Cambodia WT/TPR/S/253 
 Page 1 
 
 
I. ECONOMIC ENVIRONMENT 
(1) INTRODUCTION  
1. Cambodia's accession to the WTO in 2004 came in  the middle of a decade of strong economic 
growth.  The economic and social achievements be tween 1998 and 2007 were the most impressive in 
Cambodia's history:  real GDP growth averaged close to 10% over this period, the highest of any low-
income country in Asia, resulting in an almost doubl ing of income per capita; the poverty incidence is 
estimated to have fallen steadily;  consumer price inflation declined markedly compared with the 
1990-98 period;  and prudent fiscal policies underpinned macroeconomic stability. The recent discovery of oil and gas could be a significant boon for the country and, if properly managed, should 
provide the necessary resources to continue addressing a range of socio-economic issues.  
2. However, after the decade of high growth and relative stability, the 2008-09 global recession 
exposed Cambodia's longstanding structural vulnerab ilities, notably that growth and exports have 
remained narrowly based. The authorities are awar e that diversified private-sector-led growth is 
important for raising Cambodia's growth potential.  To this end, there have been initiatives during the 
review period to strengthen the investment climat e, reduce the cost of doing business and improve 
Cambodia's international competitiveness, expand market access through trade agreements, and 
enhance agricultural development a nd rural infrastructure to help broaden the sources of growth.  
(2) E
CONOMIC AND POLICY DEVELOPMENTS AFFECTING TRADE  
(i) Main economic developments 
3. Cambodia enjoyed a decade of high growth and relative stability prior to the recent global 
crisis, enabling improvements in living standa rds and poverty reduction. Cambodia's exceptional 
growth performance between 1998 and 2007, at an annua l average of 9.4%, relied on four drivers of 
GDP growth:  rapid garment exports, strong touris m receipts, a constructi on boom, and robust crop 
growth in agriculture. Growth in output and trade was underpinned by an open trade regime and a favourable regime for foreign direct investment.  Af ter liberalizing its economy and its trade regime in 
the 1990s, Cambodia joined ASEAN in 1999 and was the first LDC to complete WTO accession 
negotiations.   
4. However, the global crisis resulted in a grow th collapse, exposing longstanding structural 
vulnerabilities. A downturn in three of the four dr ivers of growth, agriculture being the exception
1, 
caused growth to slip to under 7% in 2008 and to contract by an estimated 2% in 2009 (Table I.1).  The narrow concentration of the sources of growth has made Cambodia vulnerable to external shocks 
and to the United States' economic cycle. Garment exports and tourism reve nues were hit hard from 
the effects of the global financial crisis and in particular the severe economic recession in the 
United States.  Several large projects, especially in the real estate and tourism sectors, were deferred. Actual foreign direct investment in Cambodia is estimated to have fallen from US$815 million in 
2008 to US$530 million in 2009. 
                                                      
1 The primary sector, the economy's fourth driver producing about 30% of GDP, maintained trend 
growth and served as a social safety net for many laid-off workers.  WT/TPR/S/253 Trade Policy Review 
Page 2 
  
Table I.1 
Selected economic indicators, 2004-10 
  2004 2005 2006 2007 2008 2009a 2010a 
Income and growth        
GDP per capita at current market price (US$) 401.3 466.2 534.9 626.0 739.4  732.9  791.2  
GDP growth (%, constant 2000 prices) 10.3 13.3 10.8 10.2 6.7  -2.0  4.8 
Agricultureb -0.9 15.7 5.5 5.0 5.7 5.4 4.0 
Manufacturing 17.7 9.7 17.4 8.9 3.1 -5.3 1.8 
Services 13.2 13.1 10.1 10.1 9.0 2.3 3.3 
Savings and investment (current market prices, % of GDP)        
Gross domestic investment 18.6 21.4 22.7 26.5 22.6 22.7 .. 
Gross national savings 16.3 17.2 21.7 22.6 10.3 17.9 .. 
Prices and interest rates        
Inflation (CPI, %age change, annual average) 3.9 6.3 6.1 7.6 25.1  -0.4  4.0 
Inflation (CPI, %age change, end-year) 5.3 8.4 4.2 14.0 12.5  5.3  3.1 
Deposit rate (%) 1.79 1.92 1.84 1.90 1.91  1.66  1.26 
Lending rate (foreign currency) (%) 17.62 17.33 16.40 16.18 16.01  15.81  15.63 
Government finance (% of GDP)         
Revenue 10.4 10.6 11.4 12.1 13.3  11.8  12.6  
Current revenue 10.3 10.0 10.1 12.0 13.1  11.7  12.5  
Tax revenue 7.7 7.7 8.0 10.2 11.2  10.1  10.6  
Expenditure 14.2 13.2 14.1 14.7 15.9  17.5  17.8  
Current expenditure 8.4 7.9 8.2 8.5 9.4  10.7  10.8  
Current fiscal balance 1.9 2.1 1.9 3.5 3.7  1.0  1.6  
Overall balance -3.8 -2.6 -2.7  -2.6 -2.7  -5.7  -5.3  
External sector (% of GDP, unless otherwise indicated)        
Current account  -8.2 -9.8 -7.9 -8.0  -13.3   -11.6  -10.9 
Net merchandise trade  -12.8 -16.1 -14.8  -15.6  -17.4   -15.7  14.9 
Merchandise exports 48.5 46.2 50.8 47.3 45.5  40.3  41.1 
Merchandise imports 61.3 62.3 65.6 62.9 62.9  56.0  56.0 
Services balance  5.4 7.6 6.8 7.3 5.9  5.8  5.6 
Services exports 15.1 17.8 17.8 17.9 15.9  15.6  14.5 
Services imports 9.6 10.2 11.1 10.6 10.0  9.8  8.9 
Financial account  4.1 4.9 2.9 7.9 13.4  5.8  5.6 
Foreign direct investment 2.3 6.0 6.5 10.0 7.7  4.9  4.9 
Balance of payments  1.1 1.2 2.7 4.9 5.0  -0.0  1.3 
Terms of trade (2005 = 100) 100.9 100.0 99.7 98.8 99.6  .. .. 
Merchandise exports (annual %age change) 24.0 12.4 27.0 10.7 15.2  -10.9  11.7  
Merchandise imports (annual %age change) 22.5 19.8 21.8 13.8 19.8  -10.4  9.5  
Service exports (annual %age change) 46.9 38.9 15.9 19.4 6.3  -1.2  1.7  
Service imports (annual %age change) 18.6 24.9 25.1 13.9 12.3  -1.7  0.1  
Foreign exchange reserves (US$ million) 708.9 83 4.0 1,096.7 1,615. 6 2,163.5  2,25 9.9  2,550.0  
in months of imports 2.1 2.0 2.2 2.8 3.2  3.7  3.6  
Total external debt stocks (US$ million; end-period) 2,99 1.7 3,350.2 3,69 8.0 4,313.1 4, 395.5  4,357. 6  5,033.2  
Debt service ratioc 1.0 0.9 0.7 0.7 0.7  0.8 0.8  
Memorandum items        
Current GDP (riels billion) 21,438.3 25,754.3 29,849.5 35,042.2 41,968.4  43,080.0  47,680.0  
Current GDP (US$ million) 5,33 7.8 6,293.0 7,27 4.5 8,639.2 10,351.8  10,407.6  11,393.3  
Rs/US$ (annual average) 4,016.3 4,092.5 4,103.3 4,056.2 4,054.2  4,139.3  4,184.9  
Population (millions) 13.3 13.5 13.6 13.8 14.0  14.2  14.4  
.. Not available. 
a Estimates. 
b Including forestry and fishing. 
c As a percentage of exports of goods and services. 
Source:  Data provided by authorities;  IMF (2010), International Financial Statistics , September;  IMF (2009), Country 
 Report No. 11/45,  February.  Cambodia WT/TPR/S/253 
 Page 3 
 
 
5. The crisis and its impact on Cambodia's real sector exposed both structural and 
competitiveness weaknesses in the economy. Fo r example, garment exports from Cambodia 
contracted by more than other countries in the re gion (such as Bangladesh) – indicative of a possible 
decline in the competitiveness of this sector. Grow th and exports have remained narrowly based, 
offering limited benefits to the rural poor, which constitute Cambodia's vast majority.  In 2010, 
however, driven by exports, the Cambodian economy ach ieved a stronger than expected recovery with 
estimated GDP growth of 4.8%, according to the IM F.  The strength of the recovery was driven by 
two of Cambodia's traditional growth drivers, indi cating that a broadening export-led recovery was 
under way. First, garment exports registered a 24%  increase in 2010, after shrinking by 20% during 
the 2008-09 crisis and, second, tour ism rebounded strongly with a 16% in crease in tourist arrivals (to 
2.5 million tourists) and a 14% increase in  tourism receipts (to US$1.8 billion).  
6. Cambodia's economy is continuing to recover from the 2008-09 downturn but annual growth 
is not expected to return to the highs of ar ound 10% recorded in the years preceding the crisis. 
However, real GDP growth is expected to rema in strong in 2011, at around 6%, as are Cambodia's 
garment and footwear exports, due partly to the EU's  relaxed rule of origin on preferential tariffs for 
LDC exports to EU markets, effective 1 Janua ry 2011. Agriculture is becoming an increasingly 
important source of economic growth in line with of ficial plans to boost exports of milled rice as the 
government seeks to develop othe r sources of economic growth.  
7. With GDP per capita at around US$790 in 2010, Cambodia remains a very poor country.  The 
poverty rate was estimated to have decreased moderate ly from 47% in 1993 to 35%  in 2004 and to an 
estimated 30% in 2007, with rural poor comprising 90% of the total.2  Further reductions in the 
poverty level have been problematic since then due to the unexpectedly sharp rise in consumer prices, 
notably for foodstuffs, in 2008 and the effects of the global economic crisis. The Government has 
adopted the Updated National Strate gic Development Plan (NSDP) to extend its development targets 
until 2013.  The updated plan targets economic growth of 6% a year and per capita income of nearly 
US$1,000 by 2013.  Maintaining high, broad-based economic growth and a pro-poor policy is crucial 
to realizing the goal of reducing the poverty rate  to 19.5% by 2015 as targeted in Cambodia's 
Millennium Development Goals.  
(ii) Main macroeconomic policies  
8. Cambodia's macroeconomic framework is based on a continuation of the prudent monetary 
and exchange rate and fiscal policies that have enabled it to achieve its impressive economic track 
record. 
(a) Monetary and exchange rate policies 
9. Over the past 20 years, consumer price infla tion has fallen sharply from an average of 56% 
over 1990-98 to an average of 3.5% over 1998-2007. Inflation then started rising again3, with the 
spike in food and energy prices, although this wa s happening nearly everywhere.  Moving into 2009, 
inflation decelerated to 5.3% from high levels, as world food and oil prices fell, and weakening 
domestic demand further subdued price pressures. Despite  price hikes in other countries in the region 
and a rapid economic recovery, Cam bodia's consumer price inflation dwindled to 3.1% in 2010.  
                                                      
2 Poverty is defined as the percentage of the population with per capita consumption below the national 
poverty line, which was 2,470 riels per capita per day in 2007 or about US$0.61 at the prevailing exchange rate  
(Ministry of Planning, 2010, p. 8). 
3 Inflation accelerated from 6.4% in September 2007 to a peak of 25.7% in May 2008, driv en largely 
by the surge in oil and food prices. WT/TPR/S/253 Trade Policy Review 
Page 4 
  
10. In recent years, the riel has been stable vis-à-vis  the dollar, in nominal terms, leading to some 
depreciation vis-à-vis  other currencies.  Fluctuations of the riel in real terms have a diffused impact 
given the de facto  high dollarization of the economy, and the U.S. dollar remains the currency of 
choice in Cambodia for trade and investment.  Acco rding to the IMF, Cambodia has become Asia's 
most dollarized economy (over 90% of total bank deposits are held in U.S. dollars)4, which reflects 
Cambodia's unbalanced and narrow growth, driven by  the dollarized urban export and tourism centres 
as well as FDI and aid inflows. The effectiveness of  monetary policy remains limited owing to this 
extensive dollarization which, according to some ob servers, is likely to have enhanced Cambodia's 
trade (in particular the surge in garmen t exports to the United States since 1995).5 
(b) Fiscal policy 
11. In a substantially dollarized economy, fiscal  policy is the main macroeconomic policy 
instrument.  A major problem for Cambodia over the past decade has been the poor rate of revenue 
generation although efforts are under way to broaden the tax base through an increase of the road tax 
on vehicles and the introduction of a tax on property.  An outstanding feature of Cambodia's tax base 
is the high share of trade-related taxes (customs duties and excise duties and VAT on imports) in total 
tax revenue. Although these taxes have been declini ng, from 69.5% of total tax revenue in 2004 to 
56.3% in 2010, they still account for over half of the total revenue, with fuel and vehicle imports 
alone accounting for a combined 60% of total customs revenue (see Table III.2). 
12. According to the IMF, Cambodia's revenue m obilization remains among the weakest in the 
region with a tax revenue to GDP ratio of be tween 10% and 11%, which has seriously limited 
Cambodia’s ability to address priority development needs.  Cambodia will therefore continue to 
depend on foreign grants and loans to finance its de ficit, which reached the equivalent of 5.3% of 
GDP in 2010.   
13. The Government is committed to further improvi ng customs administration and tax collection 
in order to secure fiscal sustainability and m obilize resources for Cambodia's heavy development 
needs. In this regard, reducing the scope for evasion is significant. For example, the Customs 
Valuation Agreement applies to petroleum imports  as of 1 January 2011 and the IMF estimates that 
replacing the reference price for taxes on petroleu m imports to the current transaction level could 
result in a gain of about 1% of GDP, assuming that  the resulting increase in domestic retail prices over 
those in neighbouring countries does not erode the tax base.6  This would require that greater 
incentives for smuggling are effec tively curbed by improvements in customs control. Smuggling 
continues to erode the tax base, given Cambodia' s stretched and porous border, but the authorities 
assert that anti-smuggling efforts have been stepped up in recent months.   
14. In the longer term, the fiscal picture could cha nge markedly if substantial revenues begin to 
flow from the production of oil and natural gas, which constitutes a major opportunity and challenge 
for Cambodia's medium- to long-term development.   
(iii) Trade competitiveness 
15. During the review period (2004-10), the Government  continued to adopt laws and regulations 
both to enhance private sector activity and to fulf il its WTO commitments.  While on paper the legal 
                                                      
4 Measured as the ratio of foreign currency deposits to broad money, dollarization has risen steadily, 
from about 60% in the late 1990s to about 80% in 2010 (compared with 50% in Laos and 20% in Viet Nam) 
(IMF, 2010, p. 14). 
5 IMF (2002), p. 29.  See also ADB (2008). 
6 IMF (2010), p. 12. Cambodia WT/TPR/S/253 
 Page 5 
 
 
framework for greater private sector development is taking shape, more needs to be done to 
implement laws and regulations and to create an e nvironment to attract higher levels of employment-
generating investment.  As evidenced by a number of surveys, Investment Climate assessments and 
Doing Business indicators, the business environment remains challenging in many aspects. Available 
infrastructure in key backbone services – electricity , advanced telecommunications, and transportation 
infrastructure – is also poor and, where these de pend on public investment, it will take Cambodia as 
an LDC time to redress underinvestment.  
16. Access to finance is also limited, despite th e recent rapid economic growth. The incidence of 
labour disputes has recently increased significantly.  Dispute resolution mechanisms remain weak. 
Regulations are either absent (or not enforced), or costly (with significant informal payments).  Poor 
governance is also noted in natural resource manage ment, with continued issues of weak management 
of common pool resources and encroachment on private land.   
17. Despite increasing investor interest, Cambodia c ontinues to rank poorly on global surveys of 
competitiveness and corruption.  The World Bank s uggests that regulatory uncertainty and excessive 
red tape, remaining distortions in the trade regime, electricity costs, inadequate skills of the labour 
force, and corruption are major obstacles to pr ivate sector growth and development of export 
competitiveness.7  The World Bank identifies poor pr oduct quality, an inadequate SPS policy 
framework, limited access to technology and busin ess development services, underdeveloped links 
between the rural and modern sectors of the economy, and relatively costly logistics as constraints to 
export diversification. A common thread in many value-chain studies is Cambodia's weak competition 
policy framework, broadly defined to include rema ining distortions at, and behind, the border. 
18. According to the World Economic Forum8, Cambodia's competitiveness ranking is low, at 
110 of 133 countries surveyed. Foreign investors in ge neral have also been de terred by red tape and 
high utility costs, all of which detract from  the advantages of low labour costs.  In 2009, Cambodia 
also remained low in Transparency  International’s corruption index, ranking 158 out of 180 countries 
assessed. Business people, both local and foreign, have  identified corruption, particularly within the 
judiciary, as the single biggest deterrent to investment in Cambodia.9  The long-awaited anti-
corruption legislation, approved by the National As sembly in March 2010, w as implemented later in 
the year.  Cambodia is not a signatory to the OECD Anti-Bribery Convention, but has endorsed the 
ADB/OECD Anti-Corruption Action Plan for Asia and the Pacific. In 2007, the Government signed a 
regional anti-corruption pact with eight other ASE AN countries, and in September of the same year, 
signed the UN Convention Against Corruption.  
19. The Government has reviewed the global environment for Cambodian exports and concluded 
that tariff advantages are unlikely to  drive future export growth. It derived from this the need to 
diversify exports and export markets and identifie d 19 products and services with potential for export 
diversification, 12 of which are in the agriculture, forestry and fisheries sector. The most important is 
rice, for which the Government has prepared an am bitious plan to make Cambodia the world's third 
largest exporter of rice (regarded as the country's "white gold"), behind Thailand and Viet Nam, 
by 2015. The other products are:  rubber, cassav a, fishery, fruits and vegetables, wood products, 
soybeans, silk, livestock, cashew nut s, corn, and beer.  In the industrial sector, wood products, light 
manufacturing assembly, footwear, and garments are lis ted, and in the services sector, tourism, labour 
services sector, transport, and business and web-based services.  
                                                      
7 World Bank and International Finance corporation (2009). 
8 WEF (2010). 
9 See also World Bank (2010a). WT/TPR/S/253 Trade Policy Review 
Page 6 
  
20. The Government has identified a number of sh ared challenges for Ca mbodian sectors with 
export potential. Factors that continue to constrai n export diversification include:  high production and 
infrastructure costs, low compe titiveness and low productivity; limited value added in many sectors, 
due to high import dependency for raw materials and intermediate inputs; poor quality and limited 
differentiation of products, limited access to tec hnology, and small design and R&D capacity; in 
many sectors, enterprises have difficulties meeting exacting quality standards of various foreign 
markets as well as meeting time delivery requirement s of foreign buyers; a legal and institutional 
framework for business export development that re mains underdeveloped, although improving;  and, 
in terms of licences, despite progress in some ar eas – such as the one-stop services at the Cambodia 
Investment Board (CIB) or at Special Economic Zones (SEZs) – the regulatory burden remains 
significant for small and medium firms, which ofte n opt to do business in the informal sector.  
(iv) Current account 
21. Cambodia's balance of payments remains stable but vulnerable to external shocks due to its 
relatively low level of gross international reser ves compared with imports.  Cambodia has been 
running a sizeable current account deficit due to ra pid growth in investment, averaging around 9% of 
GDP between 2004 and 2009, although in 2009 the w eak economy prompted a major fall in imports, 
which narrowed the current account deficit, after it p eaked at 13.3% in 2008, and stymied inflation.  
The widening of the current account deficit in 2010 (to -10.9% of GDP) was driven mainly by the 
trade deficit, as both imports and exports recovere d strongly and global oil prices increased.  As 
export and tourism growth continues to firm up, the Cambodian authorities expect the current account 
deficit to be reduced in 2011.  
22. Large inflows of private investment, remittanc es, and foreign assistance have so far enabled 
the authorities to maintain increasing international r eserves.  Gross official reserves stayed broadly 
stable in 2010, at around US$2.5 billion or 3.6 months  of imports; the relatively low import coverage 
makes Cambodia's external balance vulnerable to shocks and below what are considered to be 
prudential levels (around ten months) in many countries.  The global financial crisis also affected 
capital inflows, in particular foreign direct i nvestments to the construction sector. With fewer 
international banks provides financing for direct inve stment in 2009, FDI contracted by an estimated 
US$285 million.   
23. Cambodia's trade sector (goods and services) is heavily correlated with the business cycle of 
the developed economies such as the United States a nd European Union. The Government estimated 
exports of goods contracted by 11% in 2009, with export of garmen ts falling by 23%. Tourist arrivals 
(or export of services), contracted marginally by 0.8%  in 2009 due to a decline in global travel. As the 
global outlook improves in 2010, the trade sector is  expected to improve with export of goods to 
increase by 11.7% (garment experts by 7%).  Howe ver, a full recovery in garment exports may not 
occur until 2012.   
(3) DEVELOPMENTS IN TRADE AND FDI 
24. Cambodia's exports have been growing relatively rapidly, driving growth over the last decade. 
Starting from 16% of GDP in 1993, exports of goo ds and services accounted for nearly 56% of GDP 
in 2010 based on balance of payments (BOP) statisti cs.  Growth in exports has been one of the main 
drivers of Cambodia’s strong economic performance. Garments and tourism account for most of the 
exports and there has been little diversification towards other goods and services. Even within 
garments, there has been little diversification beyond  low-end garments and the U.S. market, which, 
for a historical reason related to increased access to quotas under the Multi-Fibre Arrangement, is the 
main export market.  In parallel, imports of g oods and services, according to BOP figures, increased Cambodia WT/TPR/S/253 
 Page 7 
 
 
from 32% to 65% of GDP during the same time period,  partly due to the increase of the trade deficit 
in the energy and manufacturing sectors owing to th e expansion in economic activity and to high oil 
prices.    
(i) Merchandise trade 
25. The garment industry dominates foreign trad e, overshadowing contributions from other 
subsectors such as rubber and rice.  From 1997, th e traditional exports, e.g. logs, sawn timber, and 
rubber, were increasingly superseded by sales of  garments, which accounted for 44% of domestic 
exports (excluding re-exports10) in that year and for about 90% in 2005 and 80% in 2010. Cambodia 
has a rather narrow export profile in terms of what  it exports but managed to  reduce its dependence on 
the U.S. market during the review period.  
(a) Exports  
26. According to Cambodia's customs-based trade statistics11, Cambodia's export revenue has 
recorded fairly strong growth in recent y ears, increasing from US$2.4 billion in 2005 to 
US$3.8 billion in 2010 (Chart I.1 and Table AI.1 ). Garment exports accounted for between 80% and 
90% of total exports during the five-year period. Th ere had been concerns that export revenue would 
decline sharply in 2005, following the expiry at end 2004 of the WTO's global system of quotas on 
trade in textiles and garments. However, partly  because the United States and the EU imposed 
restrictive safeguards on imports of garments fro m China, Cambodia's garments exports remained 
strong.  The rubber industry increased its share of ex ports slightly in 2010 to 2.1%, partly reflecting 
increased investment in recent years, but it s till struggles to compete with neighbours such as 
Malaysia and Thailand.  Another major traditional export, forestry products, recorded declines in 
recent years to negligible levels.  
27. Until the mid 1990s, Cambodia's main export ma rkets were other Southeast Asian economies 
with Singapore and Thailand alone accounting for over  50% of exports in 1995. However, following 
Cambodia's bilateral trade agreements with the Un ited States, the United States became the leading 
market for Cambodian exports (Chart I.2 and Tabl es AI.3).  In 2005, the U.S. accounted for two-
thirds of Cambodian exports, this share declined to half of the total in 2010, while Canada, the EU and 
Asia all increased their share of Cambodian exports.  
 
 
                                                      
 10 Re-exports used to represent a significant feature of  external trade, prompted by the differences in 
import tariffs between Cambodia and its neighbours, and included cigarettes, motorcycles, beer, and electrical 
equipment (re-exported to Viet Nam) and gold (principally re-exported to Thailand).  In the late 1990s, 
however, re-exports declined  sharply:  they accounted fo r 62% of total exports in 1 995, but only an estimated 
5% of the total in 2009.  
11 The total value of exports varies considerably between national sources and the IMF.  In addition, a 
considerable amount of unregistered cross-border trade with Viet Nam and Thailand makes it difficult to determine the exact volume of trade going on.  Figures cite d in this section exclude exports of so-called printed 
matter, consisting mainly of trade in bank notes.  BOP fi gures are considerably higher than customs-based trade 
statistics as BOP data adjust customs figures to reflect trade in printed matter, estimates of under-reporting, informal trade, and border trade.    WT/TPR/S/253 Trade Policy Review 
Page 8 
  
Chart I.1
Product composition of merchandise  trade (SITC Rev.3), 2005 and 2010
2005 2010
(a)    Exports (f.o.b.)
Other 
manufactures
5.6Manufactures
96.3
Total:   US$2,434.6 million Total:  US$3,808.7 million
(b)    Imports (c.i.f.)
Chemicals
5.8Transport 
equipment
6.5
Manufactures
82.4Non-electrical   
machinery
5.9Non-electrical 
machinery
9.0
Other
5.1Other  semi-
manufactures
8.2
Transport 
equipment
7.5Chemicals
6.3
Manufactures
79.1Fuels
7.1
Total:   US$2,546.3 million Total:   US$4,876.0 millionPer cent
Manufactures
94.2Clothing
79.8
Electrical 
machines
3.8
Other 
manufactures 
6.7Other
0.6Other  
0.1Agriculture  
5.7
Other 
manufactures
7.6Agriculture
3.2
Source :  WTO calculations, based on data provided by the authorities.Other
manufactures
12.4Other semi-
manufactures
9.4Other
0.6
Agriculture
8.7Agriculture
9.7Transport equipment
3.1Clothing
90.6
Textiles
37.0Fuels
7.4
Textiles
38.6
Note:      Exlcuding trade in bank notes.Non-electrical machinery
3.8
Electrical
machines
4.3
 Cambodia WT/TPR/S/253 
 Page 9 
 
 
Chart I.2
Direction of merchandise trade, 2005 and 2010
2005 2010
(a)    Exports (f.o.b.)
Asia
8.0
Total:   US$2,434.6 million Total:  US$3,808.7 million
(b)    Imports (c.i.f.)
Other  2.4
China
16.6EU27
8.9Singapore
5.3Malaysia
3.6Korea, 
Rep. of
5.9
EU27  
3.0
China
24.3Chinese Taipei
9.8 Chinese Taipei
11.4
Other  3.5
Total:   US$2,546.3 million Total:   US$4,876.0 millionPer cent
Asia
14.5
Thailand
11.4Other
1.3
United States
65.5United States
50.0Other   3.8
Source :  WTO calculations, based on data provided by the authorities.Japan
3.2Other Asia  5.7EU27
24.5
Canada
7.2Other Asia
5.4Japan
2.6Viet Nam  2.5
Other Asia
2.4Other Asia  5.5
Japan
3.9Malaysia
3.4
Viet Nam
10.0Korea,
Rep. of
5.1
Hong Kong,
China
17.7Viet Nam
7.1
Hong Kong,
China
10.9Indonesia
3.6EU27
20.8
Asia
90.0Asia
88.7Canada
4.4 Thailand  3.9
Thailand
14.1
Note:      Excluding trade in bank notes.Switzerland
3.5
 WT/TPR/S/253 Trade Policy Review 
Page 10 
  
(b) Imports  
28. As with Cambodia's exports, many of its impor ts are not registered due to smuggling. The 
domestic garment and tourism industries both rely ex tensively on imports and, generally, the country 
remains dependent on imports for a wide range of manufactured products and consumer goods.  
Based on customs data, Cambodia's import bill nearly doubled between 2005 and 2010, from 
US$2.5 billion to US$4.9 billion (Chart I.1 and Tabl e AI.2).  During the review period, the import 
structure changed little, with manufactures (includi ng textiles and textiles articles, machinery and 
transport equipment, chemicals, and electrical components) accounting for 80% of imports and 
primary products (mainly food and oil) accounting for about 17%. 
29. Similarly, the main import sources have changed little since 2005 with Asia accounting for 
around 90% of imports, led by China (which now pr ovides 24% of Cambodia's imports);  Thailand;  
Hong Kong, China;  Viet Nam; and Chinese Taipei (Table AI.4).   
(ii) Services trade 
30. Although services payments have been pushed up by  trade-related services costs, the services 
account has remained in surplus, owing to health y revenue growth in tourism.  Tourism receipts 
contracted marginally (by 0.8%) in 2009 due to a dec line in global travel (Table I.2).  The balance in 
the service sector was largely in surplus (about 6%  of GDP), owing to the sharp increase in receipts 
from tourism.  The services surplus is expected to  grow in the near term as tourism recovers. 
However, there will be an increase in demand for imported trade-related services, such as insurance 
and freight.  
Table I.2 
Trade in services, 2004-10 
(US$ million and %) 
    2004 2005 2006 2007 2008 2009 2010 
Services balance (US$ million) 290.0  475.6 492.3 632. 1 609.4 606.4 633.0 
       Receipts (US$ million) 804. 9 1,118.1 1,296.3 1,547.5 1,645.1 1,624.9 1,652.6 
  (% of total receipts) 
    Transportation 13.0 11.4 12.9 13.6 14.5 11.8 8.7 
    Travel 76.0 75.1 74.3 73.3 74.1 72.9 75.6 
    Other 12.0 13.6 12.8 13.1 11.4 15.3 15.7 
       Payments (US$ million)  514.4 642.6 804.0 915.4 1,035.8 1,018. 4 1,019.5 
  (% of total payments) 
    Transportation 68.0 56.1 54.7 55.9 58.7 52.9 50.2 
    Travel 9.3 15.1 15.2 13.4 9.3 10.2 11.1 
    Other 32.7 28.9 30.1 30.7 32.0 37.0 38.8 
Source: Data provided by the Cambodian authorities.  
(iii) Foreign direct investment (FDI) 
31. Investors were attracted to the construction and tourism industries in 1993, with Cambodia's 
cultural heritage perceived to have strong poten tial. A second wave of investors between 1996 and 
1998 focused on the logging sector, while the bilatera l trade agreement with the United States signed 
in 1996 encouraged substantial FDI in the garment sect or.  Prior to the discovery of petroleum and gas 
reserves, the majority of investment was concen trated within the three main sectors, garments, 
construction, and tourism, which together represented more than 80% of total capital registered. 
Investment approved by the Council for the De velopment of Cambodia (CDC) declined during Cambodia WT/TPR/S/253 
 Page 11 
 
 
1999-2004;  potential investment totalled US$201 million in 2004, while actual investment was 
US$131 million. 
32. The amount of approved (potential)  investment   subsequently increased significantly, rising 
from US$589 million to US$2.4 billion in 2006 and US$7. 2 billion in in 2008. According to figures 
provided by the National Bank of Cambodia, actua l investment increased more moderately from 
US$381 in 2005 to more than US$800 million in 2007 and 2008 and declined th ereafter (Table I.3). 
The total stock of FDI has reached the equivalent of about 50% of GDP. 
Table I.3 
Foreign direct investment, 2004-10 
(US$ million) 
 2004 2005 2006 2007 2008 2009 2010 
FDI (implemented) 131 381 483 867 815 530 553 
Approved projects (fixed assets) 201 589 2,390 1,382 7,169 2,229 2,496 
FDI stock 2,090 2,471 2,954 3,821 4,637 5,167 5,720 
Note: Revised figures based on the National Bank of Cambodia's source (for FDI and FDI stock). 
Source:  NBC.  
33. FDI in manufacturing is largely concentrated in the garment industry, with investors from 
China accounting for over 90% of investment approvals over the past five years.  The enthusiasm of Chinese investors in expanding in the Cambodian ga rment industry has alleviated concerns that the 
abolition of the MFA would result in significant expo rt losses.  In recent years, FDI has also begun 
expanding into other labour-intensive export lines, su ch as shoes, toys, and wood products.  As FDI-
driven exports in these sectors incr ease over time, it is possible that significant inroads can be made in 
addressing under-employment a nd poverty in Cambodia. 
34. China is Cambodia's largest investor, followe d by the Republic of Korea, Malaysia, the 
United States, Chinese Taipei, Thailand, Russia, and Singapore.  Most Chinese investment is in the 
garment industry. Recently, two Chinese companies app lied to invest in oil refining;  and there has 
been Chinese interest in inves ting in hydroelectricity, railways, and oil and gas exploration.  
(4) O
UTLOOK  
35. Cambodia's economic recovery is under way.  Real  GDP growth is projected to reach 6% in 
2011, driven by a rebound in exports (particularly  garments) and tourism, and the uninterrupted 
growth of agricultural production.  Growth pros pects depend largely on the performance of the 
agriculture sector, which has weathered the global cr isis well, but crop produc tion might be negatively 
affected by the sporadic droughts in some parts of the country.  Even if these developments were to 
materialize, they would be offset by a surge in exports of milled rice.  The sector has benefited from the recent adoption of paddy production and rice export policy. 
36. The merchandise trade deficit will remain substa ntial in the short term, owing to Cambodia's 
reliance on imported capital goods. Even after econom ic growth recovers in the United States, 
Cambodia's leading export market, garment manuf acturers may struggle to compete with more 
efficient producers.  High overheads, poor infr astructure and stiff competition from other garment 
manufacturers, such as Banglad esh, are casting a shadow over Cambodia's long-term garment 
prospects.  Agriculture offers potential to diversif y the export base:  there is room to substantially 
boost rice exports as rice yields are among the lowest in the region due in part to limited use of improved seeds and fertilizer and the n eed for better water management.   WT/TPR/S/253 Trade Policy Review 
Page 12 
  
37. In the medium term, there is a clear need to diversify the economy, which is overly dependent 
on the garment, tourist, and cons truction industries.  Both the ga rment and tourist industries were 
undermined by the global economic slowdown, r esulting in serious export and job losses, although 
recovery has been impressive.  The construction sect or was weakened by the bursting of the property 
bubble, which undermined the banking system by boosting non-performing loans, prompting the IMF 
to urge the central bank to strengthen the supervis ion of Cambodia's financial system.  Initiatives to 
improve the business environment and address infrast ructure bottlenecks are critical.  The recently 
promulgated Anti-Corruption Law c ould help reduce the cost of doing business, thereby improving 
Cambodia's international competitiveness, given th at Cambodia ranks low in number of governance 
indicators.