A STUDY ON ISSUES IN THE CAMBODIAN CONSTRUCTION INDUSTRY
Rajendra NIRAULA1) and Shunji KUSAYANAGI 2)
1)

2)

Ph.D., Postdoctoral Researcher, Kochi University of Technology, Japan
Dr. Eng., Professor and Head of Infrastructure Systems Engineering, Kochi University of Technology, Japan

Abstract : The construction industry is one of the important industries in Cambodia’s economy. The Cambodianconstruction industry has not been able to deliver infrastructure development project efficiently. It is necessary to analyze
the issues in the construction industry in order to investigate the factors which are inhibiting the capacity and efficiency ofthe industry. Interrelations among national economy, construction output, quality of human resources including civilengineering education and regulatory frameworks are discussed. Opportunities in the Japanese ODA in order to address theissues in Cambodian construction industry are recommended.
Key words : GDP, Cambodian construction industry, construction output, human resources

1. INTRODUCTION:
some of the issues of the Cambodian construction industry
and recommends how Japanese official development
assistance (ODA) can be utilized to address those issues.
The national economy- GDP, construction output, total andconstruction employment, educational attainment of labor
force, compensation in the construction industry data havebeen used to analyze the issues in the construction industry.

2. THE GDP AND CONSTRUCTION OUTPUT
The Cambodian economy has continued to grow strongly,
recording 7.7 percent real growth for the 2004 year
compared to the real growth of 7 percent in 2003 and 5.2
percent in 2002. The contribution from the constructionindustry has also been increasing continuously and theconstruction output accounted for 6.4 percent of the total
GDP in 2004. The contribution from the constructionindustry to the national economy in terms of the percentageof the total GDP is shown in Figure 1.

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

765432101993%

Cambodia one of the developing countries in the Asia is still
striving for basic infrastructure development. The existing
infrastructures are old and insufficient, and many of them
are in need of urgent rehabilitation. The national andprovincial roads in Cambodia are 4,165 km and 3,554 km
respectively. The rural roads are about 31,000 km. The
condition of major transport infrastructure- road and bridges
is poor. The road condition survey 2002 has revealed that
only 25 percent of the road networks in Cambodia are ingood or fair condition (MPWT 2005). In addition it isestimated that approximately 50 percent of the total numbersof bridges are in need of immediate rehabilitation. Many
parts of the country remain isolated during rainy season due
to lack of bridges across the rivers and poor condition ofroads. Similarly, only 17% and 41%of the population havethe access to the sustainable improved sanitation and water
sources respectively (HDR 2006). More than 75 percent of
the cultivated land is still dependent on rain water. In suchenvironment, the Cambodian construction industry has more
responsibility than any other industry to develop andrehabilitate the infrastructures in order to provide the basic
facilities to the citizen and to boost the economy as well.
According to the ministry of Land Management, Urban
Development and Construction, Cambodia, 500 national
level construction firms and 22 consulting/design firms havebeen registered in between 2000 to 2006 and granted theconstruction license for nationwide construction businessand consulting/design business respectively (MLMUDC2006). Although there are many national level construction
and consulting firms, the industry has been suffering frommany issues which are inhibiting the industry’s performanceand capacity building in Cambodia. This paper discusses

Fig. 1 Construction value added as % of total GDP

2500
2000
1500
1000
500

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

0Output from Construction at 2000 constant price (billion Riels)
Total Construction Employment (100 w orkers)

Fig. 2 Construction Output and Employment
2.1. Construction Output and Employment
Like in other developing countries, the constructionindustry is also a major workforce absorber in Cambodia. It
is second to the manufacturing in industry sectors and isfourth in the whole economy. The construction employment
in the year 2004 was about 2.6 percent of the total
employment whereas the agriculture absorbed about 60percent, the trade absorbed 14 percent and manufacturingindustry absorbed 9.5 percent of the total employment in thesame year. However, the rate of increase of construction
employment was higher than the rate of increase of output
from the construction industry. The construction output andemployment are shown in Figure 2.

22201816141210864203. HUMAN RESOURCE DEVELOPMENT SYSTEM
Like in many other developing countries the quality ofhuman resources in the construction industry is the major
issue in Cambodia. Neither the industry nor the government
has established any institution/training center and invested
evident sum to train the industry practitioners. In addition,some donor agencies like Asian Development Bank (ADB),Japan International Cooperation Agency (JICA) have been
providing training for a few government employees in adiscrete manner. There are no any options except learningby doing for industry practitioners in order to enhance theirskills and capacity. The distribution of the labor forces
according to the highest level of educational attainment are
shown in Table 1. The total may not add up to 100 becauseof rounding.

4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

500

1993

Million Riels

2.2. GDP and Construction Output per Capita
The Figure 3 shows the GDP per capita of the total
employment and the construction output per capita of thetotal construction employment at 2000 constant price. The
curves suggest that the construction industry has beenloosing the productivity level though the productivity levelof the whole economy is in gradual increase. This indicatesthat although the absolute productivity level of theconstruction worker is higher than average of the whole
workers of the economy the construction workers have been
producing lesser and lesser value. The decreasing trend ofconstruction output per capita of the construction workers
can be explained as: i) the rate of increase in theconstruction employment is higher than the increase rate in
the construction output which can be seen from Figure 2; ii)
although the rate of increase of the construction output ishigher (nearly double) than the rate of increase of the whole
GDP the rate of increase of the construction employment isabout 4 times higher than that of the total employment in thewhole economy; iii) the capitalization in the constructionindustry is slower than other industry as a whole and theindustry is still labor-intensive deploying more unskilledlabors who produce the less valued products; iv) thecompensation per construction employee is in decreasing
trend which can be seen from Figure 4. It is possible that
one or more of these factors combined together areresponsible for the decreasing trend of the construction
output in Cambodia.

-GDP per capita of the total employment
Construction output per capita of the construction employment

Fig. 3 GDP and Construction Output per Capita (at2000 constant price)Fig. 4 Average annual compensation perconstruction employee

Table 1 Percentage of the Labor Force (age: 10 yearsand over) with Highest Educational Attainment

1998

2000

2001

13.7

10.823.5

18.6

70%

35.2

37.7

54.7

56.4

60%

29.7

28.6

17.3

18.4

50%

17.6

15.9

3.1

4.6

1.7
0.3

3.6
0.4

0.4
0.2

0.6
0.4

20%

1.4

2.4

0

0.1

10%

0.3
0.1

0.2
0.3

0.1
0.4

0.3
0.3

0%

80%

40%

The establishment of the private universities has provided
many peoples to go for higher education and as a result there
is increase in the number of technicians and engineers. It isestimated that about 300 civil engineers are being produced
every year in Cambodia. However, the capacity ofuniversities in terms of faculties and facilities are very poor.
Many of the faculties are the one-degree graduate only andlacked industry experience. As a result, theoretical text bookknowledge imparting has become the dominantcharacteristics of the higher education. The universities do
not hold the human resources and facilities for research. A
typical human resource index of the whole labor force inCambodia calculated on the basis of years of formal
education was decreased from 1.168 in 1997 to 0.934 in
2001. Thus the quality of human resource has not been able
to cope with the needs of the industry and as a consequence
foreign construction industry has been taking the major
infrastructural development works.

4. DISCUSSION
Cambodia is still striving for the basic infrastructuredevelopment however the construction industry lacks
appropriate human resources and technology. The lower
quality of human resources and lack of appropriatetechnology are due to the lack of appropriate humanresource development system and researches in university
and industry. It is seen from Figure 5 that the major portion(about 80%) of the construction value added has been
expended under the gross operating surplus. Higher grossoperating surplus indicates that high cost of capitals
including high interest rate, taxes, depreciation, amortizationand hidden cost. Because of the high operating surplus theindustry has not been able to invest in training andresearches. In contrast to the Cambodian environment morethan 65 % of the construction value added has been used fora) Compensation

2004

2003

2002

2001

2000

1999

1998

1997

1996

30%

1995

Not attended/Noclass complete
Primary (1-6 grade)
Junior high school(7-9 grade)
Senior high school(10-12 grade)
Vocational
Undergraduate
Graduate/degree
holderPost graduate
Not Reported90%

1997

1994

Educationallevel/Year100%b) Mixed incomec) Gross operating surplus

Fig. 5 Breakdown of Income Component of theConstruction Value added

8070605040
3020
100USAJapan

Cambo diaFig. 6 Compensation to the construction
employee as a percentage of the Construction
value added in the USA, Japan and Cambodia
compensation of the employees in the USA and Japan as
seen in Figure 6. Higher the compensation to the employee
better is the motivation to improve their skills. Lack ofappropriate regulatory framework and standards of practices
are the major reasons for high operating surplus in theCambodian construction industry. Since infrastructuredevelopment in Cambodia is dependent on foreignassistances, the donors should allocate sufficient resources
to improve quality of higher education including humanresources development system in the industry, to support
research and development activities and to help establish
appropriate regulatory framework in Cambodia. The
unnecessary high operating surplus needs to be lowered inorder to increase the compensation for the employees in theindustry.

5. OPPORTUNITIES IN JAPANESE ODA
Japan is the largest donor to Cambodia. Japanese official
development assistance (ODA) is classified in to three types
namely i) bilateral grant, ii) bilateral loan, and iii) financial
subscriptions
andcontributions
tointernationalorganizations. Bilateral grant includes grant aid andtechnical cooperation. Further, bilateral grant has been
mainly utilized for hard infrastructure development, forsending experts to developing countries and accepting
trainees from developing countries. However, there is noRecipient Country
Government

evident investment on improving the quality of highereducation and establishing appropriate training system in theindustry. Bilateral grant can be utilized for the humanresource development including researches; for technology
transfer and to establish appropriate regulatory framework inCambodia. Human resource development component ofJapanese grant aid should emphasize on strengthening thecapacity of local universities in producing qualified
technical manpower and developing appropriate technology
in recipient countries instead of providing training to some
employees in discrete manner. A new model of ODA system
proposed by the authors is shown in figure 7 and details forthe same can be referred from the authors’ paper (Niraula, R.
and Kusayanagi, S. 2006).

6. CONCLUSIONS
Some of the issues of the Cambodian construction industry
have been discussed. Quality of human resources andregulatory framework dominates the other issues. Since
Cambodia has not been able to establish high quality higher

Project Executing Agency

Technical Manpower(HR)

Education &Training

Local
University

System/Equipment(Technology)

Adv. Materials(Products)

COE for Education &Research

Education &Training

UniversityCollaboration

JapaneseUniversity

KUT Human Development SchemeODA Human Development
Financial SupportLending Agencies(JICA / JBIC)

Fig. 7 Model for New ODA Scheme

Japanese Construction Industry

Local Construction Industry

ODA- Hard Infrastructure Development Project

education through its own resources, foreign assistanceincluding official development assistances should be utilized
to establish the appropriate systems for human resources &technology development and to formulate regulatory
framework for the construction and related industries which
would enhance the performance of the Cambodian
construction industry. The new ODA model proposed by theauthors would provide enough opportunities for developing
countries including Cambodia to address the constructionindustry issues.

REFERENCES
Human Development Report (HDR), 2006
Ministry of Land Management, Urban Development andConstruction (MLMUDC), Cambodia, 2006: Data base
Ministry of Public Works and Transport (MPWT),
Cambodia, 2005: Publication and presentations
Niraula, R. and Kusayanagi, S. 2006: Future direction ofJapan’s ODA, Journal of CM, JSCE, Vol. 13, pp 275288.
Niraula, R., 2005: Doctoral dissertation submitted to Kochi
University of technology, Japan
Statistical Year Book of Cambodia, 2005