Cambodia looks to banking and agriculture to spur growth

[CHANNEL NEWS ASIA]

Cambodia: Garment-making has been a mainstay of Cambodia's fledgling economy, chalking up between 6 and 7 percent annually for the past four years.

But, the country is turning its focus back to the land in the hope that rice growing and other farming produce, will lift growth closer to 8 percent, making it among the world's fastest growing economies.

A contrast to and the yearly average GDP growth rate of 7.7 percent over the last ten years, according to the IMF.

Cambodia's central bank expects economic growth in 2012 to accelerate to its fastest pace in four years.

"One of the priority sector of the government is to develop the agriculture" said Nguon Sokha, Director General, National Bank of Cambodia.

"At the moment, growth is driven by the garment sector, tourism sector and construction. Cambodia is an agriculture land so we need to develop based on our natural resource."

The ADB's growth projection for Cambodia in 2012 at 6.5 percent and with Asean economies are expected to grow some 5.5 percent this year, the Asian Development Bank says emerging markets like Cambodia should leverage off China's increasing presence in the region and make better use of the regional connectivity, in order to fully realise growth potential.

This is especially with more than half of Cambodia's FDI coming from China.

But it won't be easy.

"Cambodia faces significant infrastructure deficiency in both physical and soft infrastructure" points out Cyn-Young Park, Assistant Chief Economist, Asian Development Bank.

"Cambodia has already expressed that there are some skills mismatch in various areas. And they're trying to invest a lot in vocational training that really matches the jobs that are being created for the future".

More of such jobs may soon be found in banking, which has relatively liberal foreign ownership rules compared to Cambodia's neighbours.

"There is a lot more interest from foreign investors to enter the banking industry in Cambodia given the good economic potential, macroefonomic stability, political stability" said the Director General of National Bank of Cambodia.

"We need to balance between the need to establish fair competiton in the banking sector in order to reduce the cost in using the financial services for our consumer, but at the same time, we also need to look into the components, like risk management" said Nguon Sokha.

However, with other frontier markets like Myanmar opening up, Cambodia may have new competitors for foreign cash very nearby.