Jan Mike T.

Mandawe

BSA -1

Final Requirement in Econ 1n

Developing Country(Subject of the Study) : Cambodia

Transitioning from low income to higher income status takes more than just raising a country's

per Capita income. Cambodia, being one which clearly possesses the features that developing

countries tend to have in common, suffers from the wrath of underdevelopment. Being located

in Southeast Asia; a home to more or less 16 million people, it is among the poorest of the poor

nations in the world according to the World Bank. About 14% of its population sits below the

poverty line; most of them reside in the rural areas and have agriculture as their main source of

income. Being a country with a deep-rooted corruption, having failed to establish necessary

infrastructure by the government which limits the employment opportunities, and the low quality

of education -- are just the few economic indications as to why Cambodia is classified as a developing
nation. Socially, Cambodia's vulnerability to social exclusion, poverty; physical and mental weaknesses,
violence and abuse particularly amongst youth is severe; not to mention the rampant human rights
violation happening there.

Is there hope for Cambodia to belong to the high income or developed nations in the future?

Today, as we go through our study, we will be able to go deeper and further about the country's current
economic development level based on the indicators of development in comparison with the southeast
Asian nations', issues it currently goes through, and hopefully to identify some alternative such as
development policies which can contribute to their further development spurt.

To note, these are the following objectives or information that I hope to know by the end of this study
which will govern and serve as our guide.

1. What are the most recent economic and social profiles of Cambodia? How is the country classified in
the World Bank's classification system of economies?

2. What are the development issues/problems that slow down the development progress of Cambodia?
3. How can Cambodia accelerate their level of development towards transitioning from low income
status to higher income status? What can be done to attain economic stability?

To reiterate, it is really important to highlight these important questions to serve as our guide on the
importance of why we are doing this study.

1.1 Economic and Social Profile of Cambodia : Socio-Economic characteristics of developing countries

Commonly, developing nations are characterized by GNI per Capita income. Cambodia, being a
developing country, has a GNI per Capita of $1550, a 2.65% increase from the previous year, based on
the latest data of the World Bank. The said country's GNI per Capita is very far from that of Norway, $83,
541 --- the top country by Real GNI per Capita in the world.

In the Latest World Bank Classification of economies --- where economies who have GNI per capita of
less than $1,085 are classified as Low income countries; lower middle income countries are those having
a GNI of $1086-$4254; upper middle are those with the GNI per capita of $4256 -$13205; and countries
with GNI per Capita of more than $13,205, it's quite clear that Cambodia is classified in the Lower middle
level.

Table 1 Comparison of economies and GNI per Capita of ASEAN Countries

COUNTRY Classification GNI per Capital

Cambodia LMC $1550

Philippines LMC $3430

Brunei HIC $31,510

Vietnam LMC $3,390

Thailand UMC $7,250

Indonesia LMC $4,140

Laos LIC $2,540

Malaysia UMC $10,930

In the Given table above we can see that Cambodia has got the lowest GNI Per Capita among the given
countries which are all classified as developing nations. That being said, we can conclude that Cambodia
economy is too far from becoming highly developed and is among the poorest of the poor.

Cited by the Enotes World in Development Economics, here are some of the common features of
developing countries that basically characterized Cambodia
1. Low Per Capital Real Income

The gap between the real per Capita income of Cambodia as a developing country and developed
countries is very huge, signifying that the average income per person living in Cambodia are not
sufficient to save, let alone to invest. Low savings, and low investments because of low real per Capita
income results in the population poverty cycle of the said country.

2. Mass Poverty

In Cambodia, where widespread poverty is rife, many individuals struggle to meet even the most basic
needs. Well, the existence of severe poverty and its many manifestations is nothing new or shocking,
especially in light of the pervasive excessive corruption, the lack of proper education, and the scarcity of
employment prospects.

3. Rapid Population Growth

In the given graph, it is being shown that rate of increase in their population in rapid and and will
continue to rise according to the Projections of United Nations. The fact that rapid population growth
puts pressure to the resources of a certain country wherein there will be not enough of it for the total
population, it's a no wonder why Cambodia is still a developing country.

4. Unemployment and underemployment

Both Unemployment and underemployment are major problems in Cambodia as a developing nation.
This problem is due to the fact that the majority of the Cambodians have excessive dependency on
agriculture, low industrial development, lack of proper utilization of natural resources, lack of workforce
planning, and so on. Cambodian people are compelled to engage themselves in inferior jobs due to the
non-availability of alternative sources of jobs. The underemployment problem to a high extent is found
especially in rural and back warded areas of the said country.

5. Excessive dependence on agriculture

The graph shows the GDP Composition of Cambodia. We can see there that huge percentage of it is
composed by agriculture. From that we can draw that most people in Cambodia especially those who
are residing in rural areas are highly depending on agriculture or Cambodia's Economy highly depend on
agriculture. Nonetheless, agriculture is said to be the most crucial sector of the Cambodian economy in
terms of its share of the gross domestic product (GDP), and it employs the vast majority of the
workforce.

6. Lack of Necessary Infrastructures

Infrastructural development in Cambodia is lacking, including the development of irrigation, power,

banking institutions, social overheads, and many more. Additionally, developed infrastructure is poorly
managed and not allocated in an effective and equitable manner. This has put the country's
development at risk.

7. Lower Productivity
Factor productivity in Cambodia is likewise low. This is a result of a lack of funding and administrative
expertise needed to acquire breakthrough technology and policies and manage them successfully.
Lower productivity in the aforementioned nation is ascribed to a number of causes, including
malnutrition, inadequate health care, a strong social support network, living in an unsanitary
environment, workers' bad health and stressful work environments.

1.2 Indicators of three facets of Development : Education, Health and Real Income of Cambodia

In this section of our study, we will be able to examine Cambodia in terms of the said facets of
Development wherein Real Income per Capita is adjusted for purchasing power parity, life expectancy,
undernourishment, and child mortality as the measurements of health; and literally rate and
educational attainments as measurements of Education.

Purchasing power parity (In comparison with Exchange/market rate)Purchasing Power Parity is defined
as the rates of currency conversion which aims to equalize the Purchasing power of currencies from
different Nations in a way of elimination of the differing price levels between various nations. When
using PPP as a calculation for the country's GDP per Capita, it gives a more accurate picture of a
country's general standard of living. Other than that, Purchasing power parity is also a good way of
making a comparison between the economies of different countries as it does not extremely fluctuate
and just typically changes marginally over years. Market rates, on the other hand, are more erratic, and
utilizing them could lead to rather significant fluctuations in overall growth measurements—even when
growth rates in particular countries are consistent.

Table 2 : A Comparison of Per Capital GNI between Cambodia and some selected ASEAN Countries using
the latest Purchasing Power Parity.

Currently, Cambodia's rank in terms of Purchasing Power Parity on a Global Basis is 106 signifying that
it's one of the smaller economies around the world. Even when compared to other developing
countries, such as shown in the table above, the fact that Cambodia's PPP is extremely low is very
evident.

Health and Education : Facets of Development and their respective indicators.

Development is Multidimensional; that being said it is important to measure or evaluate a country's

overall health and educational status besides average income. Education and Health are both major
issues in Cambodia. Even before the pandemic, the Cambodian education system was already among
the weakest in the World. Most of the teachers there lack the skill set necessary to assess and address
learning gaps and delays, hence the failure of the students to reach learning standards appropriate for
their age. Their dropout rate is higher than most countries. Furthermore, most Cambodian educational
institutions lack basic infrastructure such as sanitation or hygiene facilities. And last but not the least
concern, is the fact that most parents cannot afford to send their children to school because of poverty
particularly those who are residing in rural areas. In terms of health, Cambodia faces an extreme
challenge about it. Cambodia's maternal and newborn mortality rates are among the highest in
Southeast Asia. 33.3% of its children are stunted from poor nutrition, HIV is rampant in specific areas
and tuberculosis in Cambodia is among the highest rates.

Let's take a look at the tables below. There shown the comparison of Cambodia -- our subject of study
and other selected countries SouthEast Asian in terms of indicators of Health and indicator of Education.
In the able 3, we can see some of the important informations or indicators of human development index
in terms of health. The current life expectancy of Cambodia is 70.32 years, a 0.310% increase from last
year. In the table given, Cambodia is ranked 2nd to the lowest in life expectancy area, following
Myanmar. Undernourishment is also rampant in Cambodia, with a 6.3% of the population
Undernourished due to a lot of factors such as food deficit, unsanitized areas and unhealthy
consumption of foods. However it is slightly good to note that it has lower undernourishment rate than
Thailand. In terms of under 5 mortality rate per 1000 live birth, Cambodia post a number of 20 per 1000
live birth. And lastly, is the per woman fertility rate of the said country posting a 2.4% rate, higher than
that of Myanmar, Vietnam and Thailand and is slightly lower than that of the Philippines.

Table 4 : Adult Literacy Rate

Specific Rate Per County: Cambodia-80.53%, Bangladesh -65.14%, Nicaragua -82.61%

Bolivia -92.46%, Uzbekistan - 99.98%

From the data shown, we conclude that Literacy in Cambodia is still a major challenge. In fact, it has the
2nd lowest literacy rate out of all ASEAN Countries. That being said, we cay say that Cambodia has to
fund more for skill development and training for teachers, increasing their salaries, more fund for
classroom materials, and many more.
Human Development Index : Holistically measuring the levels of living and capabilities of Cambodia

Human Development Index is a statistical composite index of life expectancy, education and per Capita
income. HDI is used to rank countries in the tiers of human development; the higher the HDI, the higher
the lifespan, education and per Capita income are. According to the World Bank, HDI's are classified into
four levels: ≥0.800 as very high, 0.7-.799 as high, .550-.0699 as average or medium HDI, and lastly
≤0.549 as low HDI.

To get the latest HDI of Cambodia, let us see below the computation of its Income Index, Life Expectancy
Index, Adult Literacy Index, Gross Enrollment Index, and Education Index.

Income Index : log(1550)-log(100)/log(40000)-log(100)=0.457

Life Expectancy Index : (70.32-25)/(85-25)=0.755

Adult Literacy Index : (80.53-0)/(100-0)=0.8053

Gross Enrollment Index : (105.35-0)/(100-0)=1.0535

Education Index : 2/3(Adult Literacy Index)+1/3(Gross Enrollment Index)

2/3(0.8053)+1/3(1.0535) = 0.88

Finally, Is the Human Development Index

HDI = 1/3(income Index)+1/3(life expectancy index)+1/3(education Index)

HDI=1/3(0.457)+1/3(0.755)+1/3(0.88)

HDI = 0.697

Therefore, the HDI level of Cambodia is average or medium level based on the world bank estimates.

Shown in the Graph are the Data for human development index of Cambodia

2018 HDI - 0.585, 2019 HDI - 0.594, 2020 HDI - 0.600, 2021 HDI - 0.697
As evidenced by the data in the graph, there is an increase of human development index in Cambodia
over the last four years. In the above data, it also shows that GNI per Capita of Cambodia is increasing
as well. Therefore, we can draw that HDI has a strong tendency to rise with per Capita Income, as
wealthier countries could invest more in health and Education, which raises human capital productivity.

Gini Coefficient : Measuring Inequality

Gini Coefficient is a tool to measure the equality or inequality of a certain country's distribution of
income. It lies in the score of 1 as perfect equality and 100 as perfect inequality. Basically, a perfect
equality signifies that a country's income or resources is shared equality among the leaders and
residents, on the contrary, perfect inequality signifies that a country's total income and resources is
practically owned by a single individual. In the case of Cambodia, income Inequality, along with poverty,
has actually declined over the last decades; however, the income inequality or gap between rural and
urban residents remain high. The country's Gini Coefficient is 30.8 which lies below the average level of
income inequality.

1.3 In Depth Analysis of Development Major Development Issues in Cambodia : Low Human Capital
Productivity and Lack of Necessary or Poor Infrastructure.
In this section of our Study, we will be able to thoroughly examine and analyze among the major
development issues in Cambodia in order to find its root causes and give possible alternatives or
solutions.

Low human capital productivity and a lack of adequate infrastructure are two of the primary causes of
Cambodia's development backlog.

What can the main instances of the aforementioned difficulties be caused by?

First, let's discuss human capital.

The knowledge, talents, and other personal qualities embedded in people that contribute to increasing
labor productivity are collectively referred to as human capital. According to a recent World Economic
Forum report, Cambodia performs the poorest in ASEAN in terms of teaching and training its inhabitants
to create a competitive labor force and put their abilities to useful use. Furthermore, according to the
report, while its HDI ranking has improved from 100 to 92 out of 130 nations from 100 last year, it still
trails its regional counterparts. Given that labor productivity and the human development index are
directly correlated, what does that indicate about labor productivity?

Due to inadequate education and training, as well as very low "total factor productivity" (a measure of
how effectively and efficiently a country uses labor and capital collectively), Cambodia's labor
productivity is low.

What might be done to address the issue of low human capital productivity?

Raising human capital productivity, promoting more effective resource allocation through improved
market institutions, and enhancing public investment management can be some of the steps taken to
move from conception to completion. Additionally, Cambodia needs to raise the standard of its higher
education, as higher education is crucial to developing a competitive and productive workforce for the
country.

Let's now discuss Cambodia's infrastructure state and quality as it relates to national development.

The infrastructure required to pull millions of Cambodians out of poverty has not been the government
of Cambodia's top priority. The proportion of Cambodians who have access to electricity, potable water,
and decent sanitation is extremely low. Additionally, poor people cannot access decent healthcare due
to the poor quality of the facilities. Despite this, Cambodia continues to have serious infrastructure
issues. Among the most important services that need to be improved are solid waste management,
water, sanitation, and roads.

Given that Cambodia's infrastructure is significantly less developed than that of its neighboring
countries, it should be clear that a lack of sufficient infrastructure is one of the main obstacles to the
country's growth and overall competitiveness. Less than 50% of the country's national and less than 20%
of its provincial highways are paved. The railroad network is underutilized and neglected.

How does a country's development impact by having weak infrastructure?

When critical infrastructure is of poor quality and is not running to its full potential, the chain of
production is disrupted. That further contributes to an economic deficit and lower living standards.

How can a country benefit from good infrastructure?

Investments in public infrastructure increase output by increasing the productivity of private labor and
capital.

To increase innovation and Cambodia's overall competitiveness, institutions need to be strengthened,

infrastructure has to be modernized, and education needs to be improved. To establish a climate that
supports innovators, more needs to be done. For instance, Cambodia should pass laws that will
encourage technical advancement and encourage teamwork in R&D projects. The bureaucratic and
regulatory barriers to entrepreneurship that might hinder innovation must be removed in Cambodia.

1.4 Overview : Towards attaining economic development

Let's Present an Overview of Cambodia's Economic Development over the last five years in terms of four
areas of that development economics focuses on : Health, Education and standards of living as
dimensions of qualitative aspects of human development; savings, Investments, Infrastructure level. We
may also want to examine the growth of Cambodia Gross Domestic Products as it is important in telling
a country's level of development.

From the Above informations and data, we can reflect that there has been positive improvement in the
development level of Cambodia. In terms of Health which can be measured through life expectancy,
Undernourishment, and under 5 mortality rate per 1000 live birth -- there has been significant
improvement in Cambodia in those areas. For instance, In the years 2018, 2019, 2020, 2021, and 2022 --
the life expectancy of Cambodia at birth was 69.57, 69.82, 70.05, 70.10, and 70.32 years respectively. In
terms of positive change of literacy rate, latest available world Bank data shows that In the years 2004,
2008, 2009, 2014, and 2015 the literacy rate in Cambodia were 73.61%, 76.87%, 76.14%, 78.06%, and
80.53% respectively. Furthermore, it is even being subjected to further increase of development levels in
the proceeding years.

The Change in rates of the given examples of components of human development signifies that
Cambodia has made a dramatic improvement in their development levels.

Now, let's take an overview of the country's development increase in terms of GNI per Capita Income,
Gross Domestic Products, and Savings. GNI per Capita in Cambodia has also increased over the years,
from $1380 in 2018 to $1550 in the latest report. This certain change signifies an increase in the
country's standard of living as more funds can be use to establish necessary infrastructures increasing
employment opportunities, increase budget for education to raise literacy rate, and increase funds for
healthcare facilities. Other than GNI per Capita, we can also take a look at Cambodia's increase of Gross
Domestic product Overtime.

As we can see there has been an increase, although inconsistently but higher than previous years in
Cambodia's GDP. GDP is actually really important as it provides a general overview or assessment of a
country state of economy. As shown above---over the years, GDP has increased in Cambodia, thus jts
economic development level is rising together.

What about its Savings?

Based on the data provided by the CEIC, these are the latest available gross savings rate of Cambodia
from 2008 - 2019.
Savings play a significant role in determining wealth. Governments place significance on saving money at
the macroeconomic level in order to make new investments, manufacture new capital products, and
maintain economic growth and it is good to note that savings in Cambodia has actually increased over
the years based on the latest report of the World Bank signifying the further increase of Cambodia's
Economic Development Level.

Cambodias Level of Necessary Infrastructure Quality : An investment in high-quality infrastructure has

positive economic impact that can encourage the creation of jobs, increase foreign direct investment,
and ultimately increase productivity and tax income in the region. Growth is impacted by infrastructure
through a number of supply- and demand-side routes. As all forms of infrastructure are necessary inputs
in the creation of products and services, investments in the energy, telecommunications, and
transportation sectors have a direct impact on growth. Notably, Cambodia's efforts in developing its
infrastructure has also paved the stage for future development. The improvement in the quality of
Cambodia's essential infrastructure has had positive effects, one of which is a decline in the rate of
poverty in the nation. In Cambodia, the improvement of ports, highways, airports, and the electricity
sector stimulates the country's development and policy-making that align with further development.

With all these increases in the aspects of economic development, what were the policies that
significantly contributed to the overall development of Cambodia over the years?

Cambodia’s economic direction has been steered by a series of national economic plans, socioeconomic
goals and efficient policies. The efficient policies that made economic improvement in Cambodia over
the years possible include Fiscal Policy which refers to the use of government spending and taxation,
Monetary Policy which was determined and implemented by the National Bank of Cambodia, and
Economic Development Policy which aims to improve agriculture activity.

The use of fiscal Policy by the government is embedded with their goals of promoting strong and
sustainable growth as well as to alleviate poverty. It has been the key tool as to why there has been
major improvement in Cambodias aspects of economic development. This policy is embarked on an
ambitious Public Financial Management Reform Program of Cambodia which consist of two stages : the
building project credibility being the first one and the preparation of financial accountability being the
second one. This management reformed program of Cambodia that is embarked on the Fiscal policy had
the objectives of rationalizing expenditures, improving audit, public procurement and public investment
especially in physic infrastructures.

The next one is the Monetary Policy. This policy implemented by the National Bank of Cambodia has the
mission of maintaining price stability, and develop a stable financial sector that support economic
growth through efficient resource allocation. This is the reason why the rate of inflation in Cambodia is
managed and kept at average reasonable level.
For the last one, Economic Development Policy, aims to elevate agriculture productivity in Cambodia.
The fact that majority of Cambodian Population is heavily reliant on Agriculture, focusing on this area is
a key by enabling agriculture sector as a dynamic driving force for economic development and poverty
reduction .

From all the information above, we can say that Cambodia is really committed to raising its level of
development. In fact, it aims to become an upper middle income country by 2030 and a high income
country by 2050. They have introduced a lot og policies ensuring economic growth, enhance
competitiveness while maintain macroeconomic stability and promote sound financial management.
With all these, do you believe that the aspirations of Cambodia towards becoming an upper middle and
high income country in the future is Feasible?

End