In March, the World Bank forecast a slight dip in economic growth by 2019 due to rising inflation and a slowdown in the expansion of garment manufacturing. This means that while Cambodia’s GDP growth is still projected to top Vietnam and Thailand’s in 2019, it might align more closely with Burma and Laos.
The country’s GDP growth rate is projected to remain steady at 6.9% this year and next, as stronger fiscal expansion, agricultural reforms, and the continuing buoyancy of tourism offset moderation in the construction sector. As in Vietnam, Cambodia has seen livelihood diversification in rural areas, which has strongly contributed to poverty reduction. Non-agricultural income now constitutes about 36% of rural population revenue. This trend indicates that the rural non-farming economy could be a significant contributor to poverty reduction in the country in years to come. Foreign direct investment (FDI) as a percentage of GDP is expected to decline over the next two years, from 9.4% to 6.55%, as local investment rises significantly. For now, FDI – US$1.7 billion in net inflows in 2015 – remains significant.
According to Moody’s Investors Service, it was reported that, since 2012, China has surpassed all multilateral organizations combined and the European Union in annual aid. A diplomatic shift toward Beijing has seen Cambodia scrap a long- standing military development aid program and cancel a joint military exercise with the US. Cambodia has gone further than other Southeast Asian nations in developing ties with China, with the move away from Washington accelerating under President Donald Trump. Trump might nevertheless open new doors between the two countries, as experts forecast that Cambodia could take advantage of his crackdown on trade imbalances between the US and 16 other countries, including Thailand, Vietnam, Malaysia and Indonesia. In April, Cambodia’s National Assembly passed 22 amendments to the country’s Law on Political Parties.
The revised law allows the Supreme Court and Interior Ministry to suspend and dissolve political parties for ambiguous offenses such as causing “incitement that would lead to national disintegration” and “subverting liberal multi-party democracy”. This is especially problematic for former politician Sam Rainsy, who lives in exile in Paris after resigning as president of the main opposition party in anticipation of the revised law. Kem Sokha is now the acting party president. In February, a national healthcare policy for the elderly was presented in Phnom Penh in a bid to tackle the problem of an aging population.
Although the policy will be costly and will take time to be fully implemented, some initiatives have already started, according to authorities, including simple health screenings. In the same month, King Norodom Sihamoni signed a royal decree establishing a social security healthcare fund for public officials, civil servants and veterans. This will ensure that more than 300,000 public servants in the country will receive insurance that covers emergency treatment, pre- and post- natal care, medical consultations and other services, financed by a fee out of paychecks and government funding. Respect for pharmaceutical patents in Cambodia is expected to remain an issue, despite efforts to modernize the country’s intellectual property infrastructure. Cambodia has wanted to exclude pharmaceutical products from recent agreements signed with the European Patent Office. The January validation agreement was intended to lead to all European patents being recognized in Cambodia upon demand by the applicant. The agreement is due to become effective by July 1, if adopted into Cambodian law by then. However pharmaceutical products are excluded for the length of the transitional period.
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Views from the region - KH - Q1 2017