PHNOM PENH: Cambodia’s growing reliance on renewable energy and its strategic position in regional connectivity could serve as critical buffers against external economic shocks, senior officials from the Asian Development Bank said, at the April 10 launch of its latest economic outlook report.
As the country faces mounting global uncertainties — including commodity price volatility and geopolitical tensions — policymakers and development partners are increasingly pointing to structural strengths that could help Cambodia weather future crises.
Among these, the transition toward cleaner energy and deeper regional integration are emerging as key pillars of long-term resilience.
“We see that Cambodia, in many ways, is already ahead of the curve,” said Yasmin Siddiqi, ADB country director for Cambodia, referring to the country’s energy mix.
“More than 60% of power generation already comes from renewable sources,” she added.
She noted that this shift reduces Cambodia’s exposure to global oil price shocks, which have intensified amid ongoing instability in the Middle East and continue to ripple through global markets.
“This transition towards renewables is, in some ways, a safeguard measure,” she said.
“It means Cambodia is less reliant on oil for power generation, which can have very significant impacts during times of global crisis,” she continued.
Energy transition as a buffer against global volatility
Cambodia’s vulnerability to external shocks has been highlighted in ADB’s Asian Development Outlook (ADO) April 2026, which warned that rising fuel prices could weigh heavily on inflation, production costs and household consumption.
However, Siddiqi said the country’s progress in renewable energy development offers an important layer of protection.
In recent years, with support from development partners, including ADB, Cambodia has expanded its investment in solar energy, hydropower and battery storage systems.
A new project focused on solar generation and energy storage is expected to be launched later this year, further strengthening the country’s energy security.
The push toward renewables also aligns with broader regional trends, as Southeast Asian economies seek to diversify energy sources and reduce dependence on imported fossil fuels.
“Cambodia’s role in the Asean power grid will also become increasingly important,” Siddiqi said, noting that the country is well positioned to act as a regional energy connector as cross-border electricity trade expands.
This positioning could not only enhance energy resilience but also open new avenues for economic growth through regional cooperation.
As part of its push to strengthen energy security, Cambodia has made significant progress through the National Solar Park in Kampong Chhnang, a 100-megawatt facility supported by the Asian Development Bank that began full operations in late 2024.
The project, which supplies about one-quarter of Phnom Penh’s electricity, has helped reduce reliance on imported energy and lower power costs through record-low tariffs in the region.
Described by Siddiqi as a model of public-private partnership, the solar park marks a shift in Cambodia’s energy mix, with import dependence falling from 64% in 2011 to around 10% today.
Beyond cost savings, the project is expected to cut nearly 150,000 tonnes of carbon emissions annually while supporting the country’s goal of reaching 70% renewable energy by 2030, positioning Cambodia for a more secure and sustainable energy future.
Urges EV shift as fuel costs rise, clean energy expands
Minster of Mines and Energy Keo Rottanak has called on businesses and the wider public to accelerate the shift to electric vehicles (EVs), citing rising global fuel prices and Cambodia’s growing clean energy supply.
Speaking at the Upper Tatay hydropower project groundbreaking on April 10, he said EV adoption would help reduce costs.
“Amid rising global fuel prices, electric vehicles offer a cost-saving alternative while allowing Cambodia to tap into its growing clean energy supply, which accounted for over 63% in 2025,” said Rottanak.
To support the transition, the government has scrapped import duties on many EVs from April 1, cutting tariffs from 35% to zero.
The government aims to raise renewable energy to 70% by 2030 and expand EV adoption to 40% of cars and 70% of motorcycles by 2050.
Cambodia had more than registered 9,000 EVs by 2025, with brands such as BYD, Toyota and Tesla leading the market, while Chinese-backed energy investments have helped push national electrification to nearly 96%, according to Chinese ambassador Wang Wenbin.
Regional connectivity offers alternative trade routes
Beyond energy, Cambodia’s geographic location provides another critical advantage in navigating external shocks.
While recent disruptions — including border tensions — have underscored vulnerabilities in cross-border trade, ADB officials emphasised that Cambodia is not dependent on a single route or partner.
“Cambodia is blessed with multiple borders,” Siddiqi said.
“If one corridor faces disruption, there are opportunities to redirect flows through others, including Vietnam and Laos,” she explained.
This flexibility is particularly important for an economy that relies heavily on trade and the movement of goods across borders.
Regional connectivity initiatives — including transport infrastructure, trade facilitation and economic corridors — have been central to Cambodia’s development strategy over the past decade.
These efforts are expected to play an even more critical role as global uncertainties persist.
By strengthening links with neighbouring countries and regional markets, Cambodia can mitigate the impact of localised disruptions and maintain supply chain continuity.
Crisis highlights structural vulnerabilities
Despite these advantages, ADB economists cautioned that Cambodia remains highly exposed to external shocks, particularly due to its dependence on imported inputs.
Milan Thomas, ADB country economist for Cambodia, said the current crisis differs from previous ones in its breadth and impact.
“This crisis is very different because it is so economy-wide,” he said, adding “There is no significant driver of growth that does not rely on imported inputs.”
He pointed out that key sectors — from agriculture to manufacturing and services — are all affected by disruptions in global supply chains.
In agriculture, which employs roughly one-third of the Kingdom’s workforce, productivity depends heavily on imported fertilisers.
“About 98% of fertiliser is imported,” Thomas noted, warning that supply disruptions or price spikes could significantly affect output.
Similarly, industrial production relies on imported raw materials such as plastics and petrochemical inputs, which are essential for garment manufacturing and other export industries.
Even the services sector is not immune. Tourism, which accounts for around 10% of the economy, is highly sensitive to external conditions, including travel disruptions and regional instability.
Policy space and rapid response capacity
In addition to structural strengths, ADB officials highlighted Cambodia’s policy framework as another source of resilience.
Thomas noted that the government retains important tools to respond to economic shocks, including monetary, fiscal and structural policies.
On the monetary side, Cambodia’s high level of dollarisation can help limit exchange rate volatility and reduce the risk of imported inflation.
“Dollarisation can actually be somewhat helpful in the current context,” Thomas said.
“It reduces concerns about currency depreciation on top of rising global prices,” he explained.
Fiscal policy also provides room for manoeuvre. Cambodia’s relatively low public debt levels allow the government to deploy targeted support measures during crises, as demonstrated during the Covid-19 pandemic.
“Good fiscal management gives the government the breathing room to respond,” Thomas said, pointing to past stimulus programmes that helped cushion the impact on vulnerable households and businesses.
The ADB is currently in discussions with the Ministry of Economy and Finance on potential support measures, including rapid financing to address emerging economic pressures.
“We are working very closely with the government to understand the needs and see how we can provide urgent support,” Siddiqi said.
Turning crisis into opportunity
While the near-term outlook remains uncertain, ADB officials stressed that the current challenges also present opportunities for Cambodia to accelerate structural reforms.
The transition to renewable energy, expansion of regional connectivity and continued investment in human capital are seen as key priorities for building long-term resilience.
Siddiqi noted that crises can often act as catalysts for change, pushing economies to adopt more sustainable and diversified growth models.
“Cambodia has important advantages that it can build on,” she said.
“By leveraging these strengths, the country can not only manage current challenges but also position itself for stronger and more resilient growth in the future,” she added.
As global economic conditions remain volatile, Cambodia’s ability to navigate these uncertainties will depend on how effectively it harnesses these structural advantages — turning vulnerability into resilience in an increasingly unpredictable world. - The Phnom Penh Post/ANN
