Why Cambodia is investing in human development to manage uncertainty

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Alissar Chaker, Resident Representative, United Nations Development Programme in Cambodia, Ivan Gonzalez de Alba, Senior Economist, United Nations Development Programme in Cambodia

• Cambodia’s response to the COVID-19 pandemic has proven to be relatively effective in mitigating losses.
• COVID-19 exposed the importance of building socioeconomic resilience in Cambodia.
• A great deal can be accomplished by working together to double down on investments in people and enhancing their freedoms, capabilities and opportunities to thrive.

The COVID-19 pandemic created widespread challenges, which were compounded by the war in Ukraine. These shocks largely stalled global recovery. In Cambodia, the latest macroeconomic outlook released by the Ministry of Economy and Finance and the United Nations Development Programme (UNDP), estimates that GDP will grow by 4.9 % this year, compared to the original estimate of 5.4%. This is due to the increase in the cost of living associated with soaring prices of fuel, food and other commodities. Further loss in growth is mitigated by social protection and other stimulus measures.

From 1991, when the UNDP started calculating it, until 2020, the Human Development Index (HDI), a measure of a nation’s wellbeing considering three basic aspects of human development – health, education and standard of living – rose progressively. It fell for the first time in 2020 and then again in 2021, with 90% of countries declining in either or both years, wiping out an average of five years of human development progress.

During these two years, Cambodia saw a decline in its hard-earned development gains and regressed to its 2018 HDI level. Yet, the country made commendable improvements between 1990 and 2021, with its income per capita increasing fourfold to $4,078; its life expectancy increasing by more than 14 years to surpass the age of 70; and, its mean years of schooling growing by 2.4 years to 5.1 years. With these improvements in income, health and education, the country’s HDI increased by 56.9%, reaching the medium human development category and putting Cambodia at 146 among 191 countries.

Cambodia’s decline to its 2018 HDI level compared to the global average decline to 2016, suggests that Cambodia’s response to the COVID-19 pandemic was effective in mitigating the losses. The Royal Government managed to roll out in a timely manner, with support from the Australian government and the UNDP, a campaign in all its 1,646 communes to identify and register poor and vulnerable families. These efforts led to the first cash transfer programme in terms of magnitude and reach in the country’s history. After 27 months and $806 million invested in nearly 700,000 households, the programme successfully mitigated impacts on GDP, poverty and unemployment.

Underlying challenges for Cambodia

The recently launched UNDP Human Development Report 2022, Uncertain Times, Unsettled Lives:Shaping our Future in a World in Transformation, identifies a new web of interconnected uncertainties, including climate and biodiversity crises, inequalities, political polarisation and technological upheavals. This is happening at a speed and scale beyond what we have ever experienced and it is taking a heavy toll on our deeply connected societies.

At the same time, uncertainties are making people feel increasingly distressed. Stress, sadness, anger and worry have been on the rise and are reaching record levels. It is estimated that over 35% of the world’s population suffers from mental health and psychological problems – a startling 10% higher than a decade ago. According to the Transcultural Psychosocial Organization, this figure was 40% in Cambodia before the pandemic; it has likely increased since. Suicide cases in Cambodia are also on the rise, with 242 cases reported by the Cambodian National Police in the first quarter of 2022. Suicide is ranked as the second leading cause of death among young adults aged 13 to 24-years-old, after road traffic accidents. This mental health crisis is damaging human development and limiting people’s prospects and opportunities.

Discover

How is the World Economic Forum ensuring sustainable global markets?

The World Economic Forum’s Platform for Shaping the Future of Trade and Investment informs business and policy action on critical international trade and investment choices, driving inclusive growth and development by working with companies, governments, and civil society.

• The Global Alliance for Trade Facilitation is cutting trade costs by delivering trade facilitation projects in 30 countries in Latin America, Africa and Asia.
• The Forum piloted sustainable investment facilitation in Cambodia, Ghana and Kenya to unlock foreign direct investment for development.
• The Forum’s Digital Trade work drives coherence and interoperability in TradeTech and Digital Economy Agreements.
• The Forum’s Green Trade and Supply Chain Sustainability community identified 25 technologies to cut global emissions.

Contact us for more information on how to get involved.

The way forward

Looking ahead, we see for the first time a future in which our children may be worse off than previous generations. But this can be reversed. COVID-19 exposed the importance of building socioeconomic resilience. It also reaffirmed that economic growth alone is not enough to tackle current challenges or to manage the emergence of increasingly complex uncertainties. It is, thus, important to strengthen the country’s socio-economic preparedness to absorb future shocks, manage the uncertainty complex and harness the potential embedded in uncertain times.

This requires concrete transformations that focus on investment, insurance and innovation. Investment is required in renewable energy, preparedness for future pandemics and extreme natural hazards, nature-based solutions to ease planetary pressures, adaptation to climate change and whole-of-society digital transformation. Insurance, including social protection, helps people navigate uncertainties. Innovation in its various forms (technological, economic, and cultural) enhances people’s capacity to withstand uncertainty and unleashes their potential to be agents of change.

Navigating uncertainty requires an open and inclusive dialogue to strengthen trust and enhance access to and the quality of social services and public goods. It also requires developing psychological resilience through expanding access to mental health services, often a privilege accessible only to some.

A great deal can be accomplished by working together to double down on investments in people by enhancing their freedoms, capabilities and opportunities to thrive in peace, including with the planet. In a context of heightened uncertainties, one thing is sure: business as usual is not functioning. It is time to rethink the ground rules and assumptions, rekindle hope and rewrite our future.