The Economic, Social and Environmental Impacts of Greening the Industrial Sector in Cambodia

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October 2018
Global Green Growth Institute (GGGI)

Cambodia 's industrial sector is at a crossroads. The largest manufacturing subsectors have reached maturity; to maintain sector expansion, new ways must be found to access new and more premium markets. The policy aim is to develop new “creative and highly competitive [sectors] that focus[es] not only on consumer products but also production equipment.”

This study, The Economic, Social and Environmental Impacts of Greening the Industrial Sector in Cambodia, provides evidence on the economics and social benefits of greening the industrial sector of Cambodia, based on a robust economic analysis that included a quantitative study and integrated modelling and scenario analysis. It aims to inform the development of green growth priorities in the next phase (2019-2023) of Cambodia' national policy and investment plan, National Strategic Development Plan (NSDP).

It includes an assessment of the required investment for resource efficiency improvements and the adoption of sustainable energy sources, as well as the resulting avoided costs and added benefits for four industrial subsectors:

  • Food processing (as part of the Food, Beverages, and Tobacco sector included in GDP statistics), 
  • Construction (with a focus on bricks production), 
  • Manufacturing of Non-Metallic Mineral Products, and 
  • Garments manufacturing (as part of the Textile, Wearing Apparel, and Footwear sector included in GDP statistics). 

These sectors were selected based on the following criteria: (a) national economic significance such as share of GDP and employment, (b) reliance on natural resources and climate vulnerability, and (c) a qualitative assessment of future competitiveness (informed by stakeholder input). 

The research shows that green industry investment generates positive financial returns for firms and for society, resulting in economy-wide benefits; reduces costs by lowering consumption of production inputs (e.g., materials, energy, and water) and mitigating the negative environmental impacts of production; reduces societal costs, i.e. public expenditure and costs for households relating to water and air pollution and resulting health impacts; and generates new opportunities, particularly in emerging sectors, which will be poised to grow with higher profit margins and a smaller environmental footprint.

The report argues that effective policy interventions are needed to promote or incentivize green indutsry investment. It outlines several available options, including the provision of incentives, the introduction of new regulations/mandates, and capacity building and awareness raising.