sector, much of which comes from tourism and hospitality, made up around 39 percent of GDP.
“The services sector has been impacted the most and in that the tourism and hospitality sectors have been impacted,” Roth said, noting that the year on year drop in tourism in the second quarter of 2020 was almost 100 percent. He said the tourism sector’s recovery will be slow, even though the country reintroduced quarantine-free tourism for foreign visitors at the end of last month.
Roth said the government’s efforts to help struggling sectors and the nation’s poor have proved effective.
“There is a range of fiscal stimulus when it comes to mitigating the Covid-19 pandemic. One of the important fiscal stimulus packages right now is the Cash Transfer to the Poor and Vulnerable (CTPV) during Covid-19,” he said.
It started in March of this year but the government has extended the scheme up until now because of the continuing impact of the pandemic. “The government is also providing subsidies and tax relief for firms in order to deal with the crisis as well,” Roth said.
The CDET carried out a survey of experts last year to ask them for their opinions on how to best help the economy recover from Covid.
In terms of government policies they said the CTPV scheme should continue and social protection mechanisms should be more carefully targeted to ensure that the money gets to the people who really need it and the emphasis should be on inclusivity, ensuring sustainable development, support for small and medium-sized companies, closing the income gap between the countryside and the cities and narrowing the gender gap between men and women in terms of pay and opportunities.
“We are not out of the woods yet so we will have to protect the most affected, the poor and the vulnerable. We suggest continuing the cash transfer for the poor and vulnerable programme but at the same time increase the coverage,” Roth said, adding that contributing more funds to the scheme would reduce the need to target the payouts because more people will receive benefits.
“For resilience we should increase social protection as a percentage of GDP. Cambodia is one of the countries that has low expenditure on social protection as a percentage of GDP. Moving forward the government should think about including social protection systematically as part of the fiscal policy.”
The experts surveyed also said the economy should become more diversified to move away from the focus on the labour intensive garment manufacturing industry.
“Infrastructure projects are still necessary because, for example in terms of the tourism sector I don’t think international arrivals will increase incrementally for the next two or three years. Right now an option for us is to look domestically, trying to mobilise domestic tourism. That also links to infrastructure, ecotourism sites that have not been accessible to the public,” he said.
Roth praised the government for a successful immunisation campaign. Cambodia has successfully fully vaccinated nearly 88 percent of the population, according to the Reuters Coronavirus Tracker but Roth says the campaign should continue with booster shots to help protect against new variants of Covid-19.
This article was first published in Khmer Times. All contents and images are copyright to their respective owners and sources.
