The International Monetary Fund (IMF) has asked the Cambodian government to improve the country’s business climate and enhance competitiveness by upgrading infrastructure, improving the quality of labour and strengthening governance. It should do so on the lines of China that changes its trade pattern by moving up the value chain, it added. China is a major investor in Cambodia that pumps in $2 billion by way of grants, loans and direct assistance with foreign direct investment (FDI) reaching $10 billion since 1990.
According to the IMF’s ‘China’s Changing Trade and the Implications for the CLMV’ report that was released on September 1, the evolution of Chinese trade, investment and consumption patterns offers opportunities and challenges to low-wage, low-income countries, including China’s neighbours in the Mekong region like Cambodia, Laos, Myanmar and Vietnam (CLMV) which are all open economies highly integrated with China.
The IMF report said rebalancing in China may mean less of a role for commodity exports from the region. But at the same time, the CLMV’s low labour costs suggest that manufacturing assembly for export could take off as China becomes less competitive, and as China itself demands more consumption items. The IMF’s report recommended that Cambodia take full advantage of opportunities arising from China’s potential exit from labour-intensive industries by upgrading infrastructure to reduce logistics costs, find cheaper, more reliable, and more accessible electricity. Cambodia should also strengthen the legal framework for public-private partnership projects to possibly facilitate infrastructure investment, it remarked.
