កម្ពុជាក្នុងឋានៈជាប្រទេសមានប្រាក់ចំណូលមធ្យម​ – អន្ទាក់ ឬកាលានុវត្តភាព៖ ផលិតភាព និងការបំផ្លាញប្រកបដោយការបង្កើតថ្មីនៅកម្រិតសហគ្រាស ភាគ ២

សារគន្លឹះ

• របាយការណ៍វាយតម្លៃស្ថានភាពប្រទេសកម្ពុជាឆ្នាំ២០២៤ របស់ធនាគារពិភពលោក បានបង្ហាញថា ផលិតភាពគឺជាកត្តាសំខាន់បំផុត ក្នុងការរក្សាល្បឿននៃកំណើនសេដ្ឋកិច្ច ប៉ុន្តែមិនបានផ្តោតលើការឈ្វេងយល់ពីកត្តាជំរុញនៃកំណើនផលិតភាពនោះទេ។
• អត្ថបទប្លុកនេះគឺជាភាគ​ ២ នៃកម្រងអត្ថបទដែលចែកជា​ ៣ ភាគ ដែលសិក្សាឈ្វេងយល់អំពីអ្វីដែលកម្ពុជាត្រូវការ ដើម្បីផ្លាស់ប្តូរទៅរកយុទ្ធសាស្ត្រកំណើនដែលផ្អែកលើផលិតភាពនៅកម្រិតសហគ្រាសឬក្រុមហ៊ុន។
• អត្ថបទប្លុកនេះផ្តោតលើផលនៃការជ្រើសរើស រវាងសហគ្រាសដែលមានផលិតភាពខ្ពស់ឱ្យចូលក្នុងទីផ្សារ ចំណែកឯសហគ្រាសដែលមានផលិតភាពទាបឱ្យចាកចេញពីទីផ្សារ។
• ភស្តុតាងពីការស្រាវជ្រាវបានបង្ហាញថា កម្ពុជាមានច្បាប់ និងបទប្បញ្ញត្តិនានា ពាក់ព័ន្ធនឹងការចូល និងការចាកចេញរបស់អាជីវកម្មពីទីផ្សារ។
• ប៉ុន្តែភស្តុតាងក៏បានបង្ហាញផងដែរថា ការអនុវត្តច្បាប់ទាំងនោះនៅមានកម្រិត ចំណាយថវិកាច្រើន និងប្រើពេលវេលាច្រើន។ ជាលទ្ធផល មានសហគ្រាសថ្មីៗតិចតួចណាស់ដែលចូលក្នុងទីផ្សារ ឬចាកចេញពីទីផ្សារនៅកម្ពុជា។
• ដូច្នេះ ការកែទម្រង់គួរផ្តោតសំខាន់លើការអនុវត្តច្បាប់ និងបទប្បញ្ញត្តិនានា នៅកម្រិតសហគ្រាស ដែលពាក់ព័ន្ធនឹងការចូល និងការចាកចេញពីទីផ្សារ។

Key Message

• The World Bank’s 2024 country diagnostic of Cambodia highlights productivity as being crucial to sustaining rapid economic growth but does not focus on understanding the drivers of productivity growth.
• This blog is the second in a three-part series that explores, at the firm-level, what is needed for Cambodia to shift towards a growth strategy based on productivity.
• This blog focuses on the selection effect, whereby high-productivity firms enter the market, and low-productivity firms exit.
• The evidence shows that Cambodia performs well on the laws and regulations related to business entry and exit.
• The evidence shows that the implementation of those laws is ineffective, costly, and time-consuming. As a result, very few new firms enter, or existing firms exit in Cambodia.
• Reform should focus on the firm-level implementation of laws and regulations related to entry and exit.

Introduction

In the first blog in this series, we noted that Cambodia has successfully mobilised resources for development—moving workers from fields and households to the factory, providing the young with basic literacy, and boosting savings and investment to very high levels. This strategy, which helped drive Cambodia from low- to middle-income status, is running out of steam.

This blog is the second in a three-part series that explores, at the firm level, what is needed for Cambodia to shift towards a growth strategy based on productivity. Nobel Prize-winning economist Paul Krugman famously argued, “Productivity isn't everything, but, in the long run, it is almost everything.” Higher productivity can benefit firms (higher profits), workers (higher wages), consumers (lower costs of goods and services), and governments (higher tax revenue).

Productivity is defined as “the efficiency with which societies combine their people, resources, and tools.” The most encompassing measure is Total Factor Productivity (TFP), which measures the efficiency with which all factors of production are being used in production. CDRI research shows that Cambodia has experienced slow growth of TFP over the last twenty years. World Bank data shows that this has resulted in average labour productivity among formal sector firms in Cambodia being less than USD7,000 per worker in 2023, significantly less than peer countries (Vietnam, Bangladesh, and the Philippines).

Research shows that there are three key drivers of productivity: within-firm, selection, and reallocation. This blog reviews the second of these three drivers—selection—explains the concept, discusses what we know for the Cambodian case, and derives some policy conclusions.

Recent Policy Advice: Where Is Productivity?

The World Bank produced a major study of Cambodia in 2024 that sought to diagnose the current economic situation and devise appropriate policy recommendations. The study concluded (p. 25) that, “[to] ensure that growth remains sustainable and inclusive, Cambodia will need to increase the contribution to growth from productivity over time.” The report noted that rapid economic growth in Cambodia since 2012 had been dominated by increased investment and employment, and that productivity had made a negative and labour quality a minimal contribution respectively. In the analysis, the report focused on the importance of diversification, noting that the excessive concentration of exports in garments and narrow range of export markets was a risk to Cambodia. The report concluded with a long list of policy recommendations, without rooting that discussion in a clear discussion of the drivers of firm-level productivity.

Three Drivers of Productivity

By contrast, this blog (and CDRI’s research agenda more widely) has started off by defining productivity, illustrating the importance of productivity in contemporary Cambodia and will continue here by thinking about one key driver of productivity—the selection effect.

a)    Selection and Productivity

The second driver of productivity growth is selection, whereby new, dynamic, entrepreneurial, techno-savvy firms enter an industry, while inefficient, low-productivity, sclerotic firms exit[1]. This was referred to famously as a process of Creative Destruction by the economist Joseph Schumpeter in his 1942 book Capitalism, Socialism, and Democracy. As they exit and go bankrupt (destruction), firms free up the land, labour, banks loans, and machinery they were using in production, which becomes available for use by more productive firms (creation)—together here referred to as the selection effect. Wider research shows that the entry of more productive firms and exit of less productive firms accounts for roughly 25 percent of productivity growth across a sample of countries (Chile, China, Colombia, Ethiopia, India, Indonesia, Malaysia, and Mexico). Cambodia specific research shows that almost all of the productivity growth in the textiles sector in the early 2000s was accounted for by the entry of more and exit of less productive textile firms.

Cambodian firms are generally low-productivity. In 2024, GDP per employed person was USD153,544 in the US and USD12,150 in Cambodia. Even among the most dynamic firms in Cambodia, average productivity was 83 percent below that of equivalent firms in Vietnam. This implies that there is an enormous backlog of technologies and good management practices that Cambodian firms can learn from and emulate to catch up with higher productivity in other countries.

Where are the entrepreneurs who should be taking advantage of that vast potential of technological arbitrage?

b)    The Business Climate: Business Entry

Of particular importance to the selection effect are barriers to entry. Here we can turn to the World Bank 2025 B-Ready Index, which “assesses the regulatory framework and public services directed at firms, and the efficiency with which regulatory framework and public services are combined in practice.” Table 1 shows a mixed set of results for Cambodia in relation to business entry. Cambodia scores highly in relation to regulations for business entry, poorly in relation to digital public services and information transparency, and very badly in relation to operational efficiency of business entry.

Table 1: World Bank B-Ready Business Entry 2025

Business Entry Indicator	Max Score	Malaysia	United States	Vietnam	Cambodia
Quality of Regulations for Business Entry	100	79.76	90.95	68.61	76.98
Digital Public Services and Transparency of Information for Business Entry	100	84.5	58.06	73.33	51.17
Operational Efficiency of Business Entry	100	93.02	76.34	87.92	38.73

Source: World Bank B-Ready 2025

Wider evidence supports these concerns about entry. The World Bank Enterprise Survey 2023 found that the average number of days to obtain an operating license in Cambodia (30.2) was higher than the average for low-income countries (13.5), middle-income countries (18.5), and upper-income countries (26.5). The 2019 Global Competitiveness Report from the World Economic Forum found that the cost of starting a business in Cambodia was equivalent to almost 50 percent of GDP per capita, where Cambodia ranked 130th from 141 countries.

Table 1 shows that Cambodia performs very well when judged by the quality of its regulations, but much less well when it comes to implementing those laws. The entry of new businesses captures not only the efficacy of the legal framework and its implementation but also the general business cycle—we would expect more firm entry, for example, when the economy is growing rapidly. The data is thus at best only a proxy measure for the functioning of the laws governing the entry of new businesses.

Here we can turn to the World Bank Entrepreneurship Database, which collects data on the number of formally registered new firms, total number of firms, and number of exiting firms from 2006 to 2024 across 188 economies. Table 2 shows that only 5,138 formally registered firms entered in Cambodia in 2024, compared to nearly 90,000 in Thailand and around 140,000 in Vietnam (or around 840,000 in the developed UK). As a ratio of the working population, this number was much lower in Cambodia (0.45) than in these comparable countries.

Table 2: Business Entry 2024

Country	Total Number of Newly Registered Corporations in 2024	Number of Newly Registered Corporations in 2024 per 1,000 working-age (15–64) population
Cambodia	5,138	0.45
UK	841,138	19.19
Malaysia	59,611	2.28
Laos	7,941	1.57
Thailand	87,596	1.75
Vietnam	136,757	2.00

Source: World Bank Entrepreneurship Database 2024

It is worth noting that this data only covers formal firms that enter and register with the government. CDRI Research using data from the 2022 Economic Census shows that the total number of firms in Cambodia increased from 505,134 in 2011 to 753,670 in 2022. Ninety-five percent of these firms are micro, mostly single-person firms that produce at low productivity and rarely scale up—the question of formalisation and productivity will be addressed in a subsequent blog in this series.

c)     The Business Climate: Business Exit

Research shows that any barriers to competition, subsidies, or trade protection in a sector will allow incumbents to charge higher prices and reduce their likelihood of exit. Bankruptcy laws are crucial. If bankruptcy laws allow an entrepreneur to walk away from a failed business with minimal debts, that entrepreneur will more likely enter an industry in the first place. Slow and expensive bureaucratic costs of closing businesses may lead to the persistence of zombie firms—bankrupt and unprofitable firms that generate enough revenue to continue to exist, but are unable to invest in new technology or to exit the industry. Culture is also important. In the US, there is no shame in bankruptcy—society admires individuals who try new business ideas—while in Malaysia there is serious social and reputational damage associated with being associated with a bankruptcy.

Table 3 shows that the quality of regulations for judicial insolvency proceedings in Cambodia is better than in Malaysia, broadly similar to Vietnam, but a long way behind the US.

Table 3: World Bank B-Ready Insolvency 2025

	Max Score	Malaysia	United States	Vietnam	Cambodia
Quality of Regulations for Judicial Insolvency Proceedings	100	45.14	85.53	54.83	56.53

Source: World Bank B-Ready 2025

The data on the implementation of judicial insolvency laws has not been collected in Cambodia for the B-Ready Index. We can turn again to our proxy measure of implementation—the actual number of formal businesses exiting. Table 4 uses data from the World Bank Entrepreneurship Database and shows that only 22 firms formally exited in Cambodia in 2024, compared to almost 30,000 in Malaysia and almost 24,000 in Thailand. As a ratio of the working population, this number was essentially zero in Cambodia and much higher in Thailand (0.47) or Malaysia (1.19).

Table 4: Business Exit 2024

Country	Total number of deregistered firms in 2024	Total number of deregistered firms in 2024 per 1,000 working-age (15–64) population
Cambodia	22	0
UK	701,924	16.01
Malaysia	29,820	1.19
Laos	1	0
Thailand	23,679	0.47
Vietnam	16,582	0.24

Source: World Bank Entrepreneurship Database 2024

Policy

A comparison of the World Bank Enterprise Surveys for Cambodia in 2016 and 2023 shows that significant and commendable progress has been made in the policy framework faced by firms. The general relation between government and business has improved. There was a sharp decline in firms experiencing at least one bribe payment request (64.7 to 27.1 percent) and firms identifying business licensing and permits as a major or very severe constraint (from 11.1 to 0.1 percent). To sustain rapid economic growth, government reform should focus on the implementation of existing policy. The Enterprise Surveys show that the average number of days to obtain an operating license declined only slowly, from 33 in 2016 to 30.2 in 2023.

Likewise, data from the World Bank Enterprise Database shows that there has been no progress in increasing the pace of firm entry in Cambodia. While the number of newly registered corporations in 2024 per 1,000 working-age (15–64) population increased from 0.2 in 2006 to 0.91 in 2019, alongside rapid economic growth in Cambodia, it then declined to 0.4 in 2024. Even at the peak of the economic boom around 2023, there was much less firm entry than in Vietnam (2.00) or Malaysia (2.28).

Some researchers have advocated direct government programmes to sponsor start-ups in Cambodia. We may learn, for example, from Start-Up Chile, which was established in 2010. The programme provides office space, a USD40,000 grant, and weekly workshops to learn about startups and training. Other researchers have argued that intervention should focus on people rather than business. Training can focus on encouraging those personality traits associated with entrepreneurialism, such as self-starting initiative, future orientation, and being persistent and pro-active. A study of an intervention programme in Uganda found that training in both hard business skills (accounting, law, human resources) and soft skills (communications, negotiation, leadership) both boosted subsequent firm-level profits and investment. We need more research to think about such policy interventions and how they could help promote firm entry in Cambodia.

There is much less evidence on insolvency laws—with key data from the B-Ready Index not yet collected in Cambodia. The World Bank Enterprise Surveys don’t collect information on firms that have exited an industry. We need more studies of insolvency in Cambodia. We can examine the indirect evidence for the functioning of insolvency laws—the time series data from the World Bank Enterprise Database on business exits. This data shows that the number of firms exiting in Cambodia was close to zero between 2006 and 2015, increased between 2016 and 2019 (during the COVID-19 recession) to reach a peak of 732 firms in 2022 (or 0.07 firms per 1,000 working-age population), then fell again to near zero between 2019 and 2024. A useful place to think about targeting reforms related to firm exit is the requirement that firms undertake an expensive and thorough audit before they close down, which Stephen Higgins of Mekong Capital has labelled the “biggest constraint to firm exit”.

Conclusion

Too many policy studies of Cambodia, such as the 2024 World Bank diagnostic study of Cambodia, acknowledge the importance of productivity for sustaining rapid economic growth, but fail to integrate this insight into an understanding of the firm-level drivers of productivity growth. This blog is one of a series of three that, by contrast, start off by defining productivity, illustrating the importance of productivity in contemporary Cambodia, and has examined in detail the drivers of productivity. These blogs show that there are three key drivers of productivity: within-firm, selection, and reallocation. This blog reviews the second of these three drivers—selection. The blog concludes that Cambodia experiences too little firm entry and exit. While the legal framework governing entry and exit is of a high international standard in Cambodia, the implementation of those laws needs priority attention going forward. To increase firm entry and exit and ensure that the resulting selection effects help boost productivity is ultimately a firm-level matter of implementation.

 

Look out for our fifth blog, Middle-Income Cambodia – Trap or Opportunity: Productivity and Firm-Level Dynamism.

 

Authors:

Prof Dr Matthew McCartney, Chief Economist, CDRI

Dr CHHORN Dina, Director, CDRI’s Centre for Development Economics and Trade

Mr NITH Kosal, Research Associate, CDRI’s Centre for Development Economics and Trade