EXCERPT | Cambodia’s Place in ASEAN

Cambodia is one of the smallest and poorest economies in ASEAN. It accounts for only 0.7% of total regional economic activity and had the lowest GDP per capita in 2014.

By Asian Development Bank & International Labour Organization

EXCERPT |  Cambodia’s Place in ASEAN


Cambodia is one of the smallest and poorest economies in ASEAN. It accounts for only 0.7% of total regional economic activity and had the lowest GDP per capita in 2014 (Table 1). Only the Lao PDR has a smaller economy, and the next-poorest countries in the region in terms of GDP per capita are Myanmar, the Lao PDR, and Viet Nam. Yet GDP per capita in the Lao PDR exceeds Cambodia’s by about 60% and Viet Nam’s by 74%. Thailand’s GDP per capita is more than three times Cambodia’s.

Nevertheless, the Cambodian economy has been performing strongly relative to other ASEAN member states, albeit from a low base. The total output of the ASEAN region grew by 5.5% in 2014, while Cambodia grew well above this average, at 7% (Table 1). Unemployment in Cambodia is the lowest in the region, although this is largely because most of its people cannot afford to be unemployed.

Cambodia is a small economy with a young population, but its demography is changing fast. 

By land area, only Brunei Darussalam and the city state of Singapore are smaller than Cambodia in ASEAN. Yet population density is modest: at 87 people per square kilometer, it is much higher than the Lao PDR and comparable to countries such as Malaysia and Myanmar (Table 2),6 but much lower than Indonesia, Thailand, or Viet-Nam. Population growth is above the overall ASEAN average, and is in fact the highest (along with the Lao PDR) among the 10 ASEAN countries. Cambodia’s population is also young, with 31% below 15 years of age and only 5% older than 65 (Table 2). The old-age dependency ratio is among the lowest in the region.

Table 1: ASEAN Macroeconomic Indicators

Table 1: ASEAN Macroeconomic Indicators


Table 2: ASEAN Demographic Structure, 2014

Table 2: ASEAN Demographic Structure, 2014

Table 3: ASEAN Social Indicators

Table 3: ASEAN Social Indicators


While Cambodia has reduced the most extreme forms of poverty, many are still poor. 

In terms of various poverty measures, Cambodia is placed in the medium range among ASEAN members, excluding Brunei Darussalam, Myanmar, and Singapore due to lack of data (Table 3). At the same time, income inequality, as measured by the Gini coefficient, is the lowest in Cambodia among the countries. While many Cambodians are still poor, success at reducing extreme poverty has helped keep income inequality relatively low compared with other countries in the region.

Cambodia lags in literacy and education. 

Despite the notable progress on some social indicators, Cambodia lags behind on literacy and education. Its literacy rate of about 74% in 2009 was lower than almost all other countries in the region (World Bank, World Development Indicators, accessed September 2015).Except for Cambodia and the Lao PDR, adult literacy exceeds 90% in other ASEAN countries (Table 3). 

Cambodia’s unit value of exports has risen much more slowly than in other ASEAN countries

The increase in volume of merchandise exports between 2000 and 2013 (Figure 1) was the strongest relative increase, notwithstanding the comparatively heavy adverse effects of the global financial crisis in 2008/2009. Viet Nam ran a close second, followed by the Lao PDR. Cambodia’s strong performance largely stems from rapid growth in the garment manufacturing sector.

However, an examination of the long-term trend in the value of merchandise exports (Figure 2), rather than volumes (Figure 1), adds a different and important piece to the puzzle. When export value is compared, long-term growth in Cambodia is still strong, but less rapid than the Lao PDR or Viet Nam, both also fast-growing economies. Both the latter were able to increase export values more from the base year of 2000; in Myanmar the increase in export values was similar to Cambodia’s. This difference between value and volume indicates that Cambodia has been less successful in increasing the unit value of its exports compared with other rapidly growing countries in the region: instead, it has been shipping out more units of the same kinds of modestly valued products. The strong dependence on the garment sector for merchandise exports likely explains this, with production remaining focused on low-value added, cut-make-trim apparel production.

Figure 1: Volume of Exports Index, 2000–2013 (2000 = 100)


Figure 1: Volume of Exports Index, 2000–2013 (2000 = 100)


Figure 2: Value of Exports Index, 2000–2013 (2000 = 100)

 Figure 2: Value of Exports Index, 2000–2013 (2000 = 100)


Cambodia’s export structure is heavily concentrated in manufacturing and travel.

In 2013, the share of manufacturing in merchandise exports stood at 92.8%, by far the highest in the region (Table 4). Compared with other ASEAN economies, Cambodia’s merchandise exports feature a comparatively low proportion of foods, even though food exports could potentially be much more significant for the country. In commercial services exports, the travel sector dominates, accounting for more than 75% of exports. Transportation services, at 10.7% in 2013, contributed the second-largest share. Cambodia’s export structure is skewed to a few groups of commodities and services, compared with most other countries in the region. The key exports have been relatively slow to increase in value (Figure 2). 

Table 4: Export Structure of Merchandise and Commercial Service, 2014

 Table 4: Export Structure of Merchandise and Commercial Service, 2014


The picture for the business environment is mixed, but improvements are possible at relatively low cost.

Increasing the value of output, whether for domestic consumption or export, and diversifying the economy require domestic development of businesses as well as the attraction of new ones from abroad. Available indicators on the ease of doing business and the effectiveness of the regulatory environment are imperfect measurements of a complex and multidimensional concept, but give some indication of where improvements could be made.

By some of these indicators, Cambodia appears much less welcoming to private business than the majority of its neighbors (Table 5). The World Bank’s “Doing Business” indicators rank Cambodia toward the lower end of ASEAN countries, and indeed in the world. Cambodia does especially poorly in the subcategories “starting a business” and “dealing with construction permits.” However, the legal environment appears to be more favorable to business. 

Table 5: Business Environment Indicators, 2014

Table 5: Business Environment Indicators, 2014


Thus the overall picture is mixed. The regulatory environment is viewed as generally unfavorable for business and the official costs associated with exports are high. However, the formal legal environment has relatively strong guarantees of rights associated with credit arrangements, and formal tax rates for businesses are low. This suggests that streamlining the regulatory environment for private business could produce significant room for gains at relatively low cost, since conditions could be made considerably better for business without reducing tax revenue.

NOTE: This article is an excerpt taken from a  report, titled - "Cambodia: Addressing the skills gap" - was prepared by a team from the ADB’s Economic Research and Regional Cooperation Department, under the supervision of Cyn-Young Park, director of the Economic Analysis and Operational Support Division, and from the International Labour Organization (ILO), under the supervision of Maurizio Bussi, director of the Decent Work Technical Support Team for East, Southeast Asia and the Pacific. Download the Full Report - Pdf

© Asian Development Bank https://openaccess.adb.org. Available under a CC BY 3.0 IGO license.
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IndraStra Global: EXCERPT | Cambodia’s Place in ASEAN
EXCERPT | Cambodia’s Place in ASEAN
Cambodia is one of the smallest and poorest economies in ASEAN. It accounts for only 0.7% of total regional economic activity and had the lowest GDP per capita in 2014.
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