Cambodia falls further behind in competitiveness

Workers stitch clothes at a garment factory in a special economic zone near Sihanoukville in June. Sahiba Chawdhary

Cambodia falls further behind in competitiveness

Phnom Penh Post | 2 October 2017

Cambodia slid further down the rankings of global competitiveness on this year’s Global Competitiveness Report, which showed the Kingdom dropping five notches on the annual index to hold its position as the second least competitive country in Asean after Laos.

Cambodia ranked just 94 out of 137 economies, falling from 89 last year, on the report put out annually by the World Economic Forum. Its score of 3.93 out of 7 put it only slightly ahead of Laos, which ranked 98, while Myanmar has been excluded from the Global Competitiveness Index (GCI) for the last two years.

The ranking, which combines 12 pillars that study everything from the strength of institutions to education and technological readiness, showed the Kingdom ranked under 50 in just one category: labour market efficiency at 48. Nearly half of the rest of the categories ranked within the 50 to 100 range, with the other half exceeding the 100 mark.

“Improving the determinants of competitiveness, as identified in the 12 pillars of the GCI, requires the coordinated action of the state, the business community, and civil society. All societal actors need to be engaged to make progress on all factors of competitiveness in parallel, which is necessary to achieve long-lasting results,” the report said.

Commenting yesterday on the report, Commerce Ministry spokesperson Soeng Sophary said while the dip in rankings could potentially hamper investments for companies looking to enter the Cambodian market, the index was not an evaluation that most investors would take into consideration.

She said the lower ranking was unlikely to diminish Cambodia’s potential for attracting overseas investment as serious firms undertake their own internal market surveys. 

“More and more investors know clearly about Cambodia’s investment potential and they rely on their own studies and observations before making decisions,” she said. “We have a strong economic structure, so I think the [negative] rank in this report will not change the fundamentals of our economy.” 

According to Sophary, Cambodia retains its spot as a prime destination for low-cost, labour-intensive manufacturing. However, the country needs to work on scaling up its competitiveness to attract capital-intensive industries. 

Among the 12 pillars, Cambodia’s financial market development and macroeconomic environment ranked 61 and 70, respectively. Higher education and training skills scored the worst, with an unattractive ranking of just 124 out of 137. Innovation and infrastructure fared poorly as well, at only 110 and 106, respectively. 

In Channy, president and CEO of Acleda, said yesterday that the report’s top performers – labour market efficiency, financial market development and macroeconomic environment – should be viewed in a positive context for the economy’s potential to attract investment. 

While he recognised that the low rankings for higher education and innovation were troubling, he pointed out since 2013 the government has been undertaking reforms that should pay dividends by producing workers with better skills.

“As our education system turns to focus on better quality, it will create more innovation,” Channy said, adding that he believed current weaknesses were being adequately addressed. 

“In many ways, I think that things in Cambodia are going in the right direction, but it takes time to see results,” he added. 

According to the Global Competitiveness Report, the more developed countries in Asean, such as Singapore, Malaysia, Thailand and Indonesia, consistently rank among the top 60 countries globally.