Economist advocates Cambodia’s path to prosperity via economic freedom and strategic reforms
Economist advocates Cambodia’s path to prosperity via economic freedom and strategic reforms
A well-executed public policy aimed at enhancing economic freedom has led to positive economic outcomes for Cambodia and will continue to do so as long as the Kingdom continues developing its human capital and infrastructure to accommodate future investment, claimed a renowned Cambodian economist during an exclusive interview with the Khmer Times.
Duch Darin, a Cambodian-born academic, has earned a Master’s degree in Political Science and Political Economy from the London School of Economics (LSE) and three additional Master’s degrees in Economics, Business Administration (MBA), and Law (LL.M.) from the United States, where he also completed a Ph.D. in Economics and a Juris Doctor at Florida State University.
Speaking on the latest episode of Business Talk: Money Matters Now, Darin, a professor at the Royal School of Administration, stated that economic freedom, which he defined as “the liberty of people or organisations to make economic decisions and compete in a free market without excessive intervention from governmental institutions,” exerts a positive impact on economic growth. He bases this belief on historical evidence and economic data.
“Economic freedom is a crucial component of a capital economy or free market, where the means of production are privately owned and property rights are protected by the state, whereas a communist planned economy means the state owns all the means of production,” he explained.
“World history shows that the centrally planned economy collapsed along with the Soviet Union at the end of the Cold War. Learning from this experience, almost all countries in the world today practice a free-market economy. Such a global trend allows full access to international trade, which in turn leads to prosperity and boosts investments.”
Darin added that Cambodia itself had experienced the failure of the communist economy during the Khmer Rouge regime. However, since reopening its economy in the 1990s, the Kingdom’s economic freedom has significantly increased.
According to the economist, the Economic Freedom of the World (EFW) index measures the degree of economic freedom across five major areas. These areas include the size of government, which encompasses expenditures, taxes, and enterprises; the legal structure and security of property rights; the stability of sound money; the freedom to trade internationally; and the regulation of credit, labour, and business.
Cambodia’s economic freedom score stands at 6.82 out of 10, ranking 78th in the 2023 Economic Freedom of the World Report. Cambodia’s level of economic freedom is higher than that of Vietnam and Laos.
“It should be understood that an economy, in reality, cannot be 100% liberal, as the government may sometimes intervene in the market to prevent market failures, such as the emergence of monopolies or externalities,” he explained.
“In the case of Cambodia, the country has come a long way in terms of economic liberalisation, moving from no private property under the Khmer Rouge regime to the partial reopening of its economy, followed by the dominance of privatisation, regional and global economic integration, and policies to attract foreign investment in its modern economy today.”
Darin added that improving economic freedom, along with peace and multiple other factors, has contributed to Cambodia’s rapidly growing economy as it is known today.
“First of all, better economic institutions provide stronger support for the free market,” he explained. “One of these supports is the policies and incentives formulated to attract foreign investors to Cambodia.”
Another factor is the improved economic institutions that can guarantee the protection of property rights and private ownership.
“Among the most important things that entrepreneurs or investors consider when choosing a location for their business ventures are how safe the business environment is and how favourable the government’s policies are for them,” Darin said. “These aspects have been significantly improved by the Cambodian government over the years through numerous reforms.”
As a scholar who has studied economic freedom for nearly 16 years, Darin also noted that Cambodian authorities have tried to minimise their interference in the markets; nonetheless, these actions have been effective in addressing market failures and externalities through various regulations and legislation.
“It is safe to say that the state in Cambodia knows when to let the market operate freely and when to intervene to restore equilibrium,” he added. “Examples include the government’s policies and regulations during the COVID-19 pandemic, which contributed to easing the burden on the country’s socio-economy and led to a relatively fast post-pandemic recovery.”
With the Kingdom’s economic growth this year expected to reach about 6 percent, much closer to the pre-pandemic level, combined with its peace and stability, Darin claimed that the country is now on a path towards achieving its goal of reaching upper-middle-income status by 2030 and becoming a high-income country by 2050.
However, he added, Cambodia still needs high-quality human capital to meet the increasing demand in the expanding labour market and attract foreign direct investment. This requires the government to continue to enhance education and vocational training.
“In the meantime, the Cambodian people themselves should improve their understanding of economic freedom so they can better understand and adapt to government policies,” Darin said.
“To achieve this, the country needs to improve the study of economics among the population, especially students, through various tools and mechanisms. This is because citizen engagement and a willingness to compromise are always significant parts of implementing a safe and sound-free economy, which will lead to their prosperity. In brief, Cambodia’s path to sustainable economic growth lies in the synergy between economic freedom, continued political stability, and an educated, skilled workforce, driving innovation and inclusivity.”
Cambodia’s economy is projected to grow by 5.8% in 2024 and 6.0% in 2025, driven by a continued recovery in tourism and strong manufacturing prospects, according to the latest Asian Development Bank (ADB) economic report.
Despite global economic challenges, Cambodia performed well in 2023, noted ADB Country Director for Cambodia, Jyotsana Varma. The ADB anticipates robust growth in 2024–2025, with the garments, footwear, and travel goods (GFT) sector expected to see a significant boost, building on the positive momentum from the last quarter of 2023.
The report also highlights Cambodia’s strategic preparations for its anticipated graduation from the United Nations’ least-developed country (LDC) category in 2027. While this graduation is expected to enhance Cambodia’s international standing and increase its appeal to investors, it will also bring challenges, such as reduced access to concessional financing and preferential trade agreements that currently support key sectors driving growth and employment.
To successfully manage this transition, the report emphasises the need for Cambodia to deepen its global economic integration, diversify its markets, prioritise higher value-added products, invest in sustainable infrastructure and human capital, and strengthen domestic resource mobilisation.
