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“Cambodia’s Thriving Economic Diplomacy: Navigating the Path to Prosperity”

by Surya Narayan
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In the contemporary global landscape, the intersection of economics and politics has become undeniable. Economic security is, in many ways, national security, and a nation’s economic performance significantly influences the legitimacy of its government. Against this backdrop, Cambodia, as a small and open economy, has strategically embraced open and inclusive regionalism and international economic integration as the guiding principles of its foreign policy.

Under the stewardship of Prime Minister Hun Manet, Cambodia’s foreign policy has undergone a discernible transformation, placing a strong emphasis on economic considerations. This shift reflects a pragmatic approach to foreign affairs, where economic interests take center stage in a new era of diplomacy.

Prime Minister Hun Manet’s leadership has propelled Cambodia’s economic diplomacy into high gear. His tireless efforts are evident through numerous overseas visits and meetings with foreign dignitaries, all with the singular goal of economically connecting Cambodia with the global community.

Each overseas visit underscores Cambodia’s commitment to economic pragmatism and a strategic diversification strategy aimed at maximizing benefits from existing bilateral and multilateral mechanisms. The objective is to leverage international partnerships and the global environment as catalysts for national growth and resilience.

In 2021, Cambodia’s Ministry of Foreign Affairs and International Cooperation unveiled an ambitious economic diplomacy strategy spanning from 2021 to 2023. This strategy sets ambitious goals, including boosting international trade, attracting foreign direct investment, promoting tourism, and showcasing Cambodia’s rich cultural identity to the world.

Central to this strategy is the establishment of a robust and efficient mechanism that fosters multi-sectoral and multi-stakeholder collaboration at both national and international levels. A systemic approach is deemed essential to sustain and amplify Cambodia’s economic growth.

Challenges identified in the strategy include a shortage of qualified human resources, insufficient financial resources for implementing action plans, inadequate cross-sectoral coordination, a lack of effective information-sharing platforms among relevant stakeholders, and limited nation branding campaigns and lobbying activities.

Looking ahead, the Ministry of Foreign Affairs and International Cooperation is crafting a new economic diplomacy framework to adapt to evolving national and international situations, aligning with the strategic objectives of the Pentagonal Strategy. While political leadership strongly supports these efforts, challenges persist at the working level in implementing economic diplomacy effectively.

The linchpin of Cambodia’s economic diplomacy lies in domestic reforms. To realize its vision of attracting more investments, continuous improvements in the investment and business environment are essential. Only through results-based reforms and substantial improvements can Cambodia fully unleash its economic potential and strive to become a high-income country by 2050.

Notably, the Pentagonal Strategy Phase One places good governance at its core, making it a central element of Cambodia’s economic diplomacy. Clean, efficient public institutions, a fair legal system, and smart governance are critical components.

The Pentagonal Strategy emphasizes the importance of improving the quality of public institutions at both national and sub-national levels, ensuring efficient public services, enhancing private sector governance, and fostering a favorable environment for business, investment, and trade. Concrete results are expected.

In 2021, Cambodia enacted a new investment law offering incentives, guarantees, and simplified procedures to attract more investments, particularly in high-tech industries, digital technology, green technology, manufacturing, agriculture, agro-industry, education, health, and infrastructure sectors.

Cambodia recognizes that expanding international trade requires a multifaceted strategy. The Kingdom has actively pursued this goal through strategic trade negotiations, concluding free trade agreements with China and the Republic of Korea.

Moreover, Cambodia played a crucial role in the negotiation of the Regional Comprehensive Economic Partnership (RCEP), which was launched during its ASEAN chairmanship in 2012 and concluded in 2021. The nation is now working to establish robust trade promotion policies to foster trade relationships and remove barriers hindering the flow of goods and services.

In line with Cambodia’s digital transformation, digital trade has emerged as a significant component of its foreign trade strategy. Digital trade, although relatively new to Cambodia, encompasses a wide range of commercial activities facilitated through electronic means and relies on telecommunications and information and communication technology services.

Success in Cambodia’s international trade strategy hinges not only on negotiations and policies but also on fostering a supportive ecosystem for local entrepreneurs and exporters. Small and medium-sized enterprises (SMEs) play a vital role in this context, necessitating government support in terms of access to finance, capacity building in digital literacy and marketing, and innovation capacity enhancement.

Cambodia’s economic diplomacy is ascending on a path guided by comprehensive strategies and visionary leadership. However, to unlock its full potential, Cambodia must continue implementing robust public sector reforms, focusing on good governance and combating corruption, while fostering a business-friendly environment.

Additional resources are needed to invest in economic intelligence, leadership development, nation branding, strategic lobbying, and economic diplomacy capacity building. Cambodia’s trajectory in economic diplomacy heralds a promising future, promising growth, and greater global influence.

Source: Khmer Times

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