Yengin, DuyguDraper, PeterThangavalu, Shandre (Sunway University, Malaysia)Samnang, Chea2025-05-232025-05-232025https://hdl.handle.net/2440/144707Openness does not guarantee economic growth, and its impacts on structural transformation and uneven growth can be substantial. This research intends to investigate the impacts of openness on structural transformation and uneven growth. The objective is to understand their relationship and how to address the unevenness and manage more inclusive growth. The study observes four key hypotheses. (1) Has trade liberalization influenced Cambodia’s economic growth, job creation, poverty reduction, export diversification, and upgrading in global value chains? (2) Has Cambodia's economic growth translated into inclusive and equitable development? If not, is uneven growth a natural economic phenomenon or a result of policy decisions? (3) Has trade liberalization impacted the structure of government revenue generation, particularly the ratio of international trade to GDP vis a vis the ratio of domestic taxes to GDP? (4) Have trade facilitation measures implemented under free trade agreements lowered trade costs and time and enhanced Cambodia's competitiveness? The research combines qualitative and quantitative methods, including economic modeling, to answer the above research questions. Through literature review and empirical evidence, trade liberalization positively impacts Cambodia's economic growth, employment, and poverty reduction. It has also enhanced export diversification and facilitated upward movement in global value chains. Cambodia's economic growth may not have resulted in inclusive and equitable development. While unevenness naturally arises as Cambodia progresses in openness and economic development, policies significantly shape the extent and nature of this unevenness. The unevenness is explored with Cambodia's Circular Flow of Economy Framework Diagram and in identifying the interactions between households, firms, government, and the rest of the world across crucial markets like goods and services, labour, and finance. Cambodia has experienced overall gains from openness at the aggregate level but with an uneven distribution of benefits at the micro and sectoral levels. Openness has significantly increased Cambodia's exports, with an openness ratio of 132% in 2020, and has contributed to remarkable economic growth, with GDP per capita rising from $254 in 1993 to $1760 in 2022. This economic performance has helped nearly three million people in Cambodia escape poverty, yet unevenness exists across various sectors, labour divisions, income levels, genders, and geographic locations. To quantify the effect of tariff reduction on structural transformation and revenue generation, the GTAP model is used to assess the impacts of openness on aggregate economic indicators such as economic growth, import, export, and government revenue. Cambodia is highly liberalized and has a high openness ratio. The tax buoyancy of Cambodia is 1.7, which means a 1% increase in GDP will result in a 1.7% increase in tax revenue. Domestic industries in Cambodia have grown fast, resulting in a remarkable rise in domestic tax revenue. In recent years, domestic tax revenue has surpassed revenue generated from international trade. The pivotal point was in 2020, when the ratio of domestic taxes to GDP reached 11%, exceeding the 9% ratio of international trade taxes. Data from 2020 to 2022 reveals a growing trend of the ratio of domestic taxes and a decreasing trend of international trade taxes, widening their gap. Simulation 1, employing an import-substitution strategy with higher tariffs on manufacturing, and Simulation 3, utilizing an export-promotion strategy with lower tariffs on agricultural trade, did not yield satisfactory results. In contrast, Simulation 2, featuring an export-promotion strategy with lower tariffs on manufacturing, produced more favorable outcomes. Lowering tariffs on manufacturing production from 9.8% to 7.8% increased the sector's competitiveness, leading to a 0.63% rise in exports and a 0.35% increase in imports for manufacturing. The stronger industrial activity, combined with multiplier effects, resulted in a 15.8% increase in overall tax revenue. Overall, export-promotion strategies involving reduced tariff rates contributed to a 0.36% increase in GDP growth. From our discrete choice modeling framework, the study found that firms with greater reliance on domestic inputs tend to export less, and firms with a higher proportion of skilled workers demonstrate significantly higher export participation rates. Additionally, the study finds that transport and logistics obstacles significantly hinder firm-level export activities, while customs regulations were not found to be a significant constraint. The study highlights several critical factors for Cambodia's economic growth, including maintaining affordable energy costs, investing in human capital development, improving logistics infrastructure and connectivity, fostering strong domestic linkages, and supporting multinational activities. There are several key contributions to the thesis. Firstly, it highlights the uneven impact of openness on the Cambodian economy and discusses the key policy issues to balance the economy for sustainable and inclusive growth. Secondly, it examines the revenue mobilization for Cambodia in terms of an open economy and identifies the key challenges of revenue mobilization and uneven growth. This study is the first research on revenue mobilization strategy for Cambodia. Thirdly, it highlights the importance of trade and investment facilitation by examining the key challenges of ‘behind-border’ issues in Cambodia using Custom and recent firm-level data. Again, this is the first study to examine trade and investment facilitation using custom-level data.enInternational TradeOpennessUneven GrowthStructural TransformationGovernment RevenueTrade FacilitationInclusive and Sustainable Development.Thesis