Factor to the Low Income Country Has the Greatest Impact of Economic Growth Essay

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Cambodia is currently experiencing something of an economic renaissance, in particular vs. where the country has been. In the late 1970s, Cambodia faced brutal government under the Pol Pot regime. The cities were emptied as the Khmer Rouge mobilized the nation's entire workforce to produce rice, most of which was exported to China. As part of this reorganization of society, the Khmer Rouge killed all dissidents, intellectuals or people of skill. The result was that, when the Vietnamese liberated the country, Cambodia had absolutely no functioning economy, and no people who could drive the economy and the country forward. The Khmer Rouge lingered on as a force in the country for a long time, further stunting opportunity for economic development. Now today, Cambodia's economy is beginning to show signs of life.

Facts & Figures

The country's GDP has increased an average of more than 6% per year since 2004, including 6.5% in 2012 and 7.1% in 2011. Even with this, however, the GDP per capita remains one of the lowest in the world at $2,400, reflecting of the awful circumstances this country faced for the first few decades of post-colonial life. The main drivers are tourism, garments an construction. While the industrial production growth rate is 9.2%, good for 20th in the world, the country is still largely agrarian, where 35.7% of the economy is in agriculture, much of it subsistence. While there is no official unemployment, most Cambodians struggle to make ends meet and 20% live below the poverty line (CIA World Factbook, 2013).

In terms of other indicators, the steady growth has fostered some stability. Inflation is low at 2.9%, and was 5.5% in 2011. This has held the exchange rate to a relative stable level as well. In part, however, this is because the U.S.

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dollar is the unit of currency for many transactions, or alternately the Thai baht. Cambodia's lack of industrial production leaves it with a current account deficit of $1.2 billion in 2012, equivalent to 8.4% of GDP. Hindering development is the fact that its major export markets are far-flung -- the U.S., UK, Germany and Canada combine for well over half of Cambodia's trade. Trade in Asia is underdeveloped (CIA World Factbook, 2013)..

Analysis

At present, Cambodia's main source of economic growth comes from foreign direct investment. Much of this is in the tourism sector, although there are gains made in textiles as well. The tourism industry is focused around Siem Reap (location of the ancient city of Angkor) and the capital of Phnom Penh. The sector provides ample employment opportunities, albeit in low-level service sector roles. These jobs are concentrated, however, and there are many areas of the country, especially rural districts, that see basically no money from this investment. The tourism sector is still experiencing an infrastructure boom, with new hotels being built and with new flights being added to the major airports.

Most of Cambodia's neighbours have strong economies. Vietnam has a rapidly-growing economy and Thailand has experienced periodic surges in growth. There is still a fairly poor surface transportation infrastructure that holds back the growth of the sector, for example the roads connecting the two major cities are still fairly poor and many rely on river transport. The aging railway infrastructure was built by the French during colonial times and needs significant upgrade to be a viable link to the rest of the world. Rail and highway links with Bangkok and Saigon, which in turn are connected to China, Malaysia and Singapore, would.....

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