Growth in service sector brings more challenges

Cambodia's service sector has seen significant growth in recent years, but the sector remains hampered by challenges, according to a report by the Asian Development Bank (ADB).

The service sector’s real GDP share has expanded to 39 per cent in 2011, compared to 23.7 per cent in 1993, the report said. The sector is predicted to increasingly contribute to growth in 2012 and 2013, according to the report.

However, inadequate supporting infrastructure, such as transport and basic utilities, the high cost of electricity and inadequate implementations of policies, laws and regulations and bureaucratic procedures hamper the sector.

Other challenges include tax administration and governance and corruption issues as well as a lack of skilled workforce and institutional capacity, the report said.

“Cambodia’s services sector has been growing steadily as the economy has grown relatively fast over the last 10 years,” Poullang Duong, Senior Economics Officer at the ADB Cambodia, said.

“Broadly speaking, shortages of skills, issues of governance, and high cost of electricity are among the main challenges facing the services sector,” he said.

“For example, the accounting sector lacks qualified accountants; the transport and logistics sector faces governance issues along roads and at borders; and the high cost of electricity and lack of reliable power supply have particularly affected the operations of hotels and restaurants.”

The ADB report reviews the experiences of the service sector in the six lower income Asian economies of Bangladesh, Cambodia, Nepal, Papua New Guinea, Uzbekistan and Vietnam.

Sub-sectors of Cambodia’s service sector include retail trade, transport and communications, hotels and restaurants, real estate, finance and public services.

Cambodia’s service sector has mostly been driven by tourism, according to the report.

International tourist arrivals have a positive impact on the sub-sector’s hotels and restaurants, transport and communications and retail trade, which together had a real GDP share of 20.4 per cent in 2011, the report says.

According to Ang Kim Eang, president of the Cambodia Association of Travel Agents, the number of international airlines arriving in, and departing from, Cambodia is one indicator of a growing tourism sector.

He said Angkor Wat, especially, was a big attraction for tourists. “Culture and heritage tours are one of the biggest attractions in Cambodia,” he said. But according to Ang Kim Eang, the sector still requires improvement in areas such as the quality of roads and bridges.

“Good tourism products are based on good infrastructure,” he said.

Ang Kim Eang also said eco-tourism has a high potential in Cambodia. According to the ADB report, promoting nature, beach and eco-tourism will be essential for sustaining tourism growth.

Sung Bonna, president of the Bonna Realty Group, said Cambodia’s service sector had been growing rapidly since 2010 after the economic crisis. “Especially this year, it is growing,” he said.

According to the ADB report, real-estate activities have played a key role in Cambodia’s service sector.

Sung Bonna said the number of local and international real-estate companies operating in Cambodia had almost doubled since the end of the crisis.

But Cambodia still needed more laws and regulation to strengthen investment and confidence for investors in the service sector, he said.

Sourced:Phnom Penh Post