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Cambodia Investment Review
As Cambodia navigates the evolving landscape of the East Asia and Pacific (EAP) region, it faces a rapidly changing job market influenced by technological advancements and regional economic trends. The World Bank’s East Asia and Pacific Economic Update for October 2024 highlights the opportunities and challenges Cambodia confronts as it aligns its workforce with the shifting demands of the regional economy, driven by automation, artificial intelligence (AI), and digitalization.
The EAP region has consistently outperformed other global economies, with projected growth at 4.8% in 2024, compared to 3.3% for other emerging markets and developing economies (EMDEs) and just 1.5% for advanced economies. However, Cambodia, like other regional players, must contend with external forces such as geopolitical tensions and shifting global trade patterns, which have reshaped the economic landscape. The slowdown of China, the region’s largest economy, is particularly significant. With China’s growth anticipated to decelerate to 4.3% by 2025, Cambodia must increasingly focus on domestic growth drivers to sustain its economic trajectory.
Automation and AI: Reshaping Cambodia’s Workforce
As technology transforms the regional labor market, Cambodia’s economic sectors must adapt. The rise of automation and AI in manufacturing has driven productivity gains across the region, particularly in countries like Vietnam and Thailand. However, these advancements also pose challenges for Cambodia, whose labor force remains concentrated in routine manual task occupations, particularly in agriculture and low-wage services. A key finding from the World Bank report emphasizes that automation, particularly in high-value-added sectors such as electronics and automotive, is already displacing low-skilled workers while creating new opportunities for skilled professionals.
This shift underscores Cambodia’s need to address gaps in its workforce development strategy. While the region has seen overall wage growth, particularly for younger and more educated workers, Cambodia’s labor force still lacks sufficient tertiary education levels to fully capitalize on emerging high-productivity sectors. Although informal employment has declined in many EAP countries, it remains a significant feature of Cambodia’s labor market, exacerbating the country’s vulnerability to job displacement caused by automation.
The Rise of Digital Platforms and Informal Work
One notable trend in the region is the growing impact of digital platforms, which have expanded rapidly in countries like Vietnam and the Philippines. While digital platforms create new job opportunities, they also blur the lines between formal and informal employment. For Cambodia, where informal employment still constitutes a large part of the economy, digital platforms may offer a double-edged sword. While they can increase participation in the labor force, especially for marginalized groups such as women, they also raise concerns about job security and access to social protections.
The integration of digital technologies into various sectors, from retail to logistics, offers significant potential for Cambodia to boost productivity and entrepreneurial growth. However, the country must address the growing divide between digital and non-digital workers to ensure that the benefits of these platforms are widely distributed. Policymakers must also explore ways to provide social insurance for workers increasingly employed in the digital informal economy.
Education and Skills Development: Key to Cambodia’s Future
To respond to these challenges, Cambodia must equip its workforce with the skills necessary to thrive in a digitized economy. The World Bank report highlights the critical importance of both hard and soft skills in meeting the demands of the new job market. In addition to increasing the number of Science, Technology, Engineering, and Mathematics (STEM) graduates, Cambodia must foster socio-emotional skills through its education system. This combination of technical and interpersonal skills will be essential in enabling workers to succeed in a labor market increasingly shaped by AI and digital platforms.
Countries like Vietnam and Malaysia have demonstrated the value of investing in advanced technical education, as evidenced by their ability to adopt automation more effectively. Cambodia, which currently lags behind in these areas, needs to accelerate its efforts to upskill its workforce, particularly in sectors where robotization and digitalization are transforming job tasks. Furthermore, addressing educational disparities and ensuring access to quality technical education will be crucial in closing the skill gap.
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Policy Considerations and Future Outlook
Cambodia’s ability to navigate the changing regional job market will depend largely on its capacity to implement forward-looking policies. In particular, facilitating labor mobility and capital investment across sectors and regions will be key to supporting workers displaced by technological change. Policies that remove barriers to internal mobility, such as improving housing markets and connectivity, could help drive productivity gains and reduce employment mismatches. Additionally, fostering digital job platforms could enhance labor force participation while supporting entrepreneurship and small businesses.
Cambodia stands at a critical juncture as it responds to the pressures of a shifting regional economy. By focusing on upskilling its workforce, embracing new technologies, and addressing the needs of its informal sector, the country has the opportunity to turn these challenges into a driving force for economic growth. However, achieving this will require a concerted effort by both the public and private sectors to invest in education, support labor mobility, and create an enabling environment for digital innovation.