The World Bank may forecast Cambodia’s economic growth to slump to between 2.5 per cent and 1 per cent this year, yet the situation offers an opportunity Cambodia to position themselves as a supply chain alternative to China.
Retailers are learning lessons about the necessity of diversifying their manufacturing hubs to make them more resilient in the face of shocks.
Several textile companies, such as Levi Strauss and Adidas, have recently increased their US imports from Cambodia. In the last 3 months, Levi Strauss had a 81.7% increase in shipments while Adidas had a 28.9% increase in imports from Cambodia. Now is the time for Cambodia to capitalize on this pivot and accelerate their manufacturing sector.
The pandemic has also led to widespread displacement of workers, creating an opportunity for the government to invest in the human capital of workers. The government is providing retraining and upskilling programs for displaced workers to support their reintegration. The move is timely and falls into the broader narrative of preparing the ASEAN labor market for job losses, already anticipated pre-COVID-19, due to existing threats such as automation.
The COVID-19 pandemic is an unprecedented crisis and Cambodia, a country dependent on tourism and supply chain links to China, is faced with heavy economic losses and an urgent need to strengthen public health capabilities. The government needs to respond quickly and decisively to stem the short term economic losses while ensuring that the most vulnerable groups are protected.
But the crisis also creates an opportunity for Cambodia to re-examine its long term priorities. By placing strategic bets on supply chain diversification and investment in human capital, Cambodia can emerge stronger in the post-pandemic world.
