Cambodia will see development challenges in 2016

Subject

Cambodia economic challenges and reform outlook.

Significance

Cambodia will graduate to lower-middle- from low-income status in 2016. However, the country faces challenges moving further up the economic value chain, including social tensions, corruption and weak political institutions. Funding needed to remove industry bottlenecks and create a more diversified manufacturing base is being diverted into populist programmes.

Impacts

• Cambodia will struggle in the long term to avoid the 'middle-income' trap unless it broadens its industrial base.
• Proposed investment reforms appear promising, but need better enforcement measures.
• The garment sector faces further strikes, potentially hitting competitiveness.