In The News

In Cambodia: Early Signs of an Emerging Middle Class

May 23, 2007

While Cambodia rarely makes international headlines except for endless accounts of past atrocities, there has been an emerging transformation occurring here over the past few years that has mostly gone unnoticed outside of this quiet corner of Southeast Asia.  The early signs of an urban middle class are beginning to emerge.  

After leaving The Asia Foundation’s Cambodia office in 2003, I recently returned for an extended assignment in Phnom Penh.  The difference is remarkable.  Upon leaving in 2003, I recall a pervading sense of pessimism about the future of democratic governance, economic growth, and poverty alleviation.  The political stalemate following the 2003 National Assembly elections, and the imminent threat of Chinese competition in the garment sector after the end of the Multi-Fiber Arrangement (MFA), seemed to indicate that Cambodia was moving backwards.  Today, the streets are thronged with motorbikes; there is a proliferation of small street-side restaurants where Khmers enjoy meals at all hours; the mobile phone industry is booming; internet cafes are filled with locals (instead of foreigners as it was in 2003); the political environment is remarkably stable by recent standards; and the signs of new affluence are everywhere.  Today, all of our staff have ATM cards.  In 2003, there were only two or three ATMs in the whole country, and most people kept their money under the mattress at home.

The economy has been booming in urban Cambodia over the past few years, with an average GDP growth of 11.3% over the past 3 years according to the World Bank.  While much of this growth is centered on land and property development and tourism – sectors that tend to concentrate wealth in the hands of elites and those with government connections – there are increasing signs that a middle income sector is growing rapidly as a result of this growth.

Why does a middle class matter?  First, it indicates that many Cambodians are finding ways out of poverty into upwardly mobile economic paths.  As the urban areas grow, and new jobs are created, an increasing number of Cambodians are leaving the rural areas and low productivity work in the rice paddies to look for wage-earning jobs in the cities and surrounding industrial areas.  The garment sector has absorbed more than 300,000 workers since 2000, most of whom came from poor, rural backgrounds.

An emerging middle class can also bring important changes in politics and governance.  There have been a number of studies that have identified a high correlation between effective democratic governance and the existence of a middle class.  At present, the ruling Cambodian People’s Party (CPP) has consolidated power, and policy-making is mostly handled by an elite inner circle.  But as the economy continues to grow in Cambodia, there will be new economic groups and increasingly influential constituencies emerging in Cambodia that do not owe their success to connections with government.  The political stability that Cambodia has enjoyed since the end of a political stalemate in 2004 seems to have been partly instrumental in creating an environment conducive to growth ” but it may also lead to more political competition in the future.  If the experience of neighboring Thailand, the Philippines or Indonesia can be used to forecast trends in Cambodia, the emergence of an independent business sector and a robust middle class will lead to increasing pressure on government to clean up its act and reduce corruption.

So, I’m much more positive about Cambodia today than I was four years ago.  If this economic growth can be maintained, millions could be pulled out of poverty, and democratic governance will improve dramatically over the next 10 to 15 years.

Thomas Parks is The Asia Foundation’s Assistant Director for Governance, Law, and Civil Society programs and Conflict Management Program Advisor.

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