Phnom Penh:Cambodia is set to graduate from the United Nations' status of least developed country (LDC) by the end of 2029.

According to Agence Kampuchea Presse, the International Monetary Fund (IMF) has analyzed the economic transitions of countries that have previously graduated from LDC status. Since 1994, only eight countries have made this transition, with mixed results on economic growth post-graduation. The IMF notes that while graduation does not inherently lead to faster growth, it advises against assuming that past growth drivers will continue to perform at the same pace.

The IMF's report highlights that Cambodia's economic structure does not closely align with recent LDC graduates. However, lessons from Cabo Verde and Bhutan could be beneficial. Cabo Verde offers insights into managing an open economy vulnerable to external shocks, while Bhutan emphasizes the importance of infrastructure and long-term planning.

As Cambodia approaches LDC graduation, it faces challenges such as the gradual withdrawal of preferential trade arrangements and flexible rules of origin. This could potentially reduce GDP growth by 0.5-1.5 percentage points and result in 165,000 job losses, particularly affecting the garment, footwear, and travel goods sectors.

The IMF economists point out that Cambodia possesses several strengths, including sustained foreign investment, deep export integration, and a young workforce. These factors provide a strong foundation for economic transition, though not a guarantee of reaching income ambitions. The focus will need to shift towards enhancing domestic capabilities, firm upgrading, and productive employment.

Cambodia compares favorably with regional peers like Laos and Vietnam in terms of foreign direct investment as a percentage of GDP. The main risks remain in sectors sensitive to preference erosion and dependence on imported inputs.