Economic Challengesin Cambodia

While overall poverty in Cambodia has fallen, the pace of development between urban and ruralareas varies greatly and 50 percent of Cambodiansare living on less than $2 a day. Cambodia isexperiencing an increasingly unequal distributionof wealth geographically as well as within thesocial structure where elites have been able tobenefit disproportionately from an uneven playing field.

Micro, small, and medium enterprises (MSMEs),which comprise the majority of the nation’s firms,generate most of the nation’s economic outputand employment. Yet, MSMEs, mostly locatedin rural areas, face a myriad of constraints thathinder their competitiveness and capacity todevelop. MSMEs lack access to market informa-tion, face unclear and burdensome regulations,lack technological capacity for production, andmost importantly, they have limited access tofinancing for business expansion. Many MSMEshave tenuous relationships with local authorities,which makes untangling these issues even morecomplicated. According to the World Bank’s Easeof Doing Business Index, Cambodia ranks 133out of 185 of the hardest countries to do businessin. Legal obstacles, red tape, informal fees andfinancial barriers constrain business growth in anumber of sectors. For women and minorities,discriminatory laws and socio-economic normsdistort the business climate even further and

represent additional challenges to starting, owning,and successfully operating businesses.

APPROACH

In Cambodia, The Asia Foundation considersMSME development as a critical step to achievesustainable and more balanced economic growth.For almost 10 years, The Asia Foundation hasbeen working with MSMEs in Cambodia to helpcreate a more productive, enabling environmentfor local business. Through different programactivities such as subnational dialogues betweenpublic and private actors, surveys, and research onimpediments to growth, the Foundation is activelyhelping Cambodians unlock constraints to privatesector growth at the provincial level.

Our ultimate aim is to improve the business envi-ronment for Cambodia’s provincial MSMEs sothey can flourish and compete in domestic andforeign markets. Our approach is to empowerlocal entrepreneurs with the tools, information,and resources they need to enhance their businessskills and to work with government, local authori-ties, and civil society. With extensive experiencein developing the private sector at the provinciallevel, the Foundation has fostered effective collab-oration between the public and private sector – akey for success factors in improving the businessenvironment in Cambodia.

The Asia Foundation’s

Economic Development

programming in

Cambodia focuses on

fostering better local

business environments

across the country.

Cambodia’s economy has shown remarkable growth, successfully recovering from the 2007 financial crisis. GDP grew at 7.2 percent in 2012. Historically, Cambodia’s economy has depended on agriculture. In recent years the manufacturing sector has been of growing importance, especially in export-orientedgarments and shoes. A fast developing tourism sector adds to Cambodia’s economic diversification.

The Foundation’s

diverse network of

local partners, strong

record of financial

controls, and capacity

to implement complex

programs make us a

trusted partner for

numerous bilateral,

multilateral, corporate,

and individual donors.

CAMBODIA

HEADQUARTERS465 California Street, 9th FloorSan Francisco, CA 94104 USATel: (415) 982-4640Fax: (415) 392-8863info@asiafound.org

WASHINGTON, DC1779 Massachusetts Ave., NWSuite 815Washington, D.C. 20036 USATel: (202) 588-9420Fax: (202) 588-9409info@asiafound-dc.org

CAMBODIAHouse No. 59Oknha Peich (St 242)Phnom Penh, CambodiaTel: + 855 (23) 210-431Fax: + 855 (23) 217-553tafcb@asiafound.org

www.asiafoundation.org

Our research tools, such as Economic GovernanceIndices, Business Climate Barometers, andRegulatory Impact Assessments, have provided a clear window into the performance of individuallocal regulatory environments and the costs associ-ated with their policies and practices. Throughsupport to map existing laws, regulations, and markets, and then training community-based organizations, The Asia Foundation’s contributionshave led to improved livelihoods for ordinaryCambodians and better natural resource manage-ment, particularly for rice production and in the fishing value chain.

The Foundation has taken locally identified priorities to seek national level reform. We haveassisted Cambodia’s Parliament in its efforts tobuild its legislative mandate to foster growth ofthe national economy through educational work-shops on local constraints for business growth andhave entered policy alternatives that take advan-tage of local context and global best practices.

ACTIVITIES

The Asia Foundation’s Economic Developmentprogramming in Cambodia focuses on fosteringbetter local business environments across thecountry by:• Deepening understanding of the driversbehind the constraints and impedimentsfaced by the private sector at the nationaland subnational level.

• Enriching the engagement and capabilitiesof communities, MSMEs, civil society, andpublic authorities in effective economicgovernance.

• Spearheading instruments for more informedand consultative policy processes.

• Promoting policies for better competition inagriculture and trade.

• Facilitating dialogues at the grass-roots levelamong community-based organizations,especially farmers and fishermen.

• Organizing cross-provincial meetings forMSMEs.

• Promoting partnerships between the publicand private sector.

• Reforming national economic policy bystrengthening the capacity of policymakers.

ACHIEVEMENTS

• Simplified business licensing processes• Reduction in local taxes and informal fees• Local governments more aware of their com-mitments to abide by government regulations

• Simplification of administrative paperwork

EXPERIENCE

The Asia Foundation has a decades-long historyof supporting economic growth across Asia andCambodia through both public and private channels. Through its Economic Developmentprograms, the Foundation has assisted MSMEs in accessing legal information, financing, businessservices, skills and networks they need to enhancecompetitiveness and profitability, thereby helpingto create jobs and reduce poverty.

08/2013

The Asia Foundation

is a nonprofit international

development organization

committed to improving

lives across a dynamic

and developing Asia.

Headquartered in San

Francisco, The Asia

Foundation works through

a network of offices in

18 Asian countries and in

Washington, DC. Working

with public and private

partners, the Foundation

receives funding from

a diverse group of

bilateral and multilateral

development agencies,

foundations, corporations,

and individuals.

“I now ask for a receipt whenever I have topay a fee, because I know that it is my right.”

– MSME from Kampot