Determinants of Agriculture in Cambodia

Abstract

—In Cambodia, the agriculture sector is one of the important growth engines. Until recently, the contribution of agriculture was still the highest, higher than manufacturing. Combined with the low contribution of the manufacturing sector, the continuous decline in the level of the GDP contribution from the agricultural output has sparked interest on how to sustain, if not promote, the contribution of this sector. Hence, the objective of this study has been to investigate the factors influencing the agricultural output in Cambodia, with a special interest on the complementarity of the manufacturing-agriculture nexus. We employed the Autoregressive Distributed Lag (ARDL) model for the period from 1993 to 2016. The empirical finding of long-term coefficients of variables in all models showed that the effects of labor force, education and government service are very significant and important in agriculture output growth. By the way, a few factor such as machinery and arable land have negatively effecting on agriculture growth. Surprisingly, investment clearly play a statistically significant but small negative effect in agriculture output growth in the Cambodia economy since investment in Cambodia is moving slightly from the agricultural sector to the other sectors. Manufacturing output had a negative and significant effect on agricultural output. This finding is rather surprising, considering that most of the manufacturing sector is agriculture-based in Cambodia. Therefore, the government should design policies that could encourage local manufactures to use more local content.