Economic Structure of Cambodia
Cambodia, officially known as the Kingdom of Cambodia, is a Southeast Asian nation
with a rich history, a unique political structure, and a developing economy. The country
operates under a constitutional monarchy with a unitary state and a parliamentary form of
government. Executive power is held by the Royal Government with the consent of the
monarch, who acts as the Head of State. As of October 14, 2004, King Norodom
Sihamoni serves as Cambodia’s monarch. On the political front, Prime Minister Hun
Manet took office on August 22, 2023, becoming the Head of Government. The
Cambodian Riel (KHR) is the country’s official currency, though the US dollar is also
widely accepted for everyday transactions, especially in urban areas. This dual-currency
system is one of the distinctive features of Cambodia’s economy.
Cambodia’s economic history has been shaped by years of political unrest, civil war, and
a devastating genocide under the Khmer Rouge. Prior to the 1990s, the country
functioned under a command economy, where state ownership and centralized planning
dominated economic activity. However, after 1989, Cambodia began transitioning into an
open market economy. This shift introduced free competition, where prices are
determined by supply and demand rather than government controls. The move also
opened doors for private property rights, foreign investments, and the privatization of
previously state-owned enterprises. This transformation was not just economic—it was
symbolic of Cambodia’s desire to rebuild and integrate with the rest of the world after
years of isolation.
In terms of foreign relations, Cambodia has made conscious efforts to establish peaceful
and mutually beneficial relationships with neighboring countries like Thailand and
Vietnam. Regionally, it has become an active member of ASEAN (Association of
Southeast Asian Nations), while globally it has joined institutions such as the World
Trade Organization (WTO). These efforts highlight the government's strategy to anchor
the economy in international cooperation and regional stability. By participating in trade
agreements and fostering economic diplomacy, Cambodia hopes to create a more
predictable and attractive environment for investment and trade.
Looking at Cambodia's economic structure today, it is clear that the country is still in a
state of transition. While rapid development has taken place in some sectors, others
remain underdeveloped. The labor force is unevenly distributed across agriculture
(21.87%), industry (37.67%), and services (33.74%). Interestingly, although agriculture
still employs a significant portion of the population, it contributes less to GDP compared
to industry and services. Among the industrial sectors, textiles and tourism stand out as
the main drivers of growth. Cambodia is one of the largest exporters of garments to
Western markets, especially the United States and the European Union.
Tourism, too, has played a major role in economic development. Visitors from all over
the world travel to see the ancient temples of Angkor Wat, the bustling city of Phnom
Penh, and the scenic beaches of Sihanoukville. However, this sector faced a huge setback
during the COVID-19 pandemic, exposing the vulnerabilities of relying heavily on a few
economic pillars. The government now realizes the importance of diversification, both in
terms of industries and markets.
Cambodia imports a wide array of products to meet its industrial and consumer demands.
Among the major imports are knitted or crocheted textiles, ground transport vehicles and
accessories, petroleum products, nuclear reactors and mechanical devices, electrical
machinery, chemical fibers, plastics, cotton, paper, and ferrous metals. Many of these
goods are essential for industrial processing, construction, or domestic consumption. The
fact that Cambodia imports such a variety of goods reflects both the limitations of
domestic production and the opportunities for local industries to develop import
substitutes.
As for exports, Cambodia’s economy is still heavily dependent on garments and
footwear. However, there has been a notable push toward exporting chemical products
such as polyamides and fiberglass, as well as dairy products, optical measuring
instruments, and pharmaceutical goods. While still a small portion of total exports, these
non-textile products represent a positive step towards diversifying the economy and
reducing dependency on a narrow range of goods.
The Cambodian government has recognized the risks of overdependence on a few sectors
and markets. As such, it has laid out a comprehensive international development policy.
One major goal is to increase the share of non-textile exports to 15% by 2025. The
government also aims to boost the export value of processed agricultural goods to 12% of
total exports by the same year. This policy reflects a strategic shift from simply growing
crops to processing them locally, thereby increasing their market value and creating more
employment opportunities.
Small and medium enterprises (SMEs) are also a focus of national development. By
supporting SMEs through formal registration, better access to finance, and capacity-
building programs, the government hopes to create a more dynamic and inclusive
economy. SMEs are seen as vital to rural development and innovation, particularly in
agriculture, food processing, and light manufacturing. Encouraging their growth not only
spreads economic opportunity but also strengthens the country’s resilience against global
shocks.
To support these ambitions, Cambodia is investing in infrastructure such as roads,
bridges, industrial zones, and power generation. Without adequate infrastructure, it is
difficult to attract investment or support industrialization. In parallel, the country is
working to improve its education and vocational training systems. A more skilled
workforce is essential for moving beyond low-wage industries like garment
manufacturing and towards more value-added and technology-driven sectors. This dual
strategy of infrastructure and skill development reflects the government’s long-term
commitment to inclusive and sustainable growth.
