With the ambition of becoming a high-income economy by the year 2050, Cambodia is looking at the big picture, both in the region and the world. Sok Chenda Sophea, Secretary General of the Council for Development of Cambodia, spoke with Management Insider about exactly what provisions have been put in place to clear the path for foreign investors.
You are very optimistic about the economic future of Cambodia. Can you explain why?
Cambodia has great assets to promote: first, we are one of the most welcoming countries in ASEAN for investors. We provide an open environment with few restrictions. Of course, there is a need for guidance policies, otherwise we would risk becoming an unbridled capitalist country, but our government did put in place a conductive regulatory framework for the private sector to prosper. Secondly, we have a young population with great potential, both as a labour force and as consumers. 68% of our population is younger than 35.
Finally, our geographical position in ASEAN is strategic. Cambodia is a key link in the global ASEAN supply- chain, where transport and infrastructures are essential to respond to the new production requirements.
In today’s economy, there is a production fragmentation: labour is divided between geographical areas that have developed specific expertise. Cambodia should be able to take a role in this production chain in many industries such as rubber, electronics and automotive.
We must build together the physical and digital networks that will help us interact in this globalised economy.
Do you see other ASEAN countries as com- petitors?
Definitely not. Our key words are connectivity and complementarity. We must build together the physical and digital networks that will help us interact in this globalised economy. The full-fledged implementation of the Cross Border Transport Agreement (CBTA) will be a key success factor for our countries, because it will abolish bottlenecks at the frontiers. If we have a railway connection between Phnom Penh and Bangkok, the two cities will be able to exchange products in just seven or eight hours by rail. But if the border crossing process takes four hours, then the connectivity is not there and we will lose the advantage of our common infrastructure.
ASEAN countries will move forward together. We need a collective approach, not a nation-centric approach. Consider the Mekong area, with Thailand, Myanmar, Laos and Vietnam. See how our countries are changing right now, with Cambodia becoming a lower-middle income economy and Myanmar changing its political and economic situation. The Mekong countries are indeed a promising emerging market. Our countries need to achieve a balance in their economies between their internal markets and their exports, and ASEAN is a high-potential market for our industries. This is a complete transformation of landscape. Together we are building our future in this connected economy.
The achievement of the ASEAN Economic Community will mean more trade and investment flows within ASEAN. But there are even greater potential benefits in the achievement of the Regional Comprehensive Economic Partnership (RCEP) with ASEAN as its core, along with China, South Korea, Japan, India, Australia and New Zealand. RCEP will promote broader Asian regional trade and investment flows but also includes important provisions to enhance economic cooperation to narrow the development gap in the region.
From a production perspective, many international companies have adopted the “+1” strategy: they operate in a base country, and also have operations in a second country to diversify their production units and reduce the risk of increased production costs. In this “China+1” or “Thailand+1” strategy, Cambodia can be the secondary country for these investors.
These ambitions need good governance to be achieved. How does that work in Cambodia?
The role of the government is to define the vision, the direction, we would like the country to head towards. But it is the private sector that is the engine of growth. In that spirit, our government has welcomed the partnership with the private sector.
As such, since 1999, at the initiative of Samdech Techo, Prime Minister of the Kingdom of Cambodia, a dialogue mechanism has been created: the Government Private Sector Forum (GPSF), whereby on an annual basis, the Prime Minister himself chairs a meeting attended by the whole Cabinet, all Provincial Governors and representatives of all industries. These fora have provided a platform for the private sector to air their concerns and propose policy recommendations. Moreover, 11 sectoral Working Groups, co-chaired by a minister and a business leader, meet regularly to address and find solutions to issues investors are facing in their operations.
Is there any specific challenge that Cambodia needs to address first?
Many of our investors complain about the shortage of skills in our labour force. But remember where we come
from: During the 1990s, our priorities were roads, water, energy and human resource development. The time has come for Cambodia to invest more in its people; for human resource development to become the first priority.
As for quick win measures, we should design and provide more vocational training programmes in order to supply the required workers and technicians to industries, as designated in our Industrial Development Policy. This is key to continue to attract investors and support our objective to diversify the economy and to create more added value in the country.
Words by Dominic Ronzo