Although garment exports climbed nearly 10 percent to U.S.$3.54 billion in the first nine months of 2012, consumer confidence in Cambodia’s biggest market, the United States, is believed to have declined in December as Washington struggled to reach a consensus on tax hikes and spending cuts ahead of the New Year. Meanwhile, demand for garments in the EU, Cambodia’s second-largest market, remains sluggish as the euro-zone crisis persists. In other words, the festive shopping period in the West is not expected to have been that merry for garment producers in Cambodia. But projects like Vattanac Tower have softened the blow.
“The overall impact on the industry sector is somewhat mitigated by the strong performance of the construction sector in the first half of 2012,” the World Bank said in its report.
Tourism is also booming as ever-larger numbers of overseas visitors head to Cambodia’s star attraction Angkor Wat. On December 31, Cambodia looked to further tap into the millions of visitors to Thailand each year as the two neighbors started a joint visa scheme.Enjoying this article? Click here to subscribe for full access. Just $5 a month.
But Phnom Penh-based economist Chan Sophal says that with garments and tourism remaining crucial pillars of growth, confidence in an economy with so much room for expansion must be tempered by its vulnerability to external shocks.
At the height of the global crisis in 2009, Cambodia saw one of the most severe positive-to-negative GDP swing in East Asia as it recorded a mild recession following a period of booming growth.
“It [the economy] is still dependent on external factors in the short and medium term,” says Chan Sophal.
Like many of the region’s rapidly growing economies, the growth data and positive headlines coming out of Cambodia belie the staggering lack of progress on the ground.
When ruling party senator and sugar tycoon Ly Yong Phat opened a new sugar refinery in Kampong Speu province last week, he promised total investment of $400 million.
“We are trying to make the rural areas of Cambodia into a business place,” he was quoted by the Phnom Penh Post as saying.
Some 10,000 workers are to be hired for the project, which includes sugar cane plantations, said Ly Yong Phat. But wages start at just 12,000 riel (U.S.$3) per day, he added, and there are fears that in creating these low-paid jobs, the project may simultaneously wipeout the livelihoods of some farmers. In a country with a notoriously poor record on land rights, Ly Yong Phat is considered among the worst offenders, according to rights groups.