Specification of Key Sectors of Cambodian Economy : Application of Input-Output Analysis on Export Potentials

The slow progress of diversification and the low value added of the main manufacturing exports, given the narrow based industrial structure, make Cambodia’s foreign market vulnerable to external shocks and unable to contribute widely to the domestic economy. This paper, therefore, attempts to identify additional key export sectors by applying the Input-Output model. Results show that Food-beverage- tobacco and Rubber-plastic are the only two sectors with strong linkages both backward and forward, while Hotel-restaurant and Agriculture are backward-oriented and forward-oriented, respectively. The former two plus Wood-paper are able to induce higher income. Agriculture has high labor contents, yet the indirect employment of the sector is small, while the share of total net exports of Textile is not as high as it appears in actual share. The finding suggests that while the high linkage-oriented industries such as processed food and rubber have not been able to realize their full potential in exports, the largest current export industry, textile, is unlikely to contribute enough profit due to high import dependency and the lack of inter-industrial linkages. Limited interaction is found when net exports are dominated by a few commodities, and most sectors with relatively high linkages are not the net foreign exchange earners. This emphasizes that export potentials can be realized through not only diversification but also linkage creation. As a result, the study suggests four potential export sectors: Food-beverage-tobacco, Rubber-plastic, Hotel-restaurant, and Agriculture.