Why Cambodia Should Learn from Korea’s Economic Ledger

Why Cambodia Should Learn from Korea’s Economic Ledger

The recent ripples in the global economy, driven by Middle East energy shocks and shifting trade dynamics, have once again highlighted a fundamental truth for emerging economies: structural vulnerability can only be countered by structural strength. For Cambodia, a nation on a rapid growth trajectory but still exposed to external shocks, there is a profound lesson to be learned from the Republic of Korea. While both countries face different starting points, Korea’s ability to navigate turbulence offers a blueprint for building lasting economic resilience.

A closer look at Korea’s current economic performance reveals how a nation heavily reliant on imported energy can maintain absolute stability during global turbulence. Cambodia should look beyond the surface of Korea’s challenges — such as geopolitical tensions or demographic pressures — and benchmark its underlying strategy for economic development and crisis management. Korea does not merely survive shocks; it absorbs them through deliberate, long-term policies that prioritise export competitiveness, fiscal prudence and technological advancement.

Moving Beyond Structural Vulnerabilities

It is easy to look at Korea and see a glaring weakness: it imports virtually all the fuel it needs, making it naturally vulnerable to energy shocks from regions like the Middle East. Yet, Korea does not face a funding or balance-of-payments crisis when oil prices surge. Why? Because Korea is “strong on the ledger”. Korea has built a massive financial shock absorber through a large current-account surplus, with forecasts for 2026 reaching around $117 billion. This surplus, fuelled by strong goods exports, provides a critical buffer.

This financial cushion allows the country to fund itself calmly, defend its currency (the won) without depleting reserves excessively and continue investing in infrastructure and innovation even when global conditions worsen. In the first four months of 2026 alone, the cumulative surplus exceeded $100 billion, demonstrating the power of consistent external earnings.

For Cambodia, the lesson is clear and urgent. True economic security does not just mean trying to avoid external shocks through diversification alone; it means building the capacity to earn hard currency — primarily the US dollar — at an exceptional scale so that those shocks can be absorbed effortlessly. Cambodia’s economy has grown impressively, often posting rates around 6-7% in recent years, driven by garments, tourism and agriculture. However, reliance on a narrow set of exports leaves it exposed to demand fluctuations in key markets like the US and Europe, as well as commodity price volatility.

By emulating Korea, Cambodia could aim to accumulate reserves that act as a self-insurance mechanism. This involves not just increasing exports but ensuring they generate sustainable surpluses. A stronger current account would reduce dependence on volatile foreign direct investment (FDI) inflows and allow counter-cyclical policies during downturns, such as supporting small businesses or investing in human capital.

Upgrading the Industrial Engine

The core of Korea’s defence mechanism is its diversified, high-end manufacturing sector. Even amidst global downward revisions in growth, Korea’s economic growth forecast for 2026 remains steady at around 2-2.5 per cent, supported by robust exports. Its export engine is breaking historic records, with strong monthly performances driven heavily by semiconductors. Korea is now on the verge of solidifying its position among the world’s top exporting nations.

Semiconductors alone have propelled much of this success, with record highs in export values tied to global AI demand. This high-value focus creates a virtuous cycle: advanced industries generate higher wages, foster innovation, attract talent and build technological sovereignty that insulates the economy from low-cost competition.

Currently, Cambodia’s export base relies heavily on garments, textiles, footwear and agriculture. These sectors provide essential employment and foreign exchange but are characterised by low margins, intense competition from other low-wage countries and vulnerability to automation or trade policy shifts. To replicate Korea’s resilience, Cambodia must aggressively pursue industrial restructuring over the coming decade.

Benchmarking Korea means:

• Transitioning to High-Value Manufacturing: Shifting from low-skill assembly in garments to electronics assembly, automotive components, semiconductor packaging and testing, and eventually higher-value design and production. This requires targeted investments in vocational training, STEM education and partnerships with global firms like those in Korea’s chaebol model adapted to Cambodia’s context.
• Diversifying Foreign Exchange Channels: Creating multiple streams of revenue across advanced manufacturing, information technology services, eco-tourism and modernised agriculture (e.g., processed foods, organic exports). Cambodia could leverage its young population and strategic location in ASEAN to become a hub for regional supply chains.
• Building Global Credibility: Integrating deeply into global economic benchmarks — improving ease of doing business, intellectual property protection and transparency — to draw patient, long-term foreign capital. Korea has successfully attracted FDI that upgrades capabilities rather than just exploiting cheap labour. Cambodia could aim for similar “quality FDI” through special economic zones focused on technology transfer.

Such upgrades would raise productivity, increase wages and create a more resilient tax base. Historical evidence from East Asia shows that countries like Korea, which moved up the value chain from light manufacturing in the 1960s-80s, achieved sustained high-income status.

Proactive Governance and Fiscal Health

Korea’s resilience is also a product of disciplined fiscal management and swift government action. Korea maintains a highly stable government debt-to-GDP ratio — around 50-54% in recent data — well below many advanced economies. This gives the government ample fiscal space to implement proactive measures when crises hit, such as targeted subsidies for energy, supply chain diversification initiatives, R&D support and supplementary spending to bolster domestic demand.

For Cambodia, as it continues to develop and urbanise, maintaining a healthy fiscal balance sheet is crucial. Prudent debt management, efficient public spending and anti-corruption measures will keep international investor confidence high. Strategic government interventions — such as infrastructure development, skills programmes and incentives for priority industries — can protect and nurture domestic markets without distorting them. Global institutions and investors reward such fundamentals with lower borrowing costs and increased inflows.

Cambodia is at a pivotal moment in its economic journey. While the country continues to enjoy strong growth and has made remarkable progress in poverty reduction, global volatility is the new normal. Energy shocks, trade fragmentation and technological disruptions will test every emerging economy.

By benchmarking Korea’s model, Cambodia can learn how to transform its economy from one that merely reacts to external shocks to one that can finance its way through them with confidence. This requires visionary leadership, sustained investment in education and infrastructure, public-private collaboration and a long-term commitment to upgrading industrial capabilities. It is time for Cambodia to reshape its industrial structure, boost its capacity to earn foreign currency through high-value exports and write its own narrative of unbreakable economic resilience.

The path Korea has forged proves that with the right strategies, even resource-constrained nations can achieve enduring strength on the global ledger. Cambodia has the demographic dividend and regional advantages to do the same — now is the moment to act decisively.

Seun Sam is a policy analyst at the Royal Academy of Cambodia. The views and opinions expressed are his own.

-Phnom Penh Post-