Agriculture decline to hit poor

Mon, 20 April 2015

Ananth Baliga

The World Bank said last week that Cambodia will likely graduate to a lower-middle-income nation in 2015, on the back of sustained poverty alleviation, stable economic growth and progress made on reducing inequality between the rich and poor.

The development bank presented its Cambodia Economic Update report last week and projected growth to fall slightly to 6.9 per cent, as compared to the 7.3 per cent projected by the Asian Development Bank. The agriculture sector, one of Cambodia’s key growth drivers, remains the biggest worry for the World Bank, as a slowdown in the sector will have a ripple effect on poverty alleviation efforts.

“The agricultural sector has decelerated. This is the driver [of the economy] that has slowed the most and the reason is low yield and low rice prices,” said Enrique Aldaz-Carroll, senior country economist at the World Bank.

Aldaz-Carroll said most of the Kingdom’s poor, around 80 per cent, lived in rural areas and deceleration in agricultural growth will dampen any pro-poor growth efforts.

He added that 40 per cent of the people at the bottom of the income ladder had a 23 per cent share in the country’s consumption in 2012, up 4 percentage points from 2007, signalling increased shared prosperity.

A lower-middle income country has a GDP per capita of more than $1,045 and less than $4,125. Aldaz-Carroll said that Cambodia would achieve a GDP per capita of $1,096 in 2015, and $2,589 in 2030, which will put it close to the Philippines and Indonesia.

The report showed that the poverty rate continued to reduce through 2012, though the pace had decelerated over that last few years. According to the World Bank’s latest figures, the poverty rate was 17.7 per cent in 2012, as compared to 24 per cent in 2009.

Srey Chanthy, an independent economic analyst, said that the progress on reducing poverty was good, when compared to international standards, but that there was still “room for Cambodia to do better”.

He added that while achieving a lower-middle income status was commendable, it was only an average value, with many people possibly still below the average GDP per capita level.

“This is notional due to inequality. Nonetheless, the inequality has been reducing over the recent past,” he said.

Chanthy said the World Bank’s growth estimates were on the lower side, and predicted a 7-7.25 per cent GDP growth, given the country’s relative political stability, cheap global oil prices and strength in most major export partners.

Mey Kalyan, senior adviser to the Supreme National Economic Council, said the government needs to work on improving the agricultural sector and approach it as a complex issue with multiple variables, like climate, labour availability and water issues.

“It is that people take it [agriculture] for granted. Agriculture is a complicated industry. If it has the right policies, response to these policies] will be quick,” said Kalyan.According to Kalyan, the government has made a budgetary allocation to launch agriculture initiatives to address issues with seeds and vegetable production, possibly in 2016, though the details are still being worked out.Kalyan said the objective was not only high growth rates every year, but to achieve an equitable redistribution of wealth so that the benefits of economic growth can be felt by all Cambodians.He added that poverty alleviation and reducing income disparity were sometimes slow processes but that they needed attention and a low growth estimate, if it were accurate, should be a wakeup call for the government.

“It is good as it can be a warning sign for the government to tighten its belt and work harder on these issues,” Kalyan said.


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