The Cambodian government needs to take stock of its economic place within ASEAN, and globally, to continue its growth trajectory given the anticipated ratification of a major international trade pact expected to erode the competitiveness of the Kingdom’s biggest industrial sector, US Ambassador to Cambodia William Heidt said yesterday.
Addressing AmCham Cambodia’s annual meeting, Heidt said the Trans-Pacific Partnership (TPP) agreement – which creates a 12-member trade bloc that accounts for 40 per cent of the world’s economy – will make Vietnam a top US trading partner, potentially at the expense of Cambodia, which is not part of the landmark agreement.
“The ASEAN economic community is leading to faster integration in the region,” he said.
“But more importantly, the Trans-Pacific Partnership will accelerate the integration process and require Cambodia to think very deeply and quickly about how its economy will fit in the region.”
The TPP is expected to reduce investment in Cambodia’s $6 billion garment sector as manufacturers find more incentives to open factories in neighbouring Vietnam, which as a signatory of the agreement will enjoy preferential trade status with the US and other bloc members.
Heidt said that given Vietnam’s participation in the TPP, “it would be a shame for Cambodia to miss out and be left behind”.
While there is no formal framework for countries to enter the TPP, Heidt said American and Cambodian economists were working together on a joint study to determine the pros and cons of Cambodia joining the multilateral trade agreement.
“I am very interested in helping Cambodia to move into regional networks, and in the process, it will help develop itself and attract more US companies,” he said.
The US government has also engaged the Cambodian government in talks on a potential mutual investment protection treaty that would provide legal protection for American corporations operating in Cambodia and vice versa.
While acknowledging that rampant corruption and the lack of an independent judiciary continue to hinder American businesses, the ambassador encouraged AmCham to increase its role in drafting policy recommendations.
AmCham chairman Brett Sciaroni said that the business chamber had submitted policy recommendations to the Cambodian government to promote a bilateral trade agreement. He said such agreements “could be a stepping stone to TPP membership”.
Sciaroni stressed that with the expected ratification of the TPP, it was important that Cambodia seeks to join the trade framework agreement.
“The incentives of trying to join are high enough,” he said. “When the TPP comes into effect it will be a big concern for Cambodia.”
He added that if countries like Vietnam and Malaysian can qualify for the TPP, there was no reason why Cambodia’s application should be denied.