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The chapter delves into the significant impact of COVID-19 on Cambodia's trade, global value chains, and export competitiveness. It explores how the pandemic disrupted international trade flows and supply chains, leading to a sharp decline in demand and a global economic downturn. The analysis focuses on Cambodia's export performance, highlighting the varying impacts on different sectors, such as textiles, footwear, and machinery. The chapter also examines the role of global value chains in Cambodia's trade and the effects of the pandemic on these chains. Additionally, it assesses changes in Cambodia's export competitiveness using the Revealed Comparative Advantage (RCA) index. The chapter concludes with policy recommendations aimed at supporting Cambodia's economic recovery and enhancing its long-term competitiveness. By exploring these factors, the study offers insights into the vulnerabilities and resilience of Cambodia's trade sector, providing a comprehensive understanding of the country's trade dynamics during the pandemic.
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Abstract
The COVID-19 pandemic has severely disrupted global economic activity, impacting Cambodia’s trade dynamics, weakening its integration into global value chains, and undermining export competitiveness. This chapter assesses the pandemic’s effect on Cambodia’s trade landscape, focusing on shifts in export structure, supply chain disruptions, and changes in comparative advantage. The analysis reveals that while Cambodia’s total exports contracted, certain sectors—including agricultural products, rubber, footwear, and transportation equipment—demonstrated notable resilience. Conversely, service exports, particularly in tourism and transport, experienced severe declines. The gravity model analysis highlights how Cambodia’s machinery supply chains were disrupted by the pandemic, showing sensitivity to both domestic and international COVID-19 conditions. Additionally, the study’s analysis of revealed comparative advantage presents a mixed picture, with some sectors losing competitiveness while others, notably in agriculture and machinery, enhanced their global standing. These findings highlight the urgent need for Cambodia to diversify its export markets, increase value-added activities, and strengthen regional economic partnerships to build resilience against future global disruptions. The chapter concludes with policy recommendations aimed at fostering a robust and diversified trade sector, essential for Cambodia’s economic recovery and sustainable growth in the post-pandemic world.
2.1 Introduction
The COVID-19 pandemic profoundly disrupted international trade flows and supply chains worldwide. As the virus spread, countries enacted strict lockdown measures, leading to a sharp decline in the demand for goods and services. This, in turn, triggered an unprecedented global economic downturn, with a 4.3 percent contraction in global output in 2020—the largest since the Great Depression. International trade was severely disrupted; overall global trade volumes declined by 8.0 percent, and the services trade plummeted by 21.0 percent (WTO, 2021).
Cambodia, heavily dependent on external trade, tourism, and foreign direct investment (FDI), was significantly affected by these challenges. The country’s GDP shrank by 3.1 percent in 2020, marking its first recession in three decades. The adverse effects of the pandemic were especially pronounced in sectors like tourism and construction, leading to widespread job losses and a substantial increase in poverty. According to the World Bank, since June 2020, approximately 25.0 percent more households have been classified as “newly poor.” Similarly, UNDP (2021) estimated that about 2.5 million people, or 14.7 percent of the population, were living in poverty. The Royal Government of Cambodia later reported an increase in the poverty rate to 17.7 percent in 2021, underscoring the profound and ongoing impact of COVID-19 on the country’s most vulnerable populations. Despite forecasts of economic recovery in 2021 and 2022, the pandemic’s lingering effects on Cambodia’s trade dynamics and economic structure continue to pose significant challenges.
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While much of the existing research has focused on the broader macroeconomic impacts of the pandemic, such as GDP contraction and rising poverty, there has been limited examination of how COVID-19 specifically affected Cambodia’s trade, its participation in Global Value Chains (GVCs), and its export competitiveness. This chapter seeks to address this gap by providing a detailed analysis of Cambodia’s trade dynamics during the pandemic, with particular attention to changes in export structure, supply chain disruptions, and shifts in comparative advantage. By exploring these factors, the study aims to uncover the vulnerabilities and resilience of Cambodia’s trade sector, offering insights that can inform policy recommendations to support recovery and strengthen long-term competitiveness.
The remainder of this chapter is organized as follows. Section 2 briefly discusses how the COVID-19 pandemic reshapes the global trade landscape. Section 3 investigates the pandemic’s impact on export performance with a strong emphasis on change in export structure and geographical distribution of export markets. Section 4 presents the empirical specification and methodology used to estimate the impact of COVID-19 on Cambodia’s participation in GVC activities, specifically analyzing the effects on Cambodia’s machinery trade using the gravity model. Section 5 assesses the change in Cambodia’s export competitiveness by analyzing the revealed comparative advantage for pre—and post-COVID-19 periods. Section 6 concludes and provides suggestions for policy making.
2.2 Global Trade Following COVID-19: Challenges and Change
The COVID-19 pandemic has led to unprecedented disruptions in the global trade landscape, significantly affecting the movement of goods, services, and people, as well as the transport and logistics systems that underpin international commerce. These disruptions have intensified protectionist tendencies and non-cooperative trade practices, signaling a marked departure from the liberal trade paradigm that had characterized the global economy in recent decades. Although there are signs of recovery in goods trade, the movement of services and people continues to face substantial challenges due to increased trade costs and protective policy interventions.
Prior to the COVID-19 pandemic, global trade policies were already under significant pressure, particularly due to the escalating United States-China trade tensions and broader geopolitical rivalries. In 2018, the United States accused China of “unfair” trade practices, resulting in tariffs on over $250 billion worth of Chinese goods (Bown, 2022). China retaliated with tariffs on US imports, escalating tensions further. This confrontation disrupted the established, rule-based multilateral trading system, leading to widespread uncertainty in world trade and affecting trade flows, investments, and GVCs in Asia and beyond (Elms, 2021). WEF (2021) asserts that these tensions contributed to the localization of supply chains, as businesses sought to mitigate risks associated with trade policy uncertainty.
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The COVID-19 pandemic compounded these challenges, prompting governments worldwide to adopt a range of protectionist trade measures, such as lockdowns, travel restrictions, and export bans, which significantly reduced manufacturing output and further disrupted global trade. By April 2020, over 80 countries had imposed export bans on critical items like medical supplies and personal protective equipment (WTO, 2020a). These actions, while often necessary, have complicated global trade governance and posed significant challenges to the multilateral trading system.
The pandemic also led to increased trade costs due to public health measures like border closures and strict sanitary protocols, causing substantial delays in international cargo transport (WTO, 2020b). Maritime and air transport were particularly affected, with global air cargo capacity dropping by 24.6 percent by March 2020. These disruptions not only drove up trade costs but also strained GVC activities (Evenett, 2020). The OECD (2022) reports that freight rates have surged to their highest levels since the global financial crisis 2008–2009, with this pressure intensified by the Russia-Ukraine conflict that began in February 2022.
GVCs, critical for maximizing production efficiency across borders, were severely disrupted by the pandemic. These networks, which drive international trade and investment through specialization, faced significant challenges as lockdowns and business closures led to labor shortages and input disruptions. UNCTAD (2020a, 2020b) highlighted how rising logistics costs further strained GVCs, prompting firms to reconsider their supply chain strategies. In response to these disruptions, companies are reconfiguring their international production strategies, increasingly moving toward regionalization—localizing value chains within macro-regions such as the EU and ASEAN (Enderwick & Buckley, 2020; Gereffi, 2020; UNCTAD, 2020a, 2020b; Zhan, 2021). Others are reshoring manufacturing to reduce risks, particularly in high-tech industries (Pla-Barber et al., 2021). A recent survey found that 48.0 percent of executives are prioritizing diversification of sourcing strategies, while 5.0 percent opted for reshoring (The Economist Group, 2022). Additionally, some companies are adopting replication strategies, unbundling production stages in more geographically distributed ways, potentially reshaping global and regional GVC structures in the coming years (UNCTAD, 2020a, 2020b).
2.3 COVID-19 and Its Effects on Cambodia’s Export Dynamics
Export has been a key driver of Cambodia’s sustained economic growth over the past decades. Before the COVID-19 pandemic, Cambodia’s export of goods and services saw substantial growth, increasing from $5886 million in 2008 to $20,911 million in 2019, with an impressive annual growth rate of 12.0 percent. During this period, the export of goods grew slightly faster than services, with an average growth rate of 14.0 percent. However, the pandemic reversed this trend, leading to a decline in export volumes: total exports fell to $19,661 million in 2020 and further to $18,260 million in 2021. In growth terms, the export of goods and services contracted by 6.0 percent in 2020 and 7.0 percent in 2021.
Despite these declines, Cambodia’s export contraction was relatively moderate compared to the average declines in ASEAN and Least Developed Countries (LDCs), where exports fell by 9.0 percent and 10.5 percent, respectively. This resilience is largely due to Cambodia’s export portfolio, which includes essential goods like garments, footwear, and bicycles that maintained demand. Strong trade relationships with key markets such as the United States and the European Union, along with timely government interventions to support businesses and supply chains, also helped cushion the impact on exports.
COVID-19 had sector-specific impacts on Cambodia’s exports (Fig. 2.1). Goods exports were relatively less affected by the pandemic, with export values registering a 20.0 percent increase in 2020, although they contracted by 1.0 percent in 2021. This resilience in goods exports can be linked to the steady demand for certain essential products and the adaptability of Cambodia’s manufacturing sector. However, service trade was far more vulnerable to the shock, primarily due to stringent measures such as lockdowns, travel restrictions, and border closures, which severely impacted all modes of service delivery. The tourism and hospitality sectors were hit hard, leading to a dramatic decline in cross-border service trade. By December 2020, Cambodia’s export of services had plummeted by 68.0 percent from $6086 million in 2019. This decline continued into 2021, with export volumes dropping further to $689 million, reflecting the ongoing challenges faced by the service sector amidst the global pandemic.
Fig. 2.1
Trend in Cambodia’s goods and services exports, 2010–2021. Note Data adapted from Trade Map (International Trade Centre, 2022)
Cambodia’s merchandise export shares by destination country, 2012–2021
2012
2015
2018
2019
2020
2021
Export to world (US$ billion)
5.796
8.542
12.708
14.825
17.716
17.572
Share of total exports (%)
United States of America
32.7%
25.0%
24.0%
29.8%
30.1%
42.6%
European Union
21.6%
28.3%
30.1%
26.4%
18.2%
18.4%
China
3.1%
4.7%
6.8%
6.8%
6.1%
8.6%
Japan
3.2%
6.7%
8.5%
7.7%
6.0%
6.2%
Canada
6.8%
6.5%
6.1%
5.7%
4.2%
5.4%
United Kingdom
8.3%
10.2%
8.0%
6.6%
4.7%
4.2%
Viet Nam
1.9%
2.2%
2.8%
2.4%
2.2%
2.9%
Thailand
1.7%
4.1%
2.5%
3.4%
3.7%
2.1%
Hong Kong, China
8.6%
2.1%
2.4%
1.6%
3.8%
1.3%
Australia
0.6%
1.0%
0.8%
0.9%
0.8%
1.2%
Korea, Republic of
1.2%
1.6%
1.6%
1.4%
1.0%
1.1%
Singapore
3.60%
0.70%
0.60%
1.80%
14.80%
0.70%
Note Author’s calculation based on data from Trade Map (International Trade Centre, 2022).
2.3.1 Differential Effects of COVID-19 on Export Sectors
The pandemic’s impact on exports varies a great deal across industries and sectors. As shown in Fig. 2.2, exports of several agricultural products were hard hit in the earlier stage of the COVID-19 outbreak, but they quickly recovered at a later stage. Disaggregated by sector according to Harmonized System classification, export of animals and animal products (HS01-HS05) decreased by 86.4 percent in 2020 but it quickly rebound a year later with export growth registered at 180 percent in 2021. Likewise, food products (HS16-HS24) saw its exports falling by 12.9 percent in 2020, before rising in 2021 by 59 percent. A similar trend was observed in the exports of textile and clothing (HS50-HS63) and footwear (HS64-HS67), with exports declining in 2020 by 8.5 percent for textile and clothing and 9.8 percent for footwear, followed by an increase in 2021 of 6.4 percent and 18 percent, respectively. Such a trend highlights the disruption within the textile, clothing, and footwear production and supply chains, which then swiftly recovers once the public health measures and restrictions eased. Machinery and electronics (HS84-HS85) had a contrasting export trend, where the volume sharply increased in 2020 but plummeted in 2021. Interestingly, there are several sub-sectors including vegetable (HS6-HS15), plastic and rubber (HS39-HS40), and transportation (HS86-HS89) whose export registered positive growth during both periods, reflecting the resilience of their production and supply chains.
Fig. 2.2
Cambodia’s merchandise export growth by sector, 2020–2021. Note Data adapted from Trade Map (International Trade Centre, 2022)
Service exports, which involve the sale and delivery of intangible products such as tourism, transportation, and information technology and communication (ITC) services to foreign consumers, were severely impacted by the COVID-19 pandemic. Almost all service industries in Cambodia faced significant downturns, with the travel industry being the hardest hit. In 2020, travel-related service exports plummeted by 80.0 percent, a decline driven by strict travel restrictions, border closures, quarantine requirements, and the temporary suspension of several air transport operators. These measures directly and indirectly hindered the movement of people and the provision of travel-related services, leading to a prolonged contraction in the tourism sector throughout 2021.
Before the pandemic, Cambodia was a popular tourist destination, attracting 6.61 million visitors and generating $5.31 billion in tourism revenue in 2019 alone, accounting for 19.6 percent of the country’s GDP. However, tourist arrivals declined dramatically during the pandemic, falling to just 1.31 million in 2020—a 80.0 percent decrease compared to the previous year. Consequently, tourism revenues dropped sharply to $1.12 billion, or just 4.3 percent of GDP. The transport services sector was also heavily affected, with exports decreasing by 65.0 percent in 2020. Unlike the tourism sector, however, transport services showed signs of recovery in 2021, with exports growing by 14.0 percent. A similar recovery trend was observed in the export of ICT services, which saw a 5.0 percent decline in 2020 but rebounded with 7.0 percent growth in 2021 Fig. 2.3.
Fig. 2.3
Cambodia’s service exports growth by sector, 2020–2021. Note Data adapted from Trade Map (International Trade Centre, 2022)
The COVID-19 pandemic does not appear to have significantly altered Cambodia’s geographical distribution of exports. The United States remained Cambodia’s largest export market throughout the pandemic. In 2019, exports to the United States were valued at $4.41 billion, representing 30.0 percent of Cambodia’s total exports. This share remained stable in 2020 but saw a substantial increase in 2021, rising to 42.6 percent of total exports. By 2021, Cambodia’s exports to the United States had grown to approximately $7.49 billion, with key products including textiles and clothing (accounting for $3.11 billion, or 70.0 percent), travel goods and handbags ($1.26 billion, or 17.0 percent), furniture and bedding ($833 million), machinery and electronic appliances ($569 million), and footwear ($549 million).
In contrast, Cambodia experienced a notable decline in exports to the European Union (EU). The EU’s share of Cambodia’s total exports dropped from 26.3 percent in 2019 to 18.2 percent in 2020. While this decrease coincided with the pandemic, it cannot be solely attributed to COVID-19. A significant contributing factor was the EU’s partial withdrawal of Cambodia’s preferential access under the Generalized System of Preferences (GSP) program due to concerns over human rights violations. Effective from August 12, 2020, this decision removed duty-free access for certain Cambodian exports, including garments, footwear, travel goods, and sugar, subjecting them to standard World Trade Organization tariffs. This loss of preferential market access diminished Cambodia’s competitive edge in the EU market. Trade statistics reflect this impact: in 2019, Cambodia exported $3.54 billion in textiles and clothing and $600 million in footwear to the EU. By 2020, these values had fallen by 19.0 percent and 22.0 percent, respectively, to $2.87 billion for textiles and clothing and $468 million for footwear. Exports of travel goods and sugar similarly declined, with values dropping from $138 million and $6.46 million in 2019 to $98 million and $0.18 million in 2020, respectively.
In contrast to the declining exports to the EU, Cambodia’s exports to Singapore surged during the pandemic, making Singapore the third-largest market for Cambodian exports. In 2020, the share of exports to Singapore jumped to 14.8 percent, a significant increase from just 1.8 percent in 2019. This surge was primarily driven by an unprecedented increase in gold exports, which dramatically increased from $224 million in 2019 to $2.41 billion in 2020. Meanwhile, export shares to other key markets, such as Japan, China, the United Kingdom, Canada, and South Korea, saw slight declines compared to pre-pandemic levels. Export shares to Thailand, Vietnam, India, and Taiwan remained relatively stable between 2019 and 2020.
2.4 Analyzing Supply Chain Disruptions in Cambodia Due to COVID-19: A Gravity Model Approach
This section empirically assesses the impact of the COVID-19 pandemic on GVC activities in Cambodia. To quantify this effect, we utilize the gravity model framework, as outlined by Hayakawa and Mukunoki (2021) and Pfaffermayr (2020) to analyze the average impact of the pandemic on bilateral trade flows and GVC activities.
Tradeijt represents the trade values from Cambodia (countries i) to partner j in time t. Zit, Z′jt, and Z"ij are vectors of time-variant exporters, and time-variant importer characteristics, and time-invariant country pairs, respectively. The time-invariant country pair characteristics include factors like geographical distance and having a shared border, while time-variant characteristics include GDP and multilateral resistance. ϵijt is a disturbance term. The free trade agreement (FTA) dummy variable captures the presence of FTAs between Cambodia and its trade partners, taking the value 1 if both are members of an FTA and 0 otherwise. Key gravity variables are sourced from CEPII.
For our empirical analysis, we use monthly trade data at the 2-digit classification level for Cambodia’s bilateral trade from January 2019 to December 2020, sourced from the UN Comtrade. We focus on machinery and electronics (HS 84–85), transport equipment (HS 86–89), and precision machinery (HS90–92), which are GVC-intensive and often serve as proxies for GVC trade (Hayakawa & Mukunoki, 2021; Kimura & Obashi, 2010). To capture the pandemic’s varying effects, Tradeijt includes total trade value (export plus import), export value, and import value. The UN ComTrade data encompasses 81 countries with which Cambodia trades machinery products.
We incorporated two COVID-19-related variables in our model: monthly COVID-19 infection case in Cambodia (Covidit) and in partner countries (Covidjt). When Tradeijt denotes to export value, Covidit captures the supply-side impacts, while Covidjt captures the demand-side effects. To establish the robustness, we also use an alternative COVID-19 variable, the Covid-dummy, which is set to 1 from January 2020 onward and 0 before January 2020.
Estimating the gravity model presents several empirical challenges. We address multilateral resistance, as suggested by Anderson and Van Wincoop (2003), by incorporating exporter-year and importer-year fixed effects (Feenstra, 2002). Additionally, to handle zero-value trade issues and mitigate sample selection bias, we employ the Pseudo-Poisson Maximum Likelihood (PPML) technique, which is effective in dealing with both multilateral resistance and heteroscedasticity (Melitz, 2003). Country-pair fixed effects are also included to control for the potential endogeneity of the FTA variable.
The results of the gravity model for Cambodia’s machinery trade are presented in Table 2.2. Columns (1) and (2) display the results for total trade, columns (3) and (4) focus on exports, and columns (5) and (6) pertain to imports. Before delving into the specific effects of the COVID-19 pandemic on trade and supply chain activities, it is important to first examine the outcomes for the conventional gravity model variables.
Table 2.2
Gravity model results on the impact of COVID-19 on Cambodia’s GVC trade
Total trade
Export
Import
(1)
(2)
(3)
(4)
(5)
(6)
Distance
−0.854***
(1.02e-09)
−0.612***
(0)
−0.748***
(0)
Sharing border
−1.754***
(2.57e-09)
−3.335***
(0)
2.760***
(7.14e-11)
GDP of partner countries
0.666***
(3.17e-09)
0.649***
(0)
0.951***
(0)
FTA
0.927***
(2.42e-09)
1.346***
(3.34e-10)
0.534***
(0)
1.242***
(1.61e-10)
1.224***
(0)
0.398***
(1.21e-09)
COVID-19-infected cases in Cambodia
0.185***
(1.23e-09)
0.439***
(0)
1.570***
(0)
COVID-19-infected cases in partner countries
−0.290***
(8.17e-10)
−0.299***
(0)
−0.295***
(0)
COVID-19 dummy
−5.545***
(1.72e-09)
−2.717***
(2.56e-10)
1.234***
(4.93e-10)
Observations
1045
1045
1045
1053
1857
1865
R-squared
0.469
0.469
0.582
0.583
0.770
0.771
Exporter-time FE
Yes
Yes
Yes
Yes
Yes
Yes
Importer-time FE
Yes
Yes
Yes
Yes
Yes
Yes
Country-pair FE
No
Yes
No
Yes
No
Yes
Robust standard errors in parentheses. *** p < 0.01, ** p < 0.05, * p < 0.1.
The coefficient for distance is negative and statistically significant, underscoring the critical role of proximity in machinery trade. This finding aligns with the notion that geographical closeness is a key factor in production networks (Johnson & Noguera, 2012) and reinforces the idea that most GVC activities are inherently regional (Baldwin, 2012). Additionally, the positive and significant association between the GDPs of trade partners and machinery trade is consistent with the broader gravity model literature, supporting the theory that the volume of bilateral trade is influenced by the economic size of the trading partners.
The coefficient for FTAs is also positive and statistically significant, highlighting the importance of FTAs in facilitating machinery trade. This finding is consistent with the results of Thangavelu et al. (2022), which suggest that FTAs and the Regional Comprehensive Economic Partnership (RCEP) will further drive the transformation of Cambodia’s production and export sectors within GVCs. The involvement of key regional players like China, Japan, and Korea in the RCEP framework is particularly significant for Cambodia, as these countries serve as crucial connectors for regional and global value-chain activities in ASEAN and the broader East Asian region (Thangavelu et al., 2022).
The coefficients for the COVID-19 dummy variable are negative and statistically significant for both total trade and exports, indicating that the pandemic had a detrimental effect on Cambodia’s machinery trade, particularly in terms of exports. However, machinery imports appear to have shown greater resilience to the pandemic shock. These findings are consistent with those of Hayakawa and Mukunoki (2021); Wuri et al. (2022), who also observed disruptions in machinery supply chains during the pandemic, particularly affecting total trade and exports.
The analysis further highlights the differing impacts of COVID-19 infection rates on GVC trade in Cambodia and its partner countries. Notably, COVID-19 infections in partner countries have a more pronounced negative effect on Cambodia’s machinery supply chains than infections within Cambodia itself. This trend is evident across all GVC proxies, including total trade, exports, and imports. Specifically, the coefficient for COVID-19 infection cases in Cambodia is positive and significant, suggesting that the country’s machinery imports and exports have been less affected by its own domestic COVID-19 situation. In contrast, the negative and significant coefficient for infection cases in partner countries indicates that Cambodia’s machinery trade is more sensitive to the economic and health conditions of its trading partners.
These findings suggest that Cambodia has effectively managed the COVID-19 pandemic, mitigating its impact on domestic supply chains. However, the country’s machinery trade remains highly dependent on the stability and health conditions of its international trade partners, underscoring the interconnected nature of GVCs.
Cambodia’s GVC participation, which is defined as the sum of the share of value-added embodied in third-country exports and the share of foreign value-added in Cambodia’s gross exports. Figure 2.4 illustrates the GVC participation rate in 2019 and 2020 for various machinery sub-sectors. The overall GVC participation ratio shows a slight decline from 58.0 percent in 2019 to 54.4 percent in 2020, indicating some disruption in Cambodia’s machinery supply chains. This observation aligns with our gravity model results, which pointed to significant pandemic-related challenges, particularly in terms of exports.
Fig. 2.4
Cambodia’s GVC participation rate in 2019 and 2020. Note Author’s calculation based on the GVC index from University of International Business and Economics, China
The impact of the pandemic, however, varies across sub-sectors. The electric machinery value chains experienced the most pronounced disruption, with the GVC participation rate dropping from 79.4 percent in 2019 to 67.9 percent in 2020. This steep decline is consistent with the earlier findings that Cambodia’s machinery exports were more vulnerable to external shocks, particularly those originating from its trading partners. In contrast, the precision machinery sub-sector (HS 90–92) showed resilience, with the GVC participation ratio increasing from 53.4 percent in 2019 to 58.5 percent in 2020. This growth in GVC participation suggests that, despite the overall challenges posed by the pandemic, certain sectors managed to adapt and even expand their integration into global value chains.
Figure 2.4 visually represents these shifts in Cambodia’s GVC participation rates across the different machinery sub-sectors, reinforcing the nuanced effects of the COVID-19 pandemic on Cambodia’s trade dynamics.
2.5 Assessing the Impacts of COVID-19 on Export Competitiveness
We evaluate change in Cambodia’s export competitiveness by analyzing the Revealed Comparative Advantage (RCA) for 2019 (pre-COVID-19) and 2020 (during COVID-19). Introduced by Balassa (1965) as a means to capture the export performance of a specific product or industry in a country, the RCA is calculated as the ratio of the country’s export share of a specific product to its total exports, divided by the world’s share of that same product to total world exports. The formula for the RCA index is specified as follows:
where.P represents the set of all export products,XAi denotes the exports of product i, by country A.Xwi represents the world’s export of product i,∑i ∈ pXAi is the total exports of country A (for all products j in P), and.∑i ∈ pXwi is the total exports of the world (for all products j in P).
Country A is considered to have an RCA in product i if the value exceeds 1. A higher RCA value indicates a greater specialization in exporting that sector compared to the rest of the world. Figure 2.5 presents the RCA of Cambodia’s exports before and during the COVID-19 pandemic at a 2-digit level. The graph reveals a mixed impact of the pandemic on different sectors. While some sectors such as textiles and garments and footwear showed a decrease in RCA from 2019 to 2020, they still remained above the threshold of 1, underlining their strong position in Cambodia’s export portfolio. This is indicative of Cambodia’s ability to maintain production and exportation in these sectors, possibly due to sustained international demand or effective management of supply chain disruptions.
Fig. 2.5
Cambodia’s RCA at HS 2-digit product in 2019 and 2020. Note Author’s calculation based on data from Trade Map (International Trade Centre, 2022)
On the other hand, sectors with a steeper decline in RCA, such as raw hides and skins, rubber and plastics, wood and wood products, signal a more pronounced impact from the pandemic, likely due to severe disruptions in these specific supply chains or reduced global demand. The fact that their RCA remain above 1, however, suggests that while these sectors were affected, they continued to perform strongly relative to the rest of the world. Agricultural products, including cereals, sugar, and milling industry products, appear to have fared well, with the RCA either maintaining or increasing during the pandemic. This could reflect the essential nature of food products, which tend to be less impacted by economic downturns compared to non-essential goods.
Notably, the graph shows certain sectors where Cambodia’s RCA increased in 2020, such as in the precision machinery. This improvement may be due to a shift in global demand patterns favoring products relevant to pandemic-related needs or due to Cambodia diversifying its production capabilities in response to the crisis. The varying degrees of RCA change across these sectors suggest that Cambodia’s export competitiveness has not been uniformly affected by the pandemic, reflecting a diverse range of factors influencing each sector.
To delve into the short-term shifts in Cambodia’s comparative advantage amidst the pandemic, we calculated the RCA for the top 100 products (at the 4-digit level) where Cambodia either has a comparative advantage or is on the cusp of reaching the comparative advantage threshold. We computed the RCA for these products for the years 2019, 2020, and 2021, analyzing the RCA changes between 2019 and 2020, 2020–2021, and over the full period from 2019 to 2021. Based on the extent of change in RCA, products were categorized into four distinct groups:
Consistent Decliners: Products within this group have shown a persistent downturn in RCA throughout the 3 years under review—2019, 2020, and 2021. These products are characterized by a continued negative shift in RCA across each successive period, indicating a sustained loss in comparative advantage.
Reverse Gainers: Products classified as Reverse Gainers initially experienced an RCA boost during the early phase of the pandemic (2019–2020) but faced a downturn in the following period (2020–2021). Ultimately, in 2021, these products saw their RCA fall below the pre-pandemic levels, reflecting a reversal in their comparative advantage.
Recovery Gainers: This group captures products that, after a decline in RCA between 2019 and 2020, rebounded in 2020–2021, ultimately exceeding their initial RCA levels. This category also includes products that gained RCA during the pandemic’s onset but then experienced a setback; despite this, they maintained a higher RCA in 2021 compared to 2019, indicating a net gain in competitiveness.
Steady Gainers: Representing a positive trajectory, products in this category have displayed an unbroken rise in RCA over the three periods. This consistent increase from 2019 through to 2021 signifies a robust enhancement in comparative advantage over time
Through this classification, we can observe the dynamic nature of Cambodia’s export strengths during the period affected by the pandemic and identify which products have sustained, lost, or gained comparative advantage. Table 2.3 summarizes the extent of change in export comparative advantage among top 100 products (a detailed RCA for each product is presented in Table 2.4 in the Appendix). The detailed analysis of Cambodia’s top 100 export products paints a complex picture of shifting competitive advantages across various sectors during the COVID-19 pandemic.
Table 2.3
Classification of competitive loser/winner-based change in RCA
Molasses resulting from the extraction or refining of sugar
13.69
6.06
5.44
−7.62
−0.63
−8.25
6106
Women’s or girls’ blouses, shirts, and shirt-blouses
22.03
14.86
11.98
−7.18
−2.87
−10.05
6109
T-shirts, singlets and other vests, knitted, or crocheted
24.01
17.45
17.09
−6.55
−0.36
−6.92
6117
Made-up clothing accessories
3.29
2.83
1.57
−0.46
−1.25
−1.71
6208
Women’s or girls’ singlets and other vests
29.09
23.42
22.85
−5.67
−0.57
−6.25
6209
Babies’ garments and clothing accessories
20.60
17.40
16.58
−3.20
−0.82
−4.02
6217
Made-up clothing accessories and parts of garments
1.81
1.78
1.38
−0.03
−0.40
−0.43
6301
Blankets and traveling rugs of all types of textile materials
3.51
3.22
2.88
−0.29
−0.33
−0.63
6405
Footwear with outer soles of rubber or plastics
7.11
5.10
2.63
−2.01
−2.47
−4.48
7602
Waste and scrap, of aluminum
1.81
1.55
1.29
−0.26
−0.26
−0.52
9113
Watch straps, watch bands, and watch bracelets
1.57
1.12
0.90
−0.45
−0.22
−0.67
9404
Mattress supports
3.51
3.05
0.91
-0.46
−2.14
−2.61
9507
Fishing rods, fish-hooks
1.09
0.99
0.86
−0.10
−0.13
−0.23
9603
Brooms, brushes
1.26
1.15
1.10
−0.11
−0.06
−0.17
9616
Scent sprays and similar toilet sprays
2.15
0.96
0.57
−1.19
−0.38
−1.58
2. Reverse gainers
1006
Rice
20.07
16.66
18.29
−3.40
1.63
−1.77
1701
Cane or beet sugar
3.07
1.75
1.95
−1.32
0.21
−1.12
4115
Composition leather
3.25
7.94
1.62
4.69
−6.32
−1.63
4817
Envelopes, letter cards
2.49
1.42
1.71
−1.07
0.29
−0.78
5204
Cotton sewing thread
15.51
0.53
2.66
−14.98
2.13
−12.85
5508
Sewing thread of man-made staple fibers
6.91
8.15
2.91
1.24
−5.24
−4.00
6101
Men’s or boys’ overcoats, car coats
58.53
49.90
57.76
−8.64
7.86
−0.77
6102
Women’s or girls’ overcoats,
42.02
30.33
32.02
−11.69
1.69
−10.00
6103
Men’s or boys’ suits, ensembles, jackets, blazers
57.31
34.42
38.03
−22.89
3.61
−19.28
6104
Women’s or girls’ suits, ensembles,
38.66
27.08
29.76
−11.58
2.68
−8.90
6105
Men’s or boys’ shirts,
17.11
12.40
14.19
−4.72
1.79
−2.93
6107
Men’s or boys’ underpants, briefs, nightshirts,
35.72
32.62
33.35
−3.10
0.73
−2.37
6108
Women’s or girls’ slips, petticoats
38.02
33.63
34.28
−4.39
0.65
−3.74
6110
Jerseys, pullovers, cardigans, waistcoats
25.16
21.81
23.30
−3.36
1.49
−1.86
6111
Babies’ garments and clothing accessories
63.74
46.27
54.12
−17.47
7.85
−9.62
6112
Track-suits, ski-suits, and swimwear
33.89
28.00
31.11
−5.89
3.11
−2.78
6114
Special garments for professional
12.27
7.86
9.67
−4.41
1.81
−2.60
6115
Pantyhose, tights, stockings, socks
2.43
1.53
1.87
−0.91
0.34
−0.57
6203
Men’s or boys’ suits, ensembles
12.60
9.73
11.95
−2.87
2.23
−0.65
6204
Women’s or girls’ suits, ensembles
14.37
12.12
12.37
−2.25
0.24
−2.00
6206
Women’s or girls’ blouses, shirts, and shirt-blouses
9.39
7.27
7.66
−2.13
0.39
−1.74
6207
Men’s or boys’ singlets and other vests
18.21
11.51
14.77
−6.70
3.26
−3.44
6211
Track-suits, ski-suits, swimwear, and other garments
7.31
7.78
6.51
0.47
−1.27
−0.80
6212
Brassieres, girdles, corsets, braces
9.63
8.97
9.00
−0.66
0.03
−0.64
6302
Bedlinen, table linen, toilet linen
2.25
1.48
1.84
−0.78
0.36
−0.41
6305
Sacks and bags
5.92
4.35
4.64
−1.57
0.28
−1.29
6306
Tarpaulins, awnings and sunblinds
2.00
1.59
1.81
−0.40
0.22
−0.19
6310
Used or new rags, scrap twine, cordage, rope
5.85
3.59
4.11
−2.26
0.51
−1.74
6403
Footwear with outer soles of rubber
12.33
7.84
9.34
−4.49
1.50
−3.00
6601
Umbrellas and sun umbrellas
11.10
12.07
10.04
0.97
−2.03
−1.06
6702
Artificial flowers, foliage, and fruit
1.46
1.08
1.19
−0.38
0.11
−0.27
3. Recovery gainers
6205
Men’s or boys’ shirts
12.43
10.78
13.50
−1.65
2.72
1.07
4421
Other articles of wood, n.e.s.
0.01
0.00
1.58
−0.01
1.58
1.57
6406
Parts of footwear
2.92
2.29
3.01
−0.63
0.72
0.09
7307
Tube or pipe fittings
0.67
0.58
1.00
−0.08
0.42
0.34
9505
Festival, carnival, or other entertainment articles
0.72
2.30
1.85
1.58
−0.44
1.14
904
Pepper of the genus Piper
2.89
2.22
6.31
−0.67
4.09
3.42
8712
Bicycles and other cycles
54.00
48.38
56.68
−5.62
8.30
2.68
714
Roots and tubers of manioc
1.45
1.41
8.64
−0.04
7.23
7.19
7608
Aluminum tubes and pipes
5.62
3.94
6.18
−1.68
2.24
0.56
8447
Knitting machines, stitch-bonding machines
0.44
2.67
0.71
2.23
−1.97
0.27
6307
Made-up articles of textile materials
2.50
0.86
3.73
−1.64
2.87
1.23
6309
Worn clothing and clothing accessories
0.61
1.07
0.81
0.46
−0.26
0.20
5211
Woven fabrics of cotton
0.13
1.41
0.55
1.27
−0.85
0.42
4106
Tanned or crust hides and skins of goats
1.47
6.37
2.37
4.90
−4.00
0.90
6402
Footwear with outer soles
9.28
8.42
11.29
−0.85
2.87
2.02
4104
Tanned or crust hides and skins of bovine
3.90
3.29
5.12
−0.61
1.83
1.22
3925
Builders’ ware of plastics, n.e.s.
14.90
13.13
17.64
−1.78
4.52
2.74
2505
Natural sands of all kinds
1.94
0.51
3.71
−1.42
3.19
1.77
4302
Tanned or dressed fur skins
252.81
222.27
376.52
−30.55
154.26
123.71
6116
Gloves, mittens and mitts, knitted or crocheted
7.36
5.20
8.32
−2.16
3.12
0.96
6113
Garments, knitted or crocheted,
32.05
31.45
63.02
−0.60
31.57
30.97
7801
Unwrought lead
0.24
0.20
1.73
−0.05
1.53
1.49
4. Steady gainers
803
Bananas
4.03
7.19
13.76
3.16
6.57
9.73
812
Fruit and nuts
0.00
4.31
7.80
4.31
3.50
7.80
1102
Cereal flours (excluding wheat or meslin)
1.31
2.38
3.59
1.07
1.20
2.28
2006
Vegetables, fruit, nuts, fruit-peel
6.77
8.90
18.50
2.13
9.60
11.73
4114
Chamois leather
0.57
2.34
2.53
1.76
0.19
1.96
4201
Saddlery and harness
3.03
5.27
20.75
2.24
15.48
17.72
4203
Articles of apparel and clothing accessories
2.36
2.54
4.34
0.18
1.80
1.98
4412
Plywood, veneered panel, and similar laminated wood
9.81
11.71
14.74
1.89
3.03
4.92
4908
Transfers “decalcomanias”
1.11
1.11
2.69
0.00
1.58
1.59
5205
Cotton yarn other than sewing thread
0.00
0.35
0.53
0.35
0.18
0.53
5206
Cotton yarn containing predominantly
0.05
0.05
0.76
0.00
0.70
0.71
5515
Woven fabrics containing predominantly
1.00
1.47
1.59
0.46
0.12
0.59
5609
Articles of yarn, strip
1.17
1.49
3.09
0.32
1.60
1.92
6004
Knitted or crocheted fabrics
3.80
4.37
5.92
0.58
1.54
2.12
6006
Fabrics, knitted, or crocheted
22.89
23.94
41.81
1.05
17.86
18.92
7402
Copper
2.15
2.65
2.86
0.51
0.20
0.71
8309
Stoppers, caps, and lids
0.71
0.82
1.15
0.11
0.32
0.43
8470
Calculating machines and pocket-size
2.21
2.41
3.18
0.20
0.77
0.97
9109
Clock movements, complete, and assembled
0.75
1.77
11.18
1.02
9.41
10.43
9403
Furniture and parts thereof
0.23
0.85
1.36
0.62
0.51
1.13
9405
Lamps and lighting fittings
4.80
5.66
7.85
0.86
2.19
3.05
9605
Travel sets for personal toilet
5.76
10.12
13.35
4.37
3.22
7.59
9615
Combs, hair-slides and the like
0.19
0.30
1.64
0.11
1.34
1.45
6810
Cement, concrete, or artificial stone
0.02
0.19
1.32
0.18
1.13
1.30
7401
Copper mattes
22.89
23.94
41.81
1.05
17.86
18.92
7402
Copper
2.15
2.65
2.86
0.51
0.20
0.71
8309
Stoppers, caps, lids
0.71
0.82
1.15
0.11
0.32
0.43
8414
Pumps; liquid elevators
0.31
0.44
0.78
0.13
0.34
0.47
8470
Calculating machines and pocket-size data recording
0.00
0.27
0.96
0.27
0.69
0.96
8473
Machinery; parts and accessories
0.46
0.67
0.68
0.21
0.01
0.22
8509
Electro-mechanical domestic appliances
1.40
2.06
3.14
0.67
1.08
1.74
8541
Diodes, transistors, similar semiconductor devices;
0.26
1.20
2.13
0.94
0.93
1.87
2.5.1 Consistent Decliners
Within this cohort, 16 out of the top 100 products have experienced a consistent downtrend in their RCA from 2019 through 2021. Starch (HS 1108), notably, witnessed an RCA decline from 7.19 in 2019 to 4.37 in 2020 and then to 3.39 in 2021. A key driver of this decrease has been a contraction in exports, with a negative annual contraction of 13.0 percent over 2017–2021. Despite China’s imports of starch increasing by an 18.0 percent annual rate, Cambodia has seen its market share in China shrink, a concerning trend for one of its dominant export commodities.
The apparel and textile sectors, encompassing products like women’s shirts and blouses (HS 6106) and t-shirts (HS 6109), although enduring a decline in RCA, still hover above the crucial threshold of 1, signaling sustained competitiveness. In monetary terms, these sectors cumulatively exported goods worth $898 million in 2021, accounting for 5.0 percent of Cambodia’s total merchandise exports, signifying their strategic export significance despite the downward pressure.
2.5.2 Reverse Gainers
A larger segment of 31 products fall into the Reverse Gainers group. These products, such as rice (HS 1006) and cane or beet sugar (HS 1701), demonstrated an initial RCA increase in the early pandemic phase, but by 2021, they reverted to levels below their pre-pandemic standing. Specifically, rice exports, which rank ninth globally with a 1.6 percent share, plunged by 10.0 percentage points from the previous year, totaling $423.2 million in 2021. Cane sugar exports also took a hit, dropping 20.0 percent from $54.55 million in 2019 to $43.69 million in 2021. These figures reflect not only a diminution in Cambodia’s market share but also a retreat in its competitive edge.
The garment and textile sector (HS 50–63), a cornerstone of Cambodia’s export economy, along with select footwear products (such as HS 6403), have also been subject to diminishing competitive advantages. Despite this, the exports from these sectors account for a substantial share of the nation’s total exports, cementing their role as key contributors to the Cambodian economy. The resilience of these sectors is underscored by the recovery observed in 2021, where export values climbed to $7.09 billion, surpassing the slump experienced during the pandemic’s peak.
These patterns suggest that while Cambodia’s key export sectors have grappled with pandemic-related disturbances, they have shown a capacity to retain a foothold in the global market. However, the fluctuating nature of their comparative advantage calls for strategic measures to reinforce these sectors’ positions. The observed resilience, particularly in the post-2020 period, offers a foundation for targeted interventions aimed at enhancing productivity, diversifying export markets, and investing in value addition to fortify Cambodia’s competitive standing in the face of ongoing and future economic uncertainties.
It is important to note that the decline in RCA and export competitiveness more broadly taking place during the pandemic cannot be exclusively attributed to COVID-19 because there has been a notable shift in trade policies with Cambodia’s major partners. Specifically, the EU has partially withdrawn the Generalized System of Preferences (GSP) program given to Cambodia which has subsequently led to the gradual decline in export competitiveness of several garment and textile products. This implies that export competitiveness driven by low labor cost and preferential market access unilaterally given to Cambodia is gradually declining. The Kingdom is on the verge of graduating from LDC status that will result in significant losses of preferential market access. Therefore, there is a need for Cambodia to diversify its export markets through FTAs, and by upgrading export products by moving up the garment and textile value chains.
2.5.3 Recovery Gainers
A total of 22 products classified as Recovery Gainers have rebounded, with their 2021 RCA surpassing pre-pandemic levels. Agricultural commodities like cassava (HS 714) and pepper (HS 904) are notable mentions here, with their RCA surging to 8.64 and 6.31, respectively, in 2021—a substantial recovery from the slight dips experienced in 2020.
In the industrial sector, products such as unwrought lead (HS 7801), articles of wood (HS 4421), and entertainment articles (HS 9505) have also seen a growth in export competitiveness. Their RCA, previously below 1, crossed the threshold in 2021, signaling an emerging comparative advantage. This suggests that these sectors may have adapted quickly to the new market conditions, potentially due to innovation, shifts in global supply chains, or increased international demand for specific goods during the pandemic. Furthermore, the bicycle industry (HS 8712) has emerged as a significant export force, with an export value of $630.67 million in 2021. This represents a robust 16.0 percent annual growth from 2017 to 2021, distinguishing bicycles as a key export commodity alongside the traditional pillars of garments, textiles, and footwear. The growth in the bicycle sector could reflect a global trend toward sustainable transportation and an increased focus on health and outdoor activities during the pandemic.
The positive trajectory of these Recovery Gainers suggests that there is an underlying vitality in certain segments of Cambodia’s economy capable of not just weathering global crises but also seizing opportunities to enhance market share. It points to potential areas of focus for policymakers and industry stakeholders looking to capitalize on newfound competitive strengths, foster product diversification, and encourage the upward mobility of Cambodian exports on the value chain.
2.5.4 Steady Gainers
The Steady Gainers segment represents sectors within Cambodia’s export economy that have not merely withstood the pandemic but have thrived amidst it, recording significant gains in comparative advantage. This is particularly evident in the agricultural sector with products like bananas (HS 803), fruits and nuts (HS 812), cereal flour of corn (HS 1102), and vegetables (HS 2006), which saw the respective RCA scores soar during the pandemic, notably in 2021. For bananas, the RCA rose from 4.03 in 2019 to 13.76 in 2021, illustrating a strong growth trajectory. Similarly, the RCA for fruits and nuts, and vegetables witnessed a substantial jump, signaling growing international demand and successful market penetration, especially in China—a primary import market accounting for the vast majority of these exports. This surge is underpinned by Cambodia’s increasingly favorable trade relations with China, reinforced by a recent bilateral FTA and existing pacts such as the ASEAN-China FTA and the RCEP. These agreements are pivotal, potentially magnifying the export competitiveness of Cambodia’s agricultural sector by providing enhanced market access and fostering trade and investment ties.
In addition to agricultural products, the hides, leather, and skins sector has seen a rapid uptick in export competitiveness. Articles of apparel and clothing accessories (HS 4203) and saddlery and harness (HS 4201) exemplify this growth, with RCAs increasing from 2019 to 2021. Such positive trends in non-traditional sectors indicate Cambodia’s diversifying export profile and its capacity to scale-up the value chain in its production and export offerings.
The machinery and transport sectors also showcase burgeoning competitiveness, with products like calculating machines (HS 8470) and electro-mechanical domestic appliances (HS 8509) marking significant RCA improvements. This suggests an evolving industrial capacity within Cambodia, moving toward more sophisticated production capabilities. Moreover, the rising export values and RCAs of machinery parts and components, such as parts for office machines (HS 8473), air pumps and compressors (HS 8414), and insulated wire and cables (HS 8544), underscore Cambodia’s integration into regional machinery production networks. The majority of machinery parts and components were exported to several countries in East and Southeast Asia. For example, in 2021 Cambodia exported $96.99 million of machinery parts and accessories (HS 8473) of which 63.8 percent were exported to Thailand and 32.9 percent to China. Similarly, exports of air and vacuum pumps (HS 8414) were recorded at $59.68 million, with 39.6 percent of the value shipping to China, 16.7 percent to Thailand, 8.6 percent to Japan, and 3.7 percent to Korea. Also growing rapidly is the sector of insulated wire or cable (HS 8544) with an export sum of $425.4 million in 2021, a 34.0 percentage point growth from 2020. Approximately 40.0 percent of this amount is shipped to the United States, 26.3 percent to Japan, 22.0 percent to Thailand, and 7.7 percent to Korea. Cambodia’s growing export and comparative advantage in machinery and transport products signify the increasing participation in regional machinery production networks.
The preceding analysis confirms the recent evidence in Obashi (2022) indicating an improvement in competitiveness (proxied by empirical comparative advantage) in (a) computers, electronics, and optics and (b) transport equipment. This reflects a diversifying structure of production toward machinery, electronics, and transport equipment that supplies regional machinery, electronic, and transport production networks. This is also indicative of increasing participation in regional GVC. Another similar finding about the dynamic comparative advantage of Cambodia’s machinery export is articulated in Thangavelu et al. (2022). The study shows that Cambodia is gradually improving its export competitiveness through higher value-added GVC activities and RCEP. This not only brings together China, Japan, and Korea—the largest GVC hubs in East Asia—with a more flexible and simplified rule of origin, but will also accelerate the GVC transformation of Cambodia for greater competitiveness in parts-and-components activities in the region.
The steady climb of Cambodia’s export competitiveness across a spectrum of sectors not only speaks to its agility in adapting to global market demands but also hints at the potential for sustainable economic growth. As Cambodia expands its footprint in regional GVCs and leverages its trade agreements, it can further solidify its standing as a key exporter of both traditional agricultural products and emerging industrial goods. This progression, if supported by strategic policy measures and continued investment in product quality and diversification, can ensure that Cambodia’s export economy remains dynamic and resilient in the face of future global disruptions.
2.6 Conclusion and Policy Recommendations
2.6.1 Conclusion
Cambodia’s export performance during the COVID-19 pandemic reveals significant challenges, particularly in the country’s export structure and comparative advantage. The pandemic led to a notable contraction in trade, with total exports decreasing by 6.0 percent in 2020 and a further 7.0 percent in 2021. The impact has varied across sectors, with service exports, especially in travel and transport services, experiencing the most severe downturns. Despite recovery efforts initiated in mid-2021, the rebound of service exports has been slow. In contrast, merchandise exports have shown varying degrees of resilience. While sectors like textiles, clothing, and footwear initially faced declines, they quickly recovered. Additionally, exports of vegetables, transportation equipment, and certain machinery products remained robust throughout the pandemic.
The gravity model analysis underscores the disruptions in Cambodia’s machinery supply chains due to the pandemic. COVID-19 infection rates influenced machinery trade, showing a positive correlation with domestic cases but a negative correlation with cases in partner countries, highlighting the sensitivity of Cambodia’s trade to external conditions.
The RCA analysis presents a mixed picture of Cambodia’s export competitiveness. Several key export products are losing their comparative advantage, indicating a gradual erosion of competitiveness that has traditionally relied on low labor costs and preferential market access. As Cambodia approaches its graduation from LDC status, there is a critical need to diversify export markets through trade agreements, and to enhance competitiveness by upgrading products within the garment and textile value chains.
2.6.2 Policy Recommendations
Cambodia’s economic recovery strategy following the COVID-19 pandemic recognizes trade as a key engine for growth and resilience. The government’s Strategic Framework for Economic Recovery (2021–2023) identifies trade and regional economic cooperation as central to restoring growth potential and supporting inclusive socio-economic development. Building on this foundation, Cambodia’s post-pandemic trade strategy should focus on three interlinked priorities.
1.
Deepening regional integration and trade diversification: In an increasingly uncertain global trade environment shaped by geopolitical tensions and supply chain realignments, Cambodia should further deepen regional trade cooperation. With active participation in ASEAN, RCEP, and bilateral FTAs with China and Korea, Cambodia has a strong platform for pursuing structural reforms. These agreements offer opportunities to mitigate policy risks, integrate into resilient regional production networks, and enhance export diversification.
2.
Upgrading participation in global value chains (GVCs): Cambodia’s garment, textile, and footwear (GTF) sector remains the most established export industry but continues to generate low value-added output. To move up the value chain, policy priorities should include investing in workforce skills, improving logistics and digital infrastructure, and upgrading Special Economic Zones to attract higher value-added activities. Evidence from Cambodia’s growing exports in machinery parts and electronics suggests potential for deeper integration into East Asian production networks. Harnessing agreements like RCEP can support this transition.
3.
Promoting digital trade transformation: Digital trade has accelerated in Cambodia since the pandemic, with rapid growth in e-commerce and digital services. While institutional frameworks remain underdeveloped, policies under the Cambodia Digital Economy and Society Policy Framework (2021–2035) provide a roadmap for expanding digital connectivity, e-commerce regulation, and cybersecurity. To enable firms to compete in the digital economy, Cambodia must strengthen its digital infrastructure, regulatory environment, and digital skills development
These priorities should be underpinned by strong policy coordination, institutional effectiveness, and a stable business environment to facilitate trade-led recovery and long-term transformation. Integrating selected elements of these priorities into broader development strategies can ensure alignment with national goals and international competitiveness.
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