PHNOM PENH: Cambodia is prioritising small-scale manufacturing industries and high-impact agriculture to drive its next phase of growth, as an economic slowdown and mounting headwinds pose challenges.
Weak tourism, rising fuel costs and climate risks are undermining growth, while rising incomes and surging domestic demand for food are putting pressure on the farm sector, forcing the government to rethink its strategies.
"Cambodia must transform from a producer of raw agricultural commodities into a hub for quality, safe and technologically advanced agri-food processing," Industry, Science, Technology and Innovation Minister Hem Vanndy said at the "Cambodia Agriculture Forum and Exhibition 2026" on Saturday.
He said agricultural exports remained dominated by raw or semi-processed products, generating limited added value and leaving producers exposed to international price fluctuations.
Multiple factors – including a decline in tourism revenue, high diesel and petrol prices, geopolitical tensions, the closure of the Cambodia-Thailand border following a territorial dispute, and reduced household spending – are stifling this year's growth prospects.
The World Bank in October downscaled Cambodia's economic growth to 3.5 per cent for 2026 from an earlier forecast of 3.9 per cent in April.
Last week, Cambodian Prime Minister Hun Manet launched the "National Strategy for MSME Development 2026-2030" to steer the sector that remains a backbone of the economy.
"The government is prioritising the development of micro, small and medium enterprises (MSMEs) through improved business conditions, improved productivity, technology adoption, better access to finance and skills development as Cambodia prepares to graduate from least developed country (LDC) status by the end of 2029," Hun Manet said last Thursday, as reported by state media Agence Kampuchea Presse.
The MSME sector contributes about 63 per cent of the country's gross domestic product (GDP), providing over 70 per cent of non-agricultural jobs.
About 750,000 MSMEs employ nearly three million workers, including 1.8 million women, according to the 2022 Economic Census, reported the state media.
"Indeed, MSMEs are the backbone of the national economy and key partners of the government in creating jobs, generating household income, promoting domestic production and strengthening economic resilience," he said.
The prime minister stated that the sector still faces challenges such as limited capital, technical capacity, market access, competition, high production costs, and bureaucratic procedures.
The agriculture sector is equally important, contributing about 16 per cent of GDP and employing over three million workers.
When Cambodia graduates from least developed country (LDC) status in 2029, it could lose some preferential trade benefits. This could expose key exports, including garments, rice and other agricultural products, to higher tariffs and stricter rules of origin in major markets.
The government is strengthening infrastructure, promoting advanced drying, cold-storage and packaging technologies, and prioritising the development of agro-industrial clusters to further propel these sectors.
There is also a focus on deploying modern farming technologies, including smart tractors and drones for fertiliser application.
Around 400 exhibitors are participating in the exhibition, which runs from Oct 23 to 25 at the Diamond Island Convention and Exhibition Centre in Phnom Penh.
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