To continue on the path of rapid economic expansion, the Kingdom needs to undergo deep structural reforms, increasing investment in education and professional training, and supporting small-business owners, the World Bank concluded in its latest report.
The tenth edition of the Cambodia Economic Update, released yesterday by the World Bank, urges authorities to channel more resources into supporting small entrepreneurs, pointing out that 90 percent of all enterprises in the Kingdom fall under the category of micro, small and medium-sized enterprises, or MSMEs.
Policymakers must focus on helping MSMEs grow into larger operations so that they can employ a larger number of people, said Sodeth Ly, an economist at the World Bank. Addressing the “missing middle” in Cambodia’s private sector should be a top priority, the report states.
To achieve this, the World Bank suggests introducing labour market information networks and leveraging the use of digital and internet technology to facilitate job matching, helping migrant workers settle back into the country to bring new skills to the market, as well as reducing fiscal constraints on small-business owners.
“Cambodia can diversify growth and create more jobs by reducing the costs of firm formalisation, operation, and financing,” said Inguna Dobraja, World Bank’s country manager.
According to the report, 47 percent of all jobs in the Kingdom are salaried positions, 35 percent are in family-run farming businesses, and 18 percent are in non-farm household enterprises.
The report suggest redirecting more resources into helping non-farm household enterprises grow, as they are more likely to create jobs. Supporting owners of these enterprises with professional training programmes and courses on digital and internet technologies are some of the initiatives the World Bank proposes.
“To maintain strong growth, it is essential that Cambodia invests more on education and skills training while addressing the constraints facing small and medium businesses. Investing in people is the best for a more prosperous future,” said Ms Dobraja.
A more skilled labour force will boost productivity and help minimise the impact of rapidly rising wages.
“Improving skills in the labour force is important, but we need to make sure that we are targeting the right skills. We need to focus on valuable skills that are in high demand in the job market,” said Mr Ly.
Despite undergoing an impressive economic expansion in recent years, job growth has actually been decelerating in Cambodia, particularly since 2012, the report says.
Cambodia’s working age population surpassed 10 million people in 2015, up from just over 8 million in 2007. This is a larger increase than that seen in the net labour force – defined as those who worked or looked for a job – which increased by 1.3 million people over the same period.
On average, Cambodia adds 164,000 people to its labour force every year, according to the World Bank.
“Given the existing population dynamics, the country has a window of opportunity for rapid economic growth during the next 30 years, until its working age population starts to decline in 2050,” the report says.
Economic growth in Cambodia remains robust and is projected to accelerate slightly to 6.9 percent in 2018, compared with 6.8 percent in 2017, buoyed by a rebound in textile and apparel exports as well as a good performance in the tourism and agriculture sectors.