Phnom Penh, 1 April 2023 (TDI): According to the World Bank, manufacturing as a percentage of production has peaked in the majority of developing East Asia and Pacific economies, except Cambodia and Vietnam.
The bank observed that East Asia and the Pacific experienced faster and less volatile growth than other economies up until about 25 years ago in its April update, published in Washington.
However, “the region saw only limited structural reforms and therefore little productivity-enhancing structural change” following the Asian financial crisis of 1997–1998.
As a consequence, since the global financial crisis of 2008–2009, productivity growth has decreased in many regional economies.
The bank stated that capital deepening had contributed more to limited growth in labor productivity than had growth in total component productivity.
These productivity and growth patterns have changed the pattern of structural change at the same time.
The manufacturing share of GDP peaked and started to fall in the early industrializers during the ten years between the Asian and global financial crises, the two exceptions to this tendency were still industrializing Cambodia and Vietnam.
Regional productivity growth has usually not been favored through labor shifts so far this century.
Workers shifted primarily from the least productive agricultural sectors to the services sectors, which had below-average productivity, and not much to the manufacturing and service sectors, which had the highest productivity, in key economies in recent years.
The “formalization” and overcrowding of workers moving from rural to urban regions may be the cause of this lower productivity.
However, “movement out of agriculture was accelerating and was oriented towards relatively high productivity manufacturing and services in Cambodia, Vietnam, and up until recently, Myanmar, which is still industrializing,”, according to the bank.
The 5.2 percent GDP prediction for Cambodia for this year has not altered. After Vietnam and the Philippines, Cambodia is expected to experience the fastest GDP rate in developing East Asia this year at 5.2 percent, according to the April update.