|Poverty Alleviation Trough Micro and Small Enterprise Development in Cambodia - ILO/UNDP Project CMB/97/021 - Final Report (ILO - UNDP, 2000, 126 p.)|
|Part B: Situation Review 1997 (stand alone report)|
The Cambodian economy began recording strong GDP growth of around 7% in 1991, although from a very low base and was partly driven by a tremendous increase in consumption demand spurred by the presence of UNTAC personnel. Political uncertainties, departure of UNTAC personnel and natural calamities created an economic setback resulting in slower GDP growth in both 1993 and 1994. In 1995, overall GDP grew by 7.5% due to improved macro-economic planning and increase in foreign investment inflows, mostly from neighbouring countries (from US$ 10 million in 1994 to US$ 100 million in 1995). The impressive growth, however, was mainly concentrated in Phnom Penh in geographical terms and in construction and services in sectoral terms. The Government succeeded in achieving some macroeconomic stability; the inflation decreased from an average of 140 percent in 1990-92 to 3.5 percent in 1995 and the exchange rate has been relatively stable. The bulk of external financing is still provided by official grants and concessionary loans. Despite this favourable environment, the current account deficit grew to 14.9% of GDP in 1995.
Agriculture is the largest sector of the economy, representing about 45% of GDP and even a greater proportion of the total employment. Rice and rubber production have increased substantially in recent years, but progress is severely hampered by undeveloped infrastructure and the inability to cultivate more land area due to the widespread presence of land mines. Over recent years, rubber and timber have been the most significant export commodities. However, a ban on timber exports in 1995 resulted in a 40% decline in hardwood production and contributes to an even slower growth rate for the agricultural sector in 1996.
The industrial sector (10% of GDP including construction, energy and mining) grew by 9.5% in 1995, compared to 7.5% in 1994. Although the state sector was responsible for more than half of the total industrial production, its share is contracting at an accelerated pace due to growing household and small-scale private sector activities. Economic liberalization has resulted in the emergence of private, export-oriented manufacturing. In the last three years, the manufacturing sector has (medium- and large-scale) created some 16,500 new jobs, out of which the majority (64%) are in the labour intensive textile sector (ready-made garments). The textile industry is now the largest sector in industry, contributing to 50% of total manufacturing employment at the medium- and large-scale level. A large share of such manufacturing enterprises is fully (27%) or partly owned by foreigners (25%; joint ventures). These industries are located in a few areas in Phnom Penh and neighbouring Kandal Province absorbing 65% in employment terms. Overall, five provinces out of 22 account for three quarters of total medium-and large-scale manufacturing employment.
The service sector grew at over 8% between 1990 and 1995. Within the service sector, the hotel and restaurant component expanded at almost 21% a year and both trade and transport components grew by about 10%.
According to statistics available at the Ministry of Industry, Mines and Energy (MIME), in 1996 there were some 25,620 micro and small industrial establishments (capital of US$ not more than 200,000) in the 22 provinces in Cambodia. These establishments employed some 68,000 persons (49,000 male, 19,000 female). Compared to the figures collected during the UNIDO industry sector review mission in January 1992, there appears to be no growth in the number of such establishments, nor in the number of people employed by them. A large share of these establishments are rice mills and other small food processing enterprises. Other industries of some significance are textile and wearing apparel (some provinces), non-metallic and mineral processing (most provinces) and fabricated metal (all provinces). Only 9% of the registered establishments are licenced at the national level by MIME, whereas 33% are licensed by the provincial departments of MIME, and 58% are not licensed at all (according to their size; see Chapter 4 for criteria). MIME estimates that the figures collected by the 22 provincial departments represent about 90 per cent of all industrial small establishments.
The MIME statistics reveal that the heaviest concentration of micro and small industrial enterprises is found in Kampong Cham (labour force above 18,500 particularly in agro-processing and textiles), followed by Phnom Penh (9,000 persons), Kratie, Kampong Thom, Takeo and Kandal (some 5,000 persons each). Some provinces (Kep Vill, Preah Vihear, Mondul Kiri) report virtually no micro and small-scale industrial activities. The majority of the industrial work force is male whereas trade has a larger proportion of women.
Although some medium-scale industries have emerged as an important new form of employment generation in some urban areas, it appears that the contribution of micro and small industrial establishments to employment generation and the diversification of the economy has not increased after the liberalization of the economy in the early 1990s. However, micro and small enterprise development in trade and other services has been significant.
One estimate mentioned in the 1996 World Bank report put the total number of enterprises with more than 3 but less than 50 workers at not more than 50,000. In Phnom Penh municipality, there were 26,000 companies registered, the vast majority of which were small. Majority of the enterprises were in production followed by trade and other services.
Micro enterprises can be loosely defined as self-employed persons and family enterprises. Because of the low start-up capital (e.g. $100) and skill requirements, the self-employed persons, most of whom are women, are often engaged in trade or other services. In most cases, the business are undertaken to support their incomes, often on a part-time basis. Family enterprises are found in manufacturing and repair as well as trade and other services. Manufacturing requires more capital, up to $1,000 for family enterprises, and higher levels of skills. In rural areas, it is estimated that nearly every rural household has at least one family member engaged in some form of business activities of a seasonal nature and with minimum capital requirements3. Examples include livestock, rice wine making, preparing food and small-scale trade. In urban areas, micro enterprises activities provide income to the majority of households. The activities are diverse, encompassing service and production activities such as mechanical and electrical repair, tailoring, hairdressing, food processing, sild weaving and wholesale and retail trade.
3 There were about 1.7 million households in Cambodia in 1994.