Cambodia has become one of the world’sleaders in poverty reduction and shared prosperity. Cambodiasustained an average growth rate of 7.6 percent in1994-2015, ranking sixth in the world, and has now become alower middle-income economy. Cambodia’s success has riddenon employment creation, although labor productivity gainshave been lower than in other fast-growing economies, partlydue to lower capital intensity. Growth has also been drivento a large extent by the country’s rich and diverse naturalcapital which supports the livelihoods of millions ofCambodians. Going forward, Cambodia may not be able to relyon the same factors that drove strong growth and povertyreduction over the past two decades. Declining externalcompetitiveness threatens the sustainability of garments andtourism and poses a challenge to economic diversificationand moving up the value chain. A number of institutional,human capital, and, to a lesser extent, infrastructureconstraints hamper competitiveness as well as the creationof a vibrant private sector in Cambodia. In light of thesechallenges and risks, areas of development for ensuringstrong, inclusive, and sustainable growth with sharedprosperity in Cambodia going forward were identified, basedon analysis and consultations with stakeholders. The areasfor development were ranked based on the impactinterventions will have on maintaining strong andsustainable growth and achieving poverty reduction andshared prosperity, in terms of creating and enhancinghouseholds’ participation in better economic opportunities,the share of the population affected, and complementaritywith other interventions.
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