Written by Serey Sok and Nyda Chhinh

Cambodia’s growing population (14.7 million in 2013) is steadily becoming more urbanized, standing at 19.5% in 2008 to 21.4% in 2013, whilst still remaining overwhelmingly rural. Despite this, between 2010 and 2015, its economy grew rapidly, outstripping neighbouring countries, with an annual GDP growth averaging more than 7%. Such growth has contributed significantly to poverty reduction; the rate has been reduced from 53.2% in 2007 to 13.5% in 2014 (Figure 1). As a result, Cambodia has been re-classified as a lower-middle-income economy by the World Bank Group in 2015; its Gross Net Income (GNI) per capita was then $1,070.

Figure 1. Poverty rate and Gini Coefficient Index, 2004−2014. Source of data: MoP, 2015

As levels of poverty reduce, so does, in theory, inequality. Yet, three quarters of the national population are still classified as poor or nearly poor, below or slightly above the poverty line. Between 2004 and 2007, inequality started to rise, but has steadily declined since 2007. A very great proportion of the population is concentrated toward the bottom of the income distribution, and the poverty rate is highly sensitive to where the line is drawn. According to the Cambodia Socio-Economic Survey (2016), disposable income per capita in Phnom Penh is twice as high as those in rural areas and higher than in other urban areas. Since 2006, the Ministry of Planning has established the IDPoor Programme, to regularly update and guide governmental agencies and NGOs through providing target services and assistance to the poorest and most vulnerable households (Table 1). 90% of Cambodians have been covered by the IDPoor Programme, having assisted 13 million people as of December 2017.

Province	Population		Poor Level 1		Poor Level 2		Overall
	People	Household	People	%	People	%	People	%
Banteay Meanchey	677,766	161,006	39,670	5.9	77,727	11.5	117,397	17.4
Battambang	1,044,508	240,201	137,126	13.1	203,278	19.5	340,404	32.6
Kampong Cham	972,944	233,001	67,727	7.0	97,321	10.0	165,048	17.0
Kampong Chhnang	516,837	115,051	61,783	12.0	72,943	14.1	134,726	26.1
Kampong Speu	785,306	166,046	42,624	5.4	61,805	7.9	104,429	13.3
Kampong Thom	700,846	153,512	55,408	7.9	86,975	12.4	142,383	20.3
Kampot	577,836	134,428	29,550	5.1	47,630	8.2	77,180	13.3
Kandal	1,078,010	239,331	52,364	4.9	120,263	11.2	172,627	16.1
Koh Kong	85,472	24,025	12,413	14.5	19,345	22.6	31,758	37.1
Kratie	337,057	2,769	35,149	10.4	44,907	13.3	80,056	23.7
Mondul Kiri	65,251	14,041	3,553	5.4	10,136	15.5	13,689	20.9
Phnom Penh	725,787	152,473	28,007	3.9	43,227	6.0	71,234	9.9
Preah Vihear	205,536	45,050	16,329	7.9	28,930	14.1	45,259	22.0
Prey Veng	1,121,131	261,523	80,781	7.2	150,975	13.5	231,756	20.7
Pursat	431,219	95,614	41,918	9.7	56,221	13.0	98,139	22.7
Ratanak Kiri	165,213	33,759	8,271	5.0	20,733	12.5	29,004	17.5
Siem Reap	897,212	190,106	52,868	5.9	92,158	10.3	145,026	16.2
Preah Sihanouk	179,288	38,687	9,006	5.0	18,290	10.2	27,296	15.2
Stung Treng	118,443	25,279	7,271	6.1	13,719	11.6	20,990	17.7
Svay Rieng	557,069	132,524	26,300	4.7	56,512	10.1	82,812	14.8
Takeo	940,076	205,785	69,873	7.4	127,883	13.6	197,756	21.0
Otdar Meanchey	224,165	53,215	15,479	6.9	22,022	9.8	37,501	16.7
Kep	37,671	8,383	1,920	5.1	4,663	12.4	6,583	17.5
Pailin	59,227	13,249	7,123	12.0	7,840	13.2	14,963	25.2
Tboung Khmum	768,103	176,184	47,599	6.2	88,042	11.5	135,641	17.7
Cambodia	13,271,973	2,915,242	950,112	7.2	1,573,545	11.9	2,523,657	19.0

Table 1. Identification of Poor Household by Province  Source: MoP, 20018

There’s a strong correlation between growth inequality and poverty reduction. Aghion et al. (1999) reveal why and how high inequality can affect growth; inequality can increase or decrease economic growth. In Cambodia, rapid economic growth witnessed between 2004 and 2007 was associated not only with the fall of the national poverty rate, but also with rising levels of inequality. In practice, economic growth does not always result in social development. The human development approach, developed by the economist Mahbub Ul Haq, is anchored in Amartya Sen’s work on human capabilities, often framed in terms of whether people are able to “be” and “do” desirable things in life. In 1990, the first Human Development Report was launched as an index to measure average achievement in certain key dimensions of human development in terms of life expectancy, education, and per capita income indicators.

Cambodia’s GDP has gradually increased from US$6.813 trillion in 1994 to US$41.968 trillion in 2008. In 2008, the GDP more than doubled to $ 89.754 trillion in 2017. From 2012 onward, foreign aid has decreased and instead been substituted with FDI.  Under the Generalised System of Preferences (GSPs), the EU is the largest destination for Cambodia’s exports, overtaking the US in 2012 and accounting for USD 4.1 billion (35%) in 2015. The US and Japan account for 30% of Cambodia’s exports, meaning that two thirds of Cambodia’s exports go to just three countries. Based on its strong record of economic growth, poverty reduction and Rectangular Strategy implementation, Cambodia has now surpassed the Human Assets Index threshold for LDC graduation and is fast entering the Economic Vulnerability Index lower bound. Furthermore, Cambodia now ranks fifth amongst all countries in achieving the Millennium Development Goals (MDGs) including halving the poverty rate (CMDG 1). Finally, Cambodia has also committed to accomplishing the Sustainable Development Goals (SDG) between 2015 and 2030; two of the 17 goals are already taken cared of; “No poverty” and “Zero hunger” for all Cambodian people.

In the short-run, Cambodia must reduce growth at the expense of natural resources and allocate those resources for the rural poor households. In the medium-term, Cambodia must re-invest into natural capital such as reforestation to maintain the ecological balance so that the natural environment canbe restored. Meanwhile, more public investment on education, health and social welfare will help to reduce poverty in a sustainable manner. It should be re-stated that Cambodians are still heavily relying on the natural environment to sustain their livelihood, from fisheries to non-timber forest products. Any environmental degradation would spell disaster for the poor.

Serey Sok and Nyda Chhinh both work in the department for economic development at the Royal University of Phnom Penh (RUPP), Cambodia. Contact: sok.serey@rupp.edu.kh Image credit: CC by United Nations Development Programme/Flickr