Cambodia’s undertaking of Belt and Road Initiative and Industrial Development Policy

This article was published as Policy Brief Issue 3, 28 September 2018, Cambodia Development Centre.To download PDF version, please find the link below:
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Cambodia’s undertaking of Belt and Road Initiative and Industrial Development Policy

Cambodia is one of the strong supporters of China’s BRI. In addition to cooperation agreement to further enhance comprehensive strategic partnership signed during President Xi’s visit to Phnom Penh in 2016, Cambodia and China agreed on an ‘Outline Cooperation Plan to Jointly Build the Silk Road Economic Belt and the 21^st Century Maritime Silk Road’ a year later.

Cambodia’s firm support of BRI is driven by both strategic and economic considerations. Strategically, the initiative represents opportunities for Cambodia to reduce dependence on the development of Western donors whose assistances in many cases frustrated the government via their strict conditions attached. Since the 2000s China[1] overtook some major Western donors including EC and USA and emerged as “the largest single donor” to Cambodia. Equally important is the fact that the government of Cambodia favours China’s non-interference policy on the ground that it enable Cambodia to maintain sovereignty and pursue independent foreign policy on the international stage.

Economically, BRI can be a new source of Cambodia’s next stage of growth and development through ever increasing infrastructure development, investment, trade and tourism. During the visit of State Councilor Yang Jiechi in April 2017 in Phnom Penh, Prime Minister Hun Sen said: “the Belt and Road Initiative is of great historical significance, which will surely advance regional connectivity and the construction of regional integration, and bring enormous opportunities to the development of countries in the region. The Cambodian side hopes to realize better and faster development of its economy through further deepening bilateral practical cooperation under the Belt and Road framework” [2]. For China, Cambodia is its old and close ally that can play important role in promoting regional and sub-regional cooperation as well as the construction of its BRI (Pou 2017).

Cambodia already has its own national development policies such as the Rectangular Strategy Phase III and Industrial Development Policy (IDP). In consistency with the goal of BRI in promoting policy synergy, Cambodia’s designed policies have been fully used to shape direction of cooperation between Cambodia and China within BRI framework.

Out of the 14 points of cooperation measures that have been laid out at the Belt and Road Forum, Cambodia and China have clearly identified specific areas of cooperation that best fit with Cambodian and Chinese national strategies. Based on the MoU on Formulating the Outline of Bilateral Cooperation Plan, Cambodia and China have identified 7 key areas namely infrastructure, agriculture, capacity building, industrial cluster, culture and tourism, finance and eco-environment protection. In the 7 key areas, there are 4 areas on the MoU that are in line with priorities of the IDP namely promotion of agro-industry, stronger boost for infrastructure, promotion of industrial cluster and industrial human resource capacity building.

Cambodia’s growth metrics need nuance to uplift citizens

24 July 2018
Author: Sim Vireak, Phnom Penh
Cambodia’s fast growth rate over the past few decades has contributed to a rise in income levels and a drastic reduction in poverty in the country. All major financial institutions such as the International Monetary Fund, World Bank and Asian Development Bank (ADB) forecast Cambodia’s GDP growth to stand at around 6.9 or 7 per cent in the near term. Cambodia will likely transition out of its least developed country status after 2025 if it can maintain this growth rate.

The United Nations Development Programme (UNDP) estimates that Cambodia’s poverty rate could be below 10 per cent. But even if the poverty rate has fallen below 10 per cent, this does not mean that Cambodia’s fight against poverty has come to an end. Rather, it means that the poverty rate will soon become an obsolete instrument through which to measure Cambodia’s economic success.
Consider the case of Vietnam. Vietnam has been very successful in generating economic growth and reducing poverty over the last decades. The poverty rate decreased from 58.1 per cent in 1993 to about 10 per cent in 2012. Yet despite Vietnam’s successes in poverty reduction, around 30 per cent of the total number of poor households in 2012 were non-poor households in 2010 that fell back into poverty.
The ADB and the World Bank have warned policymakers about the rate of the ‘near poor’ in Cambodia. Although the fight against extreme poverty is indeed a great success for Cambodia, more than 70 per cent of Cambodians still live on less than US$3 a day. This means that many Cambodians remain vulnerable to falling back into poverty.
To avoid such a regression, measuring Cambodia’s future growth should be based on two sets of criteria: improving Cambodians’ quality of life and increasing their prosperity. In other words, the benchmarks should be ‘people-centred’.
To capture a better picture of people’s quality of life beyond income-based measurements, Oxford Poverty and Human Development Initiative Director Sabina Alkire and Professor James Foster created a new method for measuring multidimensional poverty in 2007. The use of Alkire and Foster’s ‘Multidimensional Poverty Index’ (MPI) has gained popularity in policy agendas in many countries around the world such as Mexico, Colombia, Costa Rica, Vietnam, the Philippines and China.
The MPI can be adapted to the national context and priorities of each country. For example, Mexico’s MPI incorporates the following dimensions: educational gap, access to healthcare, access to social security, basic services at home, quality of living spaces, access to food, the current income per capita and the degree of social cohesion.
In Cambodia, the UNDP has also used the MPI to analyse poverty through its Human Development Index (HDI). The HDI is a summary measure for assessing progress in three basic dimensions of human development: a long and healthy life, access to education and a decent standard of living. In 2014, the poverty rate was 13.5 per cent in Cambodia but the HDI suggested that some 33 per cent of Cambodians were multidimensionally poor.
Cambodia must also consider how to measure increasing prosperity. When poverty is reduced, it means that those who were previously poor have now become better off. Measuring the size of the middle class can therefore also be a benchmark of Cambodia’s success in economic development.
On how to measure the middle class, Homi Kharas defined a global middle class as all those living in households with daily per capita incomes of between US$10 and US$100 in 2005 purchasing power parity terms. According to this definition, approximately 0.3 million people or 2.3 per cent of the total population of Cambodia were middle class in 2005.
Kharas’ method of measuring the size of the middle class should be subject to further scrutiny in its application, as there are likely to be differences between a global middle class and a middle class in Cambodia’s context that are not accounted for in this definition. Still, the MPI and the size of the middle class offer various options through which to measure Cambodia’s economic growth to ensure that Cambodia’s future development is people-centred, improves citizens’ quality of life and enhances prosperity.
Sim Vireak is a public servant in Cambodia. This article is his own work and does not necessarily represent the views of his institution or the Cambodian government.
(View original source: http://www.eastasiaforum.org/2018/07/24/cambodias-growth-metrics-need-nuance-to-uplift-citizens/)