In a recent report by the Asian Development Bank (ADB), it was revealed that Cambodia is making significant strides towards graduating from its Least Developed Country (LDC) status by 2027. This positive projection is a testament to the unwavering commitment and tireless efforts of the Cambodian government. Through the implementation of strategic policies and initiatives, Cambodia has been able to foster sustainable economic growth, improve infrastructure development, and enhance social progress. The government’s dedication to these endeavors, coupled with its focus on attracting foreign investments and promoting a favorable business environment, has greatly contributed to the country’s potential for achieving this milestone and unlocking new opportunities for its citizens.
Strong Progress Made
The ADB report stated that Cambodia is “well-positioned” for a successful review by the United Nations this year, a key step towards graduating from the LDC group. This positive outlook comes after Cambodia first met the graduation criteria in 2021.
Economic Benchmarks Met
A key factor in Cambodia’s potential graduation is its economic performance. The country’s national income per person currently stands at $1,590, exceeding the graduation threshold of $1,306.
Long-term Benefits from Graduation
The ADB report emphasizes the long-term benefits Cambodia can expect from graduating LDC status. This achievement would showcase the country’s development and stability, potentially attracting more foreign investment and accelerating economic growth. Graduation can also encourage economic diversification, reducing reliance on specific products and markets. Additionally, preparing for graduation strengthens Cambodia’s institutional capacity, leading to more effective governance and policy implementation.
Challenges to Address
While graduation offers significant advantages, the ADB acknowledges challenges as well. Cambodia stands to lose some trade benefits, such as tariff exemptions and preferential treatment for certain exports. This could impact major exports, particularly garments shipped to the European Union, which accounted for 12.7% of Cambodia’s total exports in 2023. The World Trade Organization predicts a potential 6% decrease in exports from least-developed countries like Cambodia, particularly affecting the garment sector. Graduation may also lead to a reduction in Official Development Assistance (ODA), which has significantly contributed to Cambodia’s recent growth.
ADB Remains Optimistic and Recommendations
The Asian Development Bank (ADB) maintains an optimistic outlook for Cambodia’s transition. To ensure a smooth process, Cambodia should continue expanding its involvement in free trade agreements, including those with the EU, to secure post-graduation market access. It is also crucial to prioritize economic diversification into new markets and higher-value products. Additionally, the country should explore the benefits of the Generalized System of Preferences Plus (GSP+) by ratifying environmental protection and good governance conventions. Strengthening human capital, supporting climate-resilient infrastructure, and fostering a favorable business environment for micro, small, and medium-sized enterprises are key factors for long-term growth. Finally, Cambodia must enhance domestic resource mobilization, reducing dependence on ODA for public investments in infrastructure and social development projects.
Source: Asian Development Bank (ADB). (April 2024). Asian Development Outlook.
Photo by: ADB Cambodia
