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Could agriculture save Cambodia from negative growth?

Stéphane Guimbert's picture

Emerging from such a difficult history and sustaining double-digit growth continues to drive Cambodia quickly past many crossroads.
Three weeks ago I presented our analysis on growth to a business roundtable with the government of Cambodia, organized by The Economist. Its title, "On the verge of a breakthrough?", reminded me of a 2004 report prepared by the World Bank called "Cambodia at the Crossroads".

It should be of little surprise that a country emerging from such a difficult history and sustaining double-digit growth would drive quickly past many crossroads. The country's key crossroad might have been in the late 1990s when peace was solidified. Or in 2005, when the multi-fiber quotas were dismantled, ending Cambodia's higher quotas to the United States. Or at the time of the adhesion to ASEAN or to the World Trade Organization. Each general election has also marked a crossroad. Most recently, the Khmer Rouge Tribunal is also a major crossroad.

So, what kind of crossroad for can be expected 2009? Last week, the IMF suggested Cambodia will see a negative growth of 0.5 percent in 2009, resuming the discussion covered in my last blog post. Forecasting this year's growth is generating a lot of debate in Cambodia.

A key question – raised by the Prime Minister himself – is the role that agriculture can play. I won't risk a prediction since the only certainty is that agriculture is weather-dependent (and I am not good at weather forecasts). Agriculture could play an important safety net role as workers loosing their jobs might go back to rural areas. This still has a negative impact on growth since this gets workers moving from higher to lower productivity sectors (e.g. from garments to agriculture).

But that view might surprise others. In many countries, the opposite would happen, with increasing stress on the economy leading to a migration from rural to urban centers. Cambodia is probably indeed different from other countries, as evidenced in findings by Indochina Research (pdf). Compared to neighboring Lao and Vietnam, Cambodians are much less in love with their cities. But the magnitude of the migration and the capacity of the rural and urban sectors to absorb them are unknown.

So, indeed this year, there might be important crossroads to watch: Not only how the economy will react to the global crisis, but also potential significant migration and distribution effects.

Post Scriptum: I apologize for those readers who came here looking for a review of driving practices and crossroad management, on the roads of Cambodia. This certainly would be worth another blog entry.

Image credit: niamhcotter at Flickr under a Creative Commons license.

Comments

Hi, Nice write up. I've wondered myself too why more Cambodians don't flock to the city. Thanks also for the link to Indochina Research. I hadn't heard of them before. All the best, Thomas http://sites.google.com/site/tfrhoden/Home

Submitted by B.C. Albaghetti on
Despite the recent shift of jobs into manufacturing, about 80% of Cambodia's population engages in agriculture (subsistence farming), rice being the principal crop. Leaving aside the weather, farming is often credit-dependent as well. A survey of Cambodia's Ministry of Land Management of 5 years ago showed that expenditures for rice production were being financed 90% by the farmers themselves, 8% by loans from relatives/friends, and 2% by credit from NGOs, MFIs and commercial banks. Under the current conditions, it seems likely the fraction of farming financed by credit will be higher. With the Cambodian bank sector considered under increasing strain, the role of MFIs in supporting farming looms larger. Microfinance has been one of fastest growing sectors there, with annual borrower growth of about 20% since 2004, according to IFC data -- although still small compared to commercial banks, MFIs have about 3/4 of the country's credit borrowers. Microfinancing availability (enhanced by the 2008 government decision of allowing MFIs to accept deposits, one hopes) is likely to have an important effect on agriculture's role on the growth of Cambodia.

Submitted by Pisey on
I have been observing that so far many people keep saying that Cambodia is an agriculture-dependent country in one sense. Unfortunately, no agricultural commodity market in Cambodia. I wonder if the World Bank is currently working on this sub-sector or not. Pisey

Submitted by Panha on
Some do but most dont think it is the right decision to make. There is little jobs available for them in the city. Most of the jobs are just for survival only... Even those who have completed their Bachelor degree dont have appropriate position, not to mention those in the countryside where there is no university... However, some do come to the city,for their land has been captured,or they sold their land to cure their(relative) illness. N those who wanna pursue their study also have to come to the city,...

Submitted by Naushad Khan NW... on
Agriculture means biologic growth on the farm.Without agriculture development is impossible. Agriculture produces food and without food survival of life is impossible. The agriculture failure is the failure of the world. Without food life survival on the earth is impossible. The person or country whose agriculture is developed, their life expectancy is also longer than those countries whose agriculture is not developed. For development the first priority is agriculture development, if agriculture is developed, the other sectors will be automatically develop because agriculture provides food to country population, if food is sufficient then health will be good and if population is healthy then their performance in every field will be excellent and good performance is a tool which developed the country and make the people happy and increase the life expectancy. So agriculture is that field which positively improve the growth of cambodia.

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