Cambodia met the criteria to graduate from least developed country (LDC) status in 2021 and could be listed as a “developing country” as early as 2027
While Cambodia’s graduation from LDC status would be a testament to the progress the nation has made over the past 30 years, the loss of the status would also remove much of the preferential market access and trade benefits that have contributed to economic growth.
Listed as a “least developed” country for decades, Cambodia was admitted to the United Nations framework categorising states based on human resource weaknesses, economic vulnerability and poverty indices in 1991. Assessed during triennial reviews conducted by the UN Economic and Social Council, Cambodia’s most recent assessment in 2021 demonstrated improvements on two of three key benchmarks – Gross National Income per capita and Human Development Index. However, the nation’s Economic and Environmental Vulnerability Index score was deemed insufficient. Government stakeholders and private sector experts believe this last criterion is likely to be met in the upcoming 2024 review. If Cambodia can make this transition, important international economic policy changes will follow.
A number of duty-free, quota-free arrangements will expire, notably Cambodia’s Everything But Arms (EBA) agreement with the European Union. Other preferential schemes would also be rescinded.
The loss of these beneficial arrangements has some worried for Cambodia’s ongoing competitiveness in global markets. The Kingdom’s place in garment and apparel and bicycle manufacturing supply chains is considered particularly vulnerable. To address the impacts, experts recommend a number of economic strategies.
Forming and expanding bilateral free-trade agreements (FTA) with countries around the world is seen as a key action to mitigate risk. Recently signed FTAs with China, South Korea and the United Arab Emirates target a number of key Cambodian exports. Agricultural products including cassava and cashew nuts – the latter targeted for value-added processing – as well as garments and textiles and, increasingly, electronic components could all benefit from these trade deals.
Building on the FTA, the Cambodia UAE Comprehensive Economic Partnership Agreement went into effect at the end of 2023. It is hoped this will improve trade, boost tourism from the Arab state and promote knowledge-sharing in energy and petroleum exploration.
Regional trade is also considered vital to the Kingdom’s post-LDC competitiveness. The Regional Comprehensive Economic Partnership (RCEP) brings together Cambodia, Australia, New Zealand and 12 other Asia-Pacific nations to form the world’s largest FTA, streamlining trade and promoting economic cooperation.
