What Drives Urbanisation in Modern Cambodia? Some Counter-Intuitive Findings

The history of urbanisation in Cambodia is a fascinating case study. During 1965-1973, the Vietnam war triggered the mass migration of Cambodians to the urban centres as its rural economy was virtually annihilated by an unprecedented cascade of aerial bombardments. During the Pol Pot regime, 1975-1979, urban areas were hastily closed down by the Khmer Rouge militia that led to the phase of forced de-urbanisation. With the ouster of the Pol Pot regime, since 1993 a new wave of urbanisation has taken shape for Cambodia. Rising urban population in a few urban regions has triggered multidimensional problems in terms of housing, employment, infrastructure, crime rates and congestions. This paper investigates the significant drivers of urbanisation since 1994 in Cambodia. Despite severe limitations of the availability of relevant data, we have extrapolated the major long-term drivers of urbanization by using autoregressive distributed lag (ARDL) analysis and nonlinear autoregressive distributed lag (NARDL) models. Our main finding is that FDI flows have a significant short-run and long-run asymmetric effect on urbanisation. We conclude that an increase in FDI boosts the pull-factor behind rural-urban migration. At the same time, a decrease in FDI impoverishes the economy and promotes the push-factor behind the rural-urban migration.