2017 Index of Economic Freedom

Cambodia

overall score59.5
world rank94
Rule of Law

Property Rights42.4

Government Integrity12.8

Judicial Effectiveness22.1

Government Size

Government Spending88.1

Tax Burden90.2

Fiscal Health95.7

Regulatory Efficiency

Business Freedom29.6

Labor Freedom62.0

Monetary Freedom81.0

Open Markets

Trade Freedom80.3

Investment Freedom60.0

Financial Freedom50.0

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Quick Facts
  • Population:
    • 0.5 million
  • GDP (PPP):
    • $3.4 billion
    • 1.8% growth
    • 1.9% 5-year compound annual growth
    • $6,522 per capita
  • Unemployment:
    • 10.8%
  • Inflation (CPI):
    • 0.1%
  • FDI Inflow:
    • $94.9 million
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Cambodia’s continuing efforts to integrate more fully into the global trading framework have contributed to high growth rates. Public finance is sound, with modest deficits and a moderate level of debt. Promotion of foreign investment and expansion of small and medium-size enterprises are important priorities.

However, lingering institutional weaknesses hold back the emergence of a more dynamic private sector. Weak property rights and pervasive corruption continue to constrain economic freedom, and institutionalization of a more independent judicial system remains a key area for reform. The rigidity of the formal labor market is partly responsible for the existence of an underground dual labor market.

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Background

Nominally a democracy, Cambodia has been ruled by former Khmer Rouge member Prime Minister Hun Sen since 1985. The general election victory of Hun Sen’s Cambodian People’s Party in 2013 was hotly contested by the opposition Cambodia National Rescue Party. In July 2014, after Hun Sen promised to initiate electoral reform, both parties agreed to suspend protests and reconvene government. Those reforms were only partially implemented. In 2016, democracy was in retreat. Opposition leaders have been silenced, government security forces allegedly beat up opposition parliamentarians, and at least 27 people are being held as political prisoners. Cambodia’s economy remains heavily dependent on tourism and apparel assembly.

Rule of LawView Methodology

Property Rights 42.4 Create a Graph using this measurement

Government Integrity 12.8 Create a Graph using this measurement

Judicial Effectiveness 22.1 Create a Graph using this measurement

Property rights are regularly abused in the name of development. Powerful politicians, bureaucrats, and military officers have used state-sanctioned seizures to grab an estimated 12 percent or more of Cambodia’s land. The judiciary is politicized and marred by inefficiency, poorly trained judges, and a lack of independence. Corruption remains a serious obstacle to economic development and social stability.

Government SizeView Methodology

The top individual income and corporate tax rates are 20 percent. Other taxes include an excise tax and a value-added tax. The overall tax burden equals 13.4 percent of total domestic income. Government spending has amounted to 19.9 percent of total output (GDP) over the past three years, and budget deficits have averaged 1.1 percent of GDP. Public debt is equivalent to 33.6 percent of GDP.

Regulatory EfficiencyView Methodology

Measures to modernize commercial codes and facilitate private-sector development have been implemented in recent years. All sectors of the economy are open to foreign competition and investment. Labor force participation is high, but many jobs are informal. In 2016, drought conditions led the government to introduce de facto subsidies by exempting agricultural products from the value-added tax.

Open MarketsView Methodology

Trade is extremely important to Cambodia’s economy; the value of exports and imports taken together equals 142 percent of GDP. The average applied tariff rate is 4.9 percent. New foreign investment may be screened by the government. Privatization and consolidation have gradually improved the efficiency of the banking sector. Banking has become more market-oriented, and credit to the private sector has increased.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Hong Kong89.81.2
2Singapore88.60.8
3New Zealand83.72.1
4Australia810.7
5Taiwan76.51.8
6South Korea74.32.6
7Malaysia 73.82.3
8Macau70.70.6
9Brunei Darussalam69.82.5
10Japan69.6-3.5
11Kazakhstan695.4
12Vanuatu67.46.6
13Thailand 66.22.3
14Philippines65.62.5
15Azerbaijan63.63.4
16Fiji63.44.6
17Tonga633.4
18Indonesia61.92.5
19Kyrgyz Republic 61.11.5
20Cambodia59.51.6
21Bhutan58.4-1.1
22Samoa58.4-5.1
23Tajikistan58.26.9
24China57.45.4
25Sri Lanka57.4-2.5
26Nepal55.14.2
27Solomon Islands558.0
28Bangladesh 551.7
29Mongolia54.8-4.6
30Micronesia54.12.3
31Laos544.2
32Pakistan 52.8-3.1
33India52.6-3.6
34Burma52.53.8
35Vietnam52.4-1.6
36Uzbekistan52.36.3
37Papua New Guinea50.9-2.3
38Kiribati50.94.7
39Maldives50.3-3.6
40Afghanistan48.9N/A
41Turkmenistan47.45.5
42Timor-Leste46.30.5
43North Korea4.92.6
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