According to the World Bank’s latest Economic Update on Cambodia, the country’s economy this year will contract by -1 and -2.9 percent. This is a worrying sign given the country’s reliance on – tourism, manufacturing exports, agriculture and construction. At the same time, geopolitical tensions in the region present new risks for Cambodia.
In realizing this fact, Australia has stepped up in its efforts to help reduce the impact of COVID-19 on Cambodian citizens, while also responding to its own economic issues.
Given the turmoil that Australia is facing in its own economy, this not only demonstrates that foreign policy instruments are essential, but also shows that ASEAN-Australia ties are important to Australia’s foreign policy and strategic interests in the region.
Despite the chaos presented by Covid-19 and geopolitics, there is still light at the end of the tunnel for the countries to bounce back and embrace the future. To do so however, Cambodia will need to adopt the following policy measures and continue to work with its strategic partners.
Free and Open, Diversified Laissez-fair Market Economy
Poverty in 2020 could increase among households involved in the industries that are key economic drivers of growth in Cambodia. According to the World Bank, the fiscal deficit projection could reach its highest level in 22 years and could put almost 1.76 million jobs at risk. This could cause a severe slowdown in the construction boom and garment labour due to supply chain stagnation from China and Vietnam.
The fallout can be undone; however, through wise leadership which provides economic relief and public health protections easing the pain short term, while also fostering macroeconomic stability in the long term through fiscal policy measures.
The government has been on the forefront in preparing a stimulus package for the citizens that will be hit the hardest. Money has been collected in revenues from customs and taxation, while billions are pouring in from foreign aid, but more needs to be done in terms of diversification. Cambodia can further encourage the diversification of its economy so that it is not just reliant on a select number of industries to foster growth and create more employment for the young people. For the help on mainly the health sector, Cambodia is deeply grateful for Australia’s continuous support.
Learning from the Past and Neighbours
The temptation to use Cambodia as a geopolitical proxy platform is on the rise again between China and the US, as well as with China and Vietnam. As the New Cold War attitudes are starting to surface between the major players in international relations, Cambodia simply cannot afford to get stuck in another warzone again due to its geopolitical position, trapped between two major economic and political powerhouses of ASEAN.
In responding to this, Cambodia should firstly look to Thailand to offer her a glimpse of hope and inspiration. Through an aggressive Teflon approach, Thailand has continued to attract foreign investments despite political turbulence, transforming itself from an agricultural economy to a modern industrial powerhouse.
Secondly, Cambodia can open its ports and trading routes to all major international players after the global pandemic is over. Cambodia is positioned in the centre of commercial activity, with major routes crossing Cambodia’s shores and ports such as the Sihanoukville on the Gulf of Siam, Phnom Penh Autonomous Port, and the provincial port of Koh Kong.
The ports cut across the Mekong River and many goods and supplies can be easily dispersed to major economies in the region. Although, seeing a stark decrease in profits, it is without a doubt that once the pandemic is over more traffic will flow through the seaports as economic activities in China is already starting to pick up.
Lastly, Cambodia’s stance and approach to foreign policy should be consistent. Cambodia must continue to not take sides on territorial issues and urge all involving parties that are vested into the situation to deal with it peacefully, without the use of threat or coercion.
Quality Education and Building Strong Human Capital
The key to rebuilding a nation is its people. A special focus must be paid to the importance of quality education in Cambodia. On the one hand, Cambodia can rejoice knowing the fact that spending on education and teachers’ salaries has tripled from $343 million in 2014 to $848 million in 2018. On the other hand, achieving quality education in public schools remain a big challenge.
The policy solution is straightforward. By strengthening accountability in public schools, we can start to see a correlation between the quality of teachers and increases in salary on school performance. On top of that, literacy rate and STEM scores will increase, as a result, among primary and secondary students.
Looking Ahead in Cambodia-Australia Relations
Cambodia and Australia are long-time friends – the first diplomatic mission between Australia and Cambodia was established in 1957. Since then, Australia has been supporting Cambodia in all avenues from human rights, infrastructure, investments, health, and mainly education. This includes the provision of AUD$150m over the last decade to support the modernization of Cambodia’s healthcare services.
More than just investments, Australia wants to see a strong and vibrant Cambodia politically. Most vividly, in the late 1980s and 1990s, Australia’s strong support for the Cambodian Peace Process and its leading role in the United Nations Transitional Authority in Cambodia, otherwise known as UNTAC (1992-1993), still rings positively with the Cambodian people today.
In return, Cambodia also has extended a helping hand to Australian Prime Minister, Scott Morrison, on the signing of refugee settlement deal, demonstrating the cooperative nature of our two nations, with Prime Minister Morrison paying several high-level visits. Looking at the years ahead, the bilateral relationship between the two countries should be stronger building on the strong foundations of engagement in the form of development assistance, trade and investment and people to people links.
By focusing on these key areas, and through working with its strategic partners, Cambodia can build its political and economic resilience and overcome the challenges of today. Through numerous efforts in supporting Cambodia’s rapid development, the Cambodian people are extremely grateful for the contributions that the Australian government has shown over the years and hope to build on it for many years to come.