Cambodia Needs Skills Upgrade to Sustain Growth, Diversity Economy – ADB

News from Country Offices | 21 January 2016

PHNOM PENH, CAMBODIA – Tackling the skills gap and mismatch and boosting the productivity of the labor force are key challenges facing Cambodia if it is to maintain its impressive growth, says a new Asian Development Bank (ADB) report.

Closing the skills gap will help cement the gains in poverty reduction seen over the past decade and a half and increase the country’s competitiveness within the ASEAN Economic Community. 

In an employment diagnostic study, Cambodia: Addressing the Skills Gap, ADB examines the challenges to expanding and improving productive employment opportunities in the country. While Cambodia has more than halved the number of people living below the national poverty line in just 5 years, the bulk of its labor force is still employed in the informal economy or in vulnerable employment and 71% of the population lives on less than $3 a day. 

“Most of the country’s labor force is young but often not equipped with skills that match business needs, so the challenge for policymakers is to address this gap and mismatch,” said ADB Chief Economist Shang-Jin Wei. “Developing a more educated, employable, and productive workforce is essential for Cambodia to broaden its economy beyond the current four mainstays of garment manufacturing, tourism, construction and agriculture and to sustain high growth.”

Tackling the skills gap and mismatch requires action on many fronts including increasing access to quality education and mid–level skills vocational training; upgrading competencies of underqualified teachers; promoting input on skills training from the private sector, including through public-private partnerships; and implementing the qualification framework to ensure consistent national standards are applied across education and vocational training levels. Better information about labor market needs and trends is also needed.

Policymakers also need to take steps to provide better income earning opportunities for rural residents, to expand social safety nets and to improve work conditions in the informal sector to create a more inclusive economy, the study says. Strengthening the security of land tenure and the legal structure for land transactions can play a central role in promoting rural development and improving rural employment outcomes. Support for those micro, small and medium-sized enterprises that are dynamic and competitive can also increase productive employment. 

The study also highlights the gains the economy could reap by providing incentives to informal businesses and workers to join the formal economy, which would also boost to tax revenues. 

ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, it is owned by 67 members – 48 from the region.