Cambodia is benefiting from a steadily growing service sector, but it needs to clear a number of obstacles to harness the sector's potential, said a new Asian Development Bank (ADB) report released on Tuesday.

The report, entitled Developing the Service Sector as an Engine of Growth for Asia, noted that the service sector is the key growth driver for low-income economies in Asia, including Cambodia.

The tourism industry, a key component of the country's service sector, has witnessed remarkable growth with tourism arrivals increasing by 19 percent to reach 2.1 million during the first six months of 2013.

It said large tourism arrivals have supported the expansion of hotels and restaurant businesses, wholesale and retail trade industries, and enterprises in transport and communications, while financial services have also expanded rapidly, buoyed by strong private sector participation and growing public confidence.

Anchored on the robust growth of tourism and other industries, the service sector as a whole is projected to expand by 7 percent in 2013 to help achieve GDP growth of 7.2 percent for the year.

The report added that services accounted for only around 40 percent of the country's gross domestic product (GDP), lagging behind other countries in the region with similar income levels. Nonetheless, the sector is anticipated to increasingly contribute to GDP growth.

"Cambodian services remain hampered by inadequate transport infrastructure in particular in rural areas, high costs of electricity as well as logistics and transportation costs," it said.

"Also, there are inadequacies in the implementation of legal and regulations, tax and governance issues, and shortages of skilled workforce."

"Addressing these constraints will continue driving down the cost of doing business and improving the competitiveness of the service sector," the report said.

For the tourism industry, more efforts are needed to diversify and strengthen value chains, including within the Greater Mekong Subregion and ASEAN networks, to enable the industry to fully tap into regional markets and raise its competitiveness, it added.