Cambodian Economy

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Posted by DH Travel at 3:41 am July 2, 2014

The development challenge facing Cambodia is to sustain growth, reduce poverty, and accelerate the completion of the reform agenda. To accomplish these medium term goals will require effective economic management and considerable inflows of external assistance in order to support the implementation of public investment priorities and raise the pace and consistency of structural reform . Moreover, mechanisms to reduce poverty and protect vulnerable groups from accelerated transformation must be put in place. The development needs of Cambodia have shifted from survival mode to a medium term strategic framework for rapid adjustment and growth supported by sound macro and sectorial policies, and complementary public investment and technical assistance programs.
Cambodian Economy
The path covered in five years (1994-98), albeit one that shows deficiencies to be corrected and delays to be resolved, seems satisfactory, overall . Progress has been noteworthy and the results indicators positive mainly due to a good concurrence of external factors affecting economic development, and also to the clear direction given by national policies.

Results Indicators – Positive Development

The outcomes of the results indicators appears to be positive, according to the information in Table below:
1. A real average annual growth rate of 5.2% for the period. Had it not been for the downturn in 1997 which will continue to make be felt to a lesser extent in 1998, the average annual growth rate could have reached 6.0%. In this regard, 1995 and 1996 have clearly very high scores, which were lining Cambodia up among the Asian dragons until the recent crisis occurred;
2. A per capita GDP on a constant growth curve, from US$241 in 1994 to US$303 in 1996, with a slight decline in 1997 ($290.9);
3. A CPI that broke free from the soaring increases of the previous years to stabilize from 1996 onwards at a about 9%;
4. A deficit in t he current balance excluding transfers, which is sustained at 14-15% of GDP, despite the. increase in imports due to investments;
Cambodian Economy
5. Foreign exchange reserves that reached over two months of goods and services imports;
6. Foreign contributions that covered the gross deficit of the current balance on an annual average for 1994-97, in the amount of 134%, with the surplus helping to improve the gross foreign exchange reserves

External Factors and the Funding or Deficits

Factors external to the evolution of the economy are related to official transfers such as donations, capital transfers in the form of loans from international organizations and, lastly, to foreign direct investments (FDI).

National Policies and Economic Development – Budget and Monetary Policies

Expansion of the monetary supply was strong during the years 1994-97, with an annual average rate of 35.7%, and for an average 5.2% of GDP. However, no monetary financing of the Treasury was undertaken with -the National Bank of Cambodia until late 1997. In reality, the foreign currency deposit component explains this growth; liquidity in Riels has grown at an annual average rate of 13.7%. Still, this development is especially due to the exceptional year in 1997 (+33.4%). Nevertheless, the Riel-US Dollar parity has remained very stable during the period, i.e. at the end of the period 2,593 in 1994; 2,560 in 1995; and 2,720 in 1996. It was only during the second half of 1997 that, suffering the effects of the Asian monetary cataclysm, the Riel went up to 3,500 for US$I; since that time, it has basically maintained itself at this level.
 Cambodian Economy
However, a good macroeconomic performance was obvious in the – liberalization of the rate of exchange, the stabilization of inflation to a tolerable level, and the revamping of the commercial framework (removal of restrictions on imports and obstacles to exports).

Taxation-an up-to-date tax system, but still yielding inadequate results

The Government undertook the renovation and reinforcement of a taxation and duty system that was still in infancy. The country was slowing getting away from a command economy. The option was made for a modern, performing tax system, but by means of a progressive approach that would allow for reasonable time for the new economic structures to adapt and for State employees to be trained. With the year 1998-after the Taxation Code of February 1997, pending enforcement of the VAT on large commercial enterprises in 1999, and with the Customs Code yet to come out-the Cambodian approach will be five years old.
The current nomenclature of é taxes and duties is a good reflection of the tax structure as it is found in most countries in the world . An analysis of the relationship between tax revenue and the components of GDP that are the basis thereof gives rise to the following observations:
 Cambodian Economy

Money and Banking

U.S. Dollars are the de-facto currency of the country and visitors can pay anywhere in Dollars. However, you should change large bills at banks, hotels or exchange places. Many places will not have change for small purchases. Almost all currencies can be exchanged in the larger cities. The Thai Baht can be used in places near the Thai border. Exchange rates do fluctuate, and those given below are as of the date of publication, and are only a guideline.
 Cambodian Economy

Banking 

There are several national banks where you can change or withdraw money. Working hours are 8am-3.30pm, Monday to Friday. All banks will accept travelers’ cheques at a 2%-4% commission charge. Visa, JCB, Master Card and American Express credit cards are all commonly accepted. To get cash from a credit card, you will need identification (passport).
Automatic Teller Machines (ATMS) are available in Phnom Penh, Siem Reap and Sihanoukville.
 Cambodian Economy

Working Hours 

Hours of operation in Cambodia are somewhat different than in other countries. Cambodians typically take long lunches, and the opening hours for government offices and some business offices are usually from 7.30am to 11.30am, and then from 1.30pm to 5.30pm. If you show up at an office at 1pm for example, you may find no one there.

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