Cambodia Overview
Cambodia Overview The Kingdom of Cambodia has been officially independent since November 1953. Despite some achievements in economic development, the country still faces significant poverty and remains predominantly an agricultural nation.
Cambodia is considered one of the relatively poorer countries. According to the statistics from Cambodia’s Ministry of Economy and Finance, the country’s GDP in 2016 was $20.017 billion, with an economic growth rate of 6.88%. The per capita GDP was $1,140, representing a 5.19% increase compared to the previous year. In June 2017, the World Bank announced that Cambodia had officially graduated from the category of least developed countries and attained lower-middle-income status, effective from July 1, 2016.
In 2015, Cambodia had a population of 15,394,276, with 38% below the age of 17, 53% between 18 and 60, and 9% aged 61 and above. Over half of the population in Cambodia is around the age of 25, representing a youthful and vibrant labor force.
Cambodia’s economic system has undergone a transition from a mixed-planned model to a market-oriented one.
Since September 1993, Cambodia’s constitution has explicitly stated that the country follows a market economic system, promoting free-market principles, economic privatization, and trade liberalization. In April 1999, Cambodia officially became the 10th member of the Association of Southeast Asian Nations (ASEAN).
In 2003, Cambodia was granted membership in the World Trade Organization (WTO), making it the first least developed country to join the organization in its first eight years.
In 2007, Cambodia joined the China-ASEAN Free Trade Area Agreement.
Political System of Cambodia
Form of Government:
Cambodia is a constitutional monarchy that practices a multi-party system of liberal democracy. The King of Cambodia is the head of state and holds the power to appoint the Prime Minister, Cabinet members, senior military and civil officials, ambassadors, and judges. However, the “Constitution of the Kingdom of Cambodia” emphasizes that “the King reigns but does not govern.” The current King of Cambodia is Norodom Sihamoni.
Parliament:
The National Assembly is the highest authority and legislative body in the country. It consists of a Speaker, two Deputy Speakers, and a minimum of 120 members serving on various specialized committees. The National Assembly’s term of office is five years. Members of the National Assembly are elected through nationwide general elections, conducted through free, direct, and secret ballot voting. They are eligible for consecutive re-election.
Since March 2006, Heng Samrin has assumed the position of Speaker, succeeding Norodom Ranariddh. The National Assembly convenes twice a year, and during recess, the day-to-day affairs are overseen by the Standing Committee of the National Assembly. The Standing Committee is composed of the Speaker, two Deputy Speakers, and the chairpersons of nine specialized committees. The National Assembly has nine working committees, each consisting of at least seven members. The chairperson, vice-chairperson, and secretary of each committee are elected.
The Senate is responsible for reviewing bills passed by the National Assembly. It convenes at least twice a year. The King can appoint two senators, while the remaining senators are elected. Senators serve a term of six years and are eligible for consecutive re-election.
Government:
The government is the highest executive body in Cambodia. The Royal Government of Cambodia consists of the Prime Minister, Deputy Prime Ministers, Ministers, Deputy Ministers, and Secretaries of State, forming the Council of Ministers. The King appoints a prominent member of the winning party in the elections to form the government. After receiving a vote of confidence from the National Assembly, the King signs the decree appointing all members of the cabinet. The Council of Ministers operates under collective responsibility to the National Assembly, while each ministry operates under the responsibility of its respective minister.
The Fifth Government of the Kingdom of Cambodia
The Fifth Government of the Kingdom of Cambodia was formed in September 2013, with Prime Minister Hun Sen continuing in his role. The fifth government consisted of 24 ministries: Ministry of Defense, Ministry of Interior, Ministry of Parliamentary Relations and Inspection, Ministry of Foreign Affairs and International Cooperation, Ministry of Economy and Finance, Ministry of Information, Ministry of Health, Ministry of Industry and Mines, Ministry of Planning, Ministry of Commerce, Ministry of Education, Youth, and Sports, Ministry of Agriculture, Forestry, and Fisheries, Ministry of Culture and Fine Arts, Ministry of Environment, Ministry of Rural Development, Ministry of Social Affairs, Labor, Vocational Training, and Youth Rehabilitation, Ministry of Posts and Telecommunications, Ministry of Religious Affairs, Ministry of Women’s Affairs and Veterans, Ministry of Public Works and Transport, Ministry of Justice, Ministry of Tourism, Ministry of Land Management, Urban Planning, and Construction, Ministry of Water Resources, along with the Cabinet Office, Secretariat of State for Public Functions, Secretariat of State for Civil Aviation, National Bank of Cambodia, and Council for the Development of Cambodia.
Law on Political Parties
Cambodia practices a multi-party democracy. In October 1997, the National Assembly of Cambodia passed the “Law on Political Parties.” Cambodia has a diverse range of political parties. The number of parties participating in the first three elections was 20, 39, and 23, respectively. In the fourth election, the number of participating parties decreased sharply to 11, and in the fifth election, only eight parties participated.
Based on the previous three elections, the influential parties were the Cambodian People’s Party, the Funcinpec Party, and the Sam Rainsy Party. However, in the fifth election, the Cambodian People’s Party only won 68 out of 123 seats, challenging the previously dominant one-party system in Cambodian politics.
China-Cambodia Economic and Trade Relations:
Overview of Bilateral Economic and Trade Relations: China and Cambodia formally established diplomatic relations on July 19, 1958.
The signing of the “Treaty of Friendship and Non-Aggression between China and Cambodia” on December 19, 1960, marked a new stage in the development of bilateral relations. Over the past 60 years, the economic and trade cooperation between the two countries has been consolidated and developed on the basis of mutual respect and mutual benefit.
With Cambodia’s accession to ASEAN and the China-ASEAN Free Trade Agreement, bilateral economic and trade cooperation has entered a stable and rapid development phase. High-level visits between the two countries have been frequent, promoting deeper, higher, and faster development in various fields. In 2015, bilateral trade between China and Cambodia reached $4.43 billion, representing an 18% year-on-year growth.
From January to October 2016, bilateral trade amounted to $3.9 billion, an increase of 8.5% compared to the previous year. By October 2016, Chinese enterprises had signed cumulative construction contracts worth $14.67 billion in Cambodia, with completed turnover of $10.94 billion. Chinese direct investment in Cambodia reached approximately $3.93 billion by October 2016.
Economic and Trade Agreements: The following table presents some of the bilateral economic and trade agreements signed between China and Cambodia:
| No. | Agreement Name | Date of Signing |
|---|---|---|
| 1 | China-Cambodia Trade Agreement | July 1996 |
| 2 | China-Cambodia Agreement on Promotion and Protection of Investment | July 1996 |
| 3 | China-Cambodia Agreement on Tourism Cooperation | February 1999 |
| 4 | Joint Statement on Bilateral Cooperation between China and Cambodia | November 2000 |
| 5 | China-Cambodia Agreement on the Establishment of an Economic and Trade Cooperation Committee | November 2000 |
| 6 | Memorandum of Understanding on Agricultural Cooperation between China and Cambodia | November 2000 |
| 8 | Memorandum of Understanding on the Construction of the Cambodia Section of the Greater Mekong Subregion Information Superhighway Project | April 2006 |
| 9 | Establishment of the China-ASEAN Free Trade Area | January 1, 2010 |
| 10 | China-Cambodia Consular Treaty | February 2010 |
| 11 | Various agreements covering infrastructure, water resources, telecommunications, energy development, etc. | 2010 |
The Cambodia GDP
Cambodia’s GDP in 2019 was estimated to be $26.1 billion. In 2020, the GDP dropped by 0.2% due to the impact of the COVID-19 pandemic. The economy is projected to recover in the following years, with a projected growth of 3.6% in 2021 and 10.2% in 2022. The inflation rate was 2.9% in 2020 and is projected to be 2.5% in 2021 and 3.8% in 2022.
The COVID-19 pandemic has affected Cambodia’s economy by disrupting global trade and tourism, which are major drivers of the country’s economy. The pandemic has also led to job losses, decreased consumer spending, and reduced investment. However, the government’s efforts to implement economic reforms and encourage foreign investment are expected to support the country’s economic recovery.
5 Advantages of investing in Cambodia
- ASEAN Membership: Cambodia is a member of the Association of Southeast Asian Nations (ASEAN), which provides access to a market of over 600 million consumers and numerous regional trade benefits.
- WTO Membership: Cambodia has been a member of the World Trade Organization (WTO) since 2004, which has helped increase its integration into the global trading system.
- Duty-Free or Preferential Export Access: Cambodia has duty-free or preferential export access to most developed economies, making it easier for businesses to export their products to these markets.
- Favorable Investment Environment: The Cambodian government has implemented policies to create a favorable investment environment, including tax incentives and streamlined processes for investment applications.
- Low Labor Costs and Dynamic Workforce: Cambodia has one of the lowest labor costs in Asia, making it an attractive location for labor-intensive industries. The country also has a dynamic and growing workforce, providing a pool of skilled workers for investors.
What industries perform well in Cambodia?
The two largest contributors to Cambodia’s GDP are the garment and textile industry, and tourism.
The garment and textile industry is a major source of employment and foreign exchange for Cambodia, accounting for over 80% of the country’s total exports. Brands such as H&M, Nike, and Adidas source their products from Cambodia, making it a hub for the global apparel and textile trade.
Tourism is another significant contributor to the economy, with millions of visitors visiting Cambodia each year to see its famous Angkor Wat temple and other cultural and natural attractions. The tourism industry provides employment and generates revenue from accommodation, food and beverage, transportation, and souvenirs, among others.
In addition to these two main sectors, agriculture, construction, and services such as retail and finance are also growing in Cambodia and contributing to the country’s economic growth.
In conclusion
In conclusion, Cambodia’s economy is rapidly developing, with a focus on the garment and textile industry, tourism, agriculture, and construction. The country has a favorable investment environment, low labor costs, and a dynamic workforce, making it an attractive location for businesses looking to expand in Southeast Asia.
If you are in the land lease business in Cambodia, the country’s growing economy presents a unique opportunity to invest in and contribute to its continued development. With a favorable investment environment, a strategic location within ASEAN, and a growing workforce, Cambodia is poised for continued growth and success. If you are interested in expanding your land lease business in Cambodia, now may be an excellent time to consider the opportunities available in this dynamic and growing economy.
References
- Trade In Cambodia – Figures And Facts – 2022 Update. (n.d.). Aquarii. https://aquariibd.com/trade-facts-figures-and-trends-in-cambodia/
- Amarthalingam, S., & Amarthalingam, S. (n.d.). What ails Cambodia’s logistics sector? Phnom Penh Post. https://www.phnompenhpost.com/special-reports/what-ails-cambodias-logistics-sector
- Mona, T. (2022, February 4). Investing in Cambodia. KPMG. https://kpmg.com/kh/en/home/insights/2022/02/investment-in-cambodia.html
- TRADING ECONOMICS. (n.d.). Cambodia GDP – 2022 Data – 2023 Forecast – 1960-2021 Historical – Chart – News. https://tradingeconomics.com/cambodia/gdp