The World Bank says most ASEAN economies including Cambodia still enjoy a “demographic dividend” with the number of workers growing faster than the number of dependents.
In a report released in Washington Monday, the bank also said that Cambodia was among a handful of ASEAN economies with scope for “substantial” productivity gains through increased urbanisation.
Between 1960 and 2010, the report noted that economic growth in East Asia and the Pacific was supported by a rapidly growing working-age population.
“Many economies in the region reaped a ‘demographic dividend’ as the number of workers grew faster than the number of dependents.”
But “demographic trends have since become less favourable and are expected to deteriorate further over the next decade.
“The deceleration in working-age population growth has been especially stark in China and Thailand, due to population aging.”
Cambodia not at risk of ‘growing old before becoming rich’
“Several economies in the region, however, are still enjoying a demographic dividend,” the report said, pointing to Cambodia, Indonesia, Laos, Malaysia, Myanmar, Papua New Guinea and the Philippines.
The bank warned that the less favourable demographic trends in East Asia and the Pacific “are expected to continue, putting the region at risk of growing old before becoming rich.
“The largest decline in the share of working-age population is expected in China.
“In contrast, for some countries, including Cambodia, (Laos), and Papua New Guinea increases in working-age populations are expected, and these countries could continue to reap demographic dividends if they generate sufficient jobs.”
Scope for rapid urban development
The report also noted that the region’s rapid growth of potential output in recent decades had been largely fueled by labour and other resources moving from agriculture to higher-productivity sectors — a process that has encouraged urbanisation.
East Asia and the Pacific “has the potential for continued, rapid urban development,” the report said, adding that the share of people in living in urban centers was only 57 percent in 2020 — well below the advanced economy average of 80 percent.
Urbanisation is “particularly low” in Cambodia at 13 percent as well as Myanmar and Vietnam at around 35 percent.
With much of the region’s workforce still engaged in agriculture, “there is still scope for substantial productivity gains from resource reallocation, particularly in Cambodia, Indonesia, the Philippines, Timor-Leste, Thailand, and Vietnam,” the report said.
“To promote further urbanisation, possible measures include investing in infrastructure and social services, making land more accessible on a fair and transparent basis, encouraging facilities that support recent migrants, and coordinating urban services across municipal boundaries.”
And to make agriculture more productive, “renewed efforts are required to remove barriers and distortions that prevent a reallocation of productive resources across farms.
At the same time, “improving the business climate would also help raise productivity in some economies such as Cambodia, Laos, Myanmar and Papua New Guinea.
For these economies, “enhanced transparency, strengthened accountability, and greater responsiveness of state institutions to the needs of the private sector would bolster investor confidence and invite productivity-enhancing investment,” the report said.
Infrastructure needs ‘sizable’, basic roads a ‘priority’
The World Bank noted that several countries in the region still have “sizable” needs to invest in infrastructure.
“In some economies, better public infrastructure could foster connectivity and spur innovation,” it said.
In Cambodia and Laos, “investment in basic road infrastructure is a priority.”
Broadening tax bases could help finance such investment in economies such as Cambodia, Indonesia, Laos, Malaysia and the Philippines.
The report added the Cambodia and Pacific island economies could finance infrastructure by rebalancing public expenditures toward investment or promoting public-private cooperation.
But economies with relatively low incomes — like Cambodia and Myanmar — “face major challenges in implementing public-private partnerships … especially in the context of infrastructure development.
“Among these challenges are governance issues, institutional structure and capacity constraints, weak public-private partnership laws and policies, and weak country and sovereign risk ratings.”
The report said public-private partnerships could benefit from centralised government agencies coordinating national infrastructure by working with the private sector and multilateral agencies.
“Multilateral development banks could work with the private sector to provide quality and governance assurances,” it said.
“A global ‘code of conduct’ with a clear set of standards for businesses covering a regulatory framework, transparency principles, and a system for dispute resolution could enhance confidence in the private sector as a good partner,” the bank said.
Possible ‘lost decade’ looms for global economy
At the global level, the report described what it called a “worrisome trend” with the fading of economic forces that powered progress and prosperity over the last three decades.
As a result, between 2022 and 2030 average global potential GDP growth is expected to decline by roughly a third from the rate that prevailed in the first decade of this century — to 2.2 percent a year.
For developing economies, the decline will be equally steep — from 6 percent a year between 2000 and 2010 to 4 percent a year for the rest of this decade.
The bank warned that these declines would be “much steeper” in the event of a global financial crisis or a recession.
“A lost decade could be in the making for the global economy,” World Bank chief economist Indermit Gill said.
“The ongoing decline in potential growth has serious implications for the world’s ability to tackle the expanding array of challenges unique to our times—stubborn poverty, diverging incomes, and climate change.
“But this decline is reversible,” Gill said. “The global economy’s speed limit can be raised — through policies that incentivise work, increase productivity, and accelerate investment.”
Source: Agence Kampuchea Presse