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Executive Summary
Cambodia's socio-economic development faces significant challenges stemming from a narrow economic base, over-reliance on external forces, and a legacy of human capital deficits resulting from its turbulent past. While the country is positioned to benefit from its first demographic dividend, realizing this potential necessitates addressing critical skill gaps and mismatches in the labor market. Integration into regional and global economies through the Asian Economic Community (AEC) presents both opportunities and risks, requiring a strategic and proactive approach to human capital development. Current TVET systems in Cambodia, while showing signs of improvement, suffer from fragmented governance, inadequate funding, low quality assurance, and a mismatch between training provision and labor market needs. Addressing these shortcomings requires concerted efforts from the government, private sector, and development partners to create a more responsive, efficient, and effective TVET system.

In this study, we will explore the human capital and skills dynamics of the Cambodian labour market in terms of the structural transformation of the domestic economy. The mean and median of educational attainment of workers are only at primary and lower education. It is becoming very critical for the Cambodian economy to develop the human capital development strategies for the next phase of growth to higher value-added GVC activities and transit to upper middle income growth economy by 2050. The Cambodian economy will be graduating from LDC status to developing status in 2029. The study will also explore the skills requirements and human capital development policies for the transition from LDC to developing country status of Cambodia. In particular, the study will explore the skills requirements for undertaking ‘double-product transformation’² required for market access to developed countries such as the European Union. The study will examine the returns to skill and impact of training on the productivity of the Cambodian manufacturing and services industries. The study will also focus on sectoral analysis for textiles, garment, and footwear, and key manufacturing activities such as electrical and electronics, chemical, and agro-processing industries. The study will also provide key policy recommendations to map the skills and training framework for the next stage of sustainable and inclusive development of Cambodia.