Cambodia: costly electricity is holding back industrial upgrading

Cambodia is generating more power and has extended it to almost every household. But for manufacturers it remains one of the most expensive in Southeast Asia, and it is not reliable enough. An AMRO report sees this as a brake on higher-value industries.

Cambodia has succeeded in electrifying the country. It still struggles to give its factories cheap, stable power. That is the finding of AMRO, the macroeconomic research office of ASEAN+3, in its 2026 annual report on the kingdom. According to the institution, electricity limits Cambodia's ability to move up global value chains, just as the country prepares to graduate from least developed country status in 2029.

A wide network, high prices

The progress is real. Electricity delivered rose from 19,972 to 22,361 gigawatt-hours between 2024 and 2025, an increase of 12%. According to AMRO, 95.9% of households now have access to power. Licensed villages account for 99.9% of the total.

The problem lies on the industrial side. In 2024, a Cambodian manufacturer paid on average 179 dollars per megawatt-hour. In Thailand the bill fell to 108 dollars, in Malaysia to 99, in Vietnam to 81 and in China to 56. Neighboring Vietnam therefore offers industrial tariffs less than half of Cambodia's, a gap that matters when companies choose where to build.

Outages that cost productivity

Reliability is also a concern. In the World Bank's 2023 enterprise survey, 42.8% of Cambodian firms said they had suffered power cuts. The share reaches 55.7% in manufacturing and 82.9% in garments. A garment factory goes through 2.3 outages a month on average.

The effect can be measured. A study covering 84 developing countries, including Cambodia, estimates that firms exposed to outages show productivity about 11% lower than comparable firms.

Coal, dams, imports

The power mix remains fragile. Coal supplies 47.7% of the electricity generated in the country, and hydropower 39.7%. Imports from Vietnam, Thailand and Laos account for 7.9% of supply, down from 8.3% a year earlier.

Dams expose the grid to drought and unpredictable rain. Most do not have pumped storage, which limits how supply can be managed between the dry and wet seasons. The transmission grid is fragmented. AMRO points to overloaded substations, bottlenecks and heavy technical losses.

Why industry is affected

AMRO relies on the "smile curve". In a production chain, value added is high upstream (research, components, materials), low in the middle (assembly) and rises again downstream (brand, marketing, after-sales service). To earn more, a country has to leave the middle.

That is where electricity becomes an obstacle. Cambodia concentrates on assembly, which uses little power. Sewing a garment takes about 147 megawatt-hours per million dollars of value added. Making the fabric takes 932, more than six times as much. All the fabric used in Cambodia is imported. It accounts for about half the value of each garment exported.

The car industry follows the same pattern. Since the 2023 investment law, several carmakers have set up in the country. But they assemble vehicles delivered as kits for the local market, with almost all components imported. To move up the chain, the country will have to process materials and make components. Those stages need more power, and more stable power.

The tyre example

One case shows that reliable electricity changes the picture. Between 2023 and 2025, tyre exports almost quadrupled. Several factories have opened in special economic zones, which offer more secure power than the general grid.

The Sihanoukville zone, home to the first major factory, has its own 100-megawatt coal-fired power station. The country also has a solid natural rubber base. AMRO sees a chance to capture more value added, provided growers and zone-based factories build closer ties.

Solar, storage and the grid

To ease the constraint, AMRO first bets on solar. It supplied 10.2% of electricity delivered in 2025, of which 8.9% came from power stations and 1.3% from rooftops. The price of panels and batteries has fallen sharply. A solar plant is also built faster than a coal plant or a dam.

The grid will still need strengthening, losses will have to be cut and storage developed. AMRO also argues for deeper integration into the ASEAN power grid. Cambodia and Laos have signed a joint framework to develop their interconnections.

Source: AMRO, Annual Consultation Report Cambodia 2026, Annex 3, "Electricity as a Structural Constraint to Cambodia's GVC Upgrading".