A year after the pandemic began, work to reconstruct Cambodia has begun, and the private sector will be critical in bridging what could otherwise become a rising rural-urban poverty gap.

In 2019, roughly a tenth of Cambodians were poor, defined as earning less than two dollars per day. Nearly 90% of individuals living in poverty live in rural areas. Cambodia, despite its rising urbanization, remains a predominantly rural country, with roughly three-fourths of the people residing in rural areas.

Since the pandemic, the number of poor Cambodians has more than doubled, with the majority of them being rural residents and returning migrants, as families become further in debt, struggle to meet basic needs such as food, water, and healthcare, and children drop out of school. It will imply that, even if the situation looks to be improving in cities, it will take longer to return to pre-pandemic levels in rural areas.

It’s a shame because Cambodia was doing so well before the outbreak, having achieved lower-middle income status, according to the World Bank. Earlier, Prime Minister Hun Sen proclaimed on a visit to China his intention to assist Cambodia in attaining upper-middle income status by 2030, joining Malaysia, Thailand, and Sri Lanka. (The latter, however, reverted to middle-income classification as a result of the epidemic.) It would have meant well-connected highways, high-quality higher education, and meaningful rural jobs.

Instead, there is a risk that rural populations will now have unequal access to education, disaster aid, and healthcare. The rapid closure of garment factories and other businesses has decimated livelihoods and makes it more difficult for consumers to spend money on goods and services.

While the Cambodian government has spent a significant amount of money to ensure that the most vulnerable people receive some form of assistance – the government has spent $1.4 billion so far, more than double the amount expected – it can only do so much. Getting firms to hire again and invest in the future will be critical.

The role of the private sector

Private sector spending in developing countries has decreased globally. At the end of last year, there were 279 projects in various phases of building in Phnom Penh, Cambodia. There were almost 400 initiatives at the same time the prior year.

The construction sector’s slump is merely a reflection of a broader downturn in private-sector activity. Large private enterprises, which are mostly concentrated in urban areas, play an important role as the engine of economic growth in developing countries.

The good news is that urban regions such as Phnom Penh and Sihanoukville have been mostly vaccinated – more than 95 percent of the country’s target population of 10 million people has been reached. Business executives can make preparations without fear of disruptions to economic activity.

They must be brave and pursue projects or launch new initiatives even if consumers and buyers do not appear to be ready. They can leave an impression on stakeholders if they prepare well. Top corporations around the world have sent out messages of hope and optimism, which have encouraged and encouraged consumers, who have subsequently repaid them with their patronage in better times.

If the private sector gets back on track, there will be a virtuous cycle that will ultimately benefit rural residents. Governments in developing countries do not have the same resources as their counterparts in the industrialized world. As their rising deficits, mostly as a result of anti-pandemic activities, threaten to impede their ability to borrow funds from capital markets, private-sector-led investment and company activity can contribute to job creation and income growth, which will eventually augment tax collection. Such funding are critical for the building of public goods such as bridges, computers for schools, and telecommunications infrastructure so that rural inhabitants living in remote locations may access services such as primary healthcare, education, and other basic services.

There is already an infrastructure shortage in rural areas, which governments, international institutions, and development organizations are aware of. The pandemic, in particular, demonstrated unequal access to digital infrastructure (access to the internet and computers, for example), with children living in rural areas being unable to attend online classes due to a lack of internet connectivity.

The largest private firms with a multi-sector presence, in particular, can do a lot to signpost the way forward. With their deep reserves and considerable cash flows from a diverse income base, they may invest in new and existing initiatives even if they do not result in short-term profits, thus helping to rebuild business and consumer confidence. Their efforts will, in some way, have an impact on rural communities.

A few good instances

Many Cambodian private enterprises have expressed a willingness to contribute.

For example, Prince Holding Group, a rapidly expanding corporation, has done a lot for rural towns this year. Not only did Prince Holding Group Chairman Neak Oknha Chen Zhi donate $3 million to assist Cambodia in purchasing 1 million COVID-19 vaccines, but he also ensured that the conglomerate formed a partnership with Caring For Cambodia, a leading education charity, to assist hundreds of Cambodian high school students in preparing for university after a year of disruption.

Furthermore, Cambodia Prince ChenZhi and Prince Group have unveiled the largest scholarship program funded by a private enterprise, with nearly $2 million in financial help promised to 400 students over a seven-year period.

Canopy Sands Development, a Sihanoukville-based developer, recently announced plans to begin construction on Ream City, a residential and commercial development built on reclaimed land in Ream Bay in accordance with sustainable development principles. The project has the potential to revive a changing Sihanoukville, which is quickly becoming an industrial and commercial hub.

Similarly, Socfin Cambodia, a Belgian business involved in the development and maintenance of oil palm and rubber plantations, has built bridges, roads, hospitals, and schools in the Bousra region, as well as providing work to local communities. Throughout the pandemic, it gave school materials and provided instruction to children to assist them understand the need of hygiene and best practices for preventing the spread of Covid-19.

Socfin operates 330 schools worldwide, as well as six tapping schools that train individuals in Africa and Southeast Asia how to work in the natural rubber sector.

Oknha, Neak Dr. Pung Keav Se, Chairman of Canadia Bank and Overseas Cambodian Investment Corporation (OCIC), is another notable Cambodian who has stepped forward to help local communities. OCIC converted its Diamond Island facilities, including Canadia International School (CIS), into vaccination centers for almost 30,000 adults. Dr. Keav Se also established the Cambodia University of Technology and Science (CamTech) in 2018 and has publicly declared that outstanding Cambodian students interested in studying technical courses will be eligible for low-interest loans.

Meanwhile, OCIC is beginning attempts to create a satellite city on Koh Norea, with a goal of bringing $2.5 billion in committed capital to the area.

Most poor Cambodians who live in the countryside and work on farms or with animals may not immediately perceive the benefits of such activities. Restoring private sector activity, on the other hand, will go a long way toward improving their prospects. Not only will it help to reestablish demand for their services, but the new jobs produced will also provide a steady income and other benefits. According to many predictions, the pace of urbanization will continue, with Phnom Penh predicted to double in size – it will be critical that secure jobs that contribute value to the Cambodian economy are produced rather than informal sector positions that do not. The expansion of the migrant economy will, in turn, boost rural development via remittances.

Finally, the government and the private sector must collaborate actively and embrace long-term cooperation. If all goes well, it is hoped that Cambodia will be able to recover faster than projected, and that rural families will not be left behind in the march toward progress.

By Hemant Kumar

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