Cambodia experienced rapid and sustained economic growth averaging nearly eight percent per year between 1994 and 2015, ranking sixth in the world for growth and attaining middle income status in 2015. This is matched by impressive poverty reduction, which fell from 52 percent in 2004 to 13.5 percent in 2014. In spite of strong rates of poverty reduction, however, the global financial, food and fuel price crises negatively affected Cambodia’s economic growth in 2009. The poorest 20 percent were the worst affected, experiencing the biggest reduction in consumption during and after the crisis. In turn, many who managed to escape poverty remain close to the poverty line and a very large proportion of the population is concentrated at the bottom of the income distribution.
Research by the Chronic Poverty Advisory Network (CPAN), supported by USAID’s Center for Resilience, investigated the extent and drivers of transitory and sustained escapes from poverty across a series of country studies to better understand the sources of resilience that enable people to sustainably escape poverty given the complex risk environments in which they live.
Specifically, this research examined why some households escape and remain out of poverty (sustainable poverty escape), while other households escape it only to fall back into poverty (transitory poverty escape) and still others descend into poverty for the first time (impoverishment). Building on research conducted through the Leveraging Economic Opportunity activity in Bangladesh, Ethiopia and Uganda in 2016, the current body of research was aimed at expanding understanding of the drivers of sustained and transitory poverty escapes and teasing out policy and programming implications for USAID and other development actors.
This report combines analysis from four rounds of the panel Agriculture, Rural Development and Poverty Reduction Survey in Cambodia spanning 2008-2017 with qualitative research approaches, in particular, key informant interviews, life histories and participatory wealth ranking in six study sites across Cambodia major agro-ecological zones to further investigate the drivers of changes in poverty status. Analysis for this case study reveals that just under one fifth of households escaped poverty sustainably, while almost the same share (20 percent) escaped only to fall back in or became impoverished for the first time, over the study period. There is considerable dynamism in rural household poverty status, with almost four in five households living in poverty during at least one of the 2008-17 survey years.
The following factors are among those found to contribute to sustainable poverty escapes in Cambodia, according to the analysis:
Initial household resource base
- Initial conditions such as parental asset holdings, parental education and parental occupation all influence the poverty status for the next generation.
- Agricultural land for life history interviewees is important to protect household wellbeing, despite low holdings and low and variable returns to agriculture observed in the data.
- Livestock ownership seems to protect households from downward mobility, performing an important protective function. This is despite the prevalence of risk associated with livestock rearing and the high levels of initial investment necessary.
- Higher levels of skills and education are associated with sustained escapes from poverty. Household heads who have completed primary or secondary education are much more likely to escape poverty sustainably.
- Psychosocial factors such as alcohol and drug dependence and domestic violence were noted to contribute to downward mobility. Conversely, cooperative spousal relationships, strong kinship networks and supportive social relations were found to be important in enabling successful livelihood strategies.
- Agriculture is a core livelihood activity for most rural households, but marginal landholdings and low and variable profit margins mean that sustained poverty escapes cannot be achieved through agriculture alone.
- Employment of the household head in a non-farm sector is associated with a 70 percent lower risk of impoverishment relative to a sustained escape from poverty. Sustained economic growth has generated non-farm employment opportunities for poor people in construction, retail, the garments sector and tourism, supporting poverty escapes.
- Remittances are associated with a significantly lower risk of a transitory rather than sustained escape from poverty. Migration and the sending of remittances are crucial sources of income diversification, contributing to poverty escapes for some.
- Borrowing is both a source of investment and working capital and a key source of coping following shocks. Many benefit from access to credit but cycles of debt, default and the loss of assets is also a frequent driver of downward mobility.
Household shocks and stressors
- Health shocks were the most common driver of downward mobility, followed by harvest failures.
- Poor disaster preparedness seems to leave farmers highly exposed to uninsured agricultural shocks. Humanitarian responses are short-term and inadequate to enable households to rapidly recover their livelihoods and rebuild their asset bases.
- Low cost health and crop insurance, coupled with enhanced micro-saving opportunities, can support resilience and promote sustained escapes.
- Erosion of common properties (forests, fish stocks) has undermined rural livelihoods, with particularly negative consequences for the poorer households interviewed. Distress migration has risen as such sources of coping have eroded.
- Household strategies resulting in sustained poverty escapes are strongly influenced by diversification and migration.