Search form

Login - Register | FOLLOW US ON

Logo of Phnom Penh Post newspaper Phnom Penh Post - WTO approved; now for the laws

WTO approved; now for the laws

Almost exactly a decade after beginning the application process, Cambodia has ratified

its membership to the World Trade Organization (WTO) and must now rush through a

host of new laws to bring it into compliance with international trade standards.

The National Assembly approved the accession on August 31 and it was rubber-stamped

by the Senate a week later, just scraping into the already-extended deadline.

Cambodia will become a full member after a 30-day processing period.

The prospect of a stronger commercial legal system and access to new trade markets

has been widely welcomed by the private sector, but economists say widespread reforms

to the business environment will be the key to profiting from WTO membership.

"It's more likely to have long-term benefits because of the legal changes required

by WTO, which will open up the country and reduce internal and external barriers

to investment and export growth," said Kazi Matin, lead economist for the World

Bank in Cambodia, Laos and Thailand.

"Over the short term, Cambodia will be positively impacted through a perception

of change - a more open economy linked with global markets [is] more attractive to

investors," said Matin.

WTO membership comes just in time for Cambodia's garment industry, responsible for

around 90 percent of all exports and facing the end of a preferential quota system

with the United States in January 2005.

A place in the WTO means there will be no limits to the quantity of garments exported

to the US and should help secure a lower tariff rate for exports, an issue that will

be raised next week when a trade delegation heads to the US to lobby for duty-free

status for Cambodian garments.

Currently duty costs for garments going to the US are between 16 and 34 percent of

value and it is hoped that a zero or very low duty deal would reduce prices for buyers,

said Ken Loo, secretary-general of the Garment Manufacturing Association of Cambodia,

who will join the delegation.

Last year the industry was worth $1.5 billion in sales - and the 213 factories operating

in Cambodia employ 270,000 workers, mostly young women who often use part of their

salaries to support their families in the provinces.

"WTO becomes more like a basic criteria of survival [rather] than a bonus,"

said Loo.

"Being a member of the WTO means that we have to enact certain laws in line

with WTO agreements. Will that lead to an influx of factories? We don't know, but

definitely without that companies are going to leave," Loo said.

While Cambodia is not the cheapest place to produce garments, it is favored by some

brands because of its good labor record, giving it the edge over production powerhouses

like China, which is expected to increase its current 16 percent share of the market

once quotas are lifted.

Staying competitive in the "touch and go" environment of the garment industry

will also depend on the government's efforts to cut other non-tariff barriers for

investors, said Loo.

Corruption, unwieldy bureaucracy, the high price of utilities and low skill levels

among workers are factors that must be changed if Cambodia is to take advantage of

WTO membership, said Sok Hach, director of the Economics Institute of Cambodia.

"The [trade] barrier outside is finished but now we have the barriers inside

the country," said Hach.

Aside from garments, Cambodia currently has few products it can trade and little

capacity to process raw materials to gain the most out of its exports.

Trade industries of the future could include the manufacture of toys, shoes and electrical

goods, said Sok Siphana, the government's chief WTO negotiator, with agricultural

products a promising medium term prospect,

Plans to establish special economic zones at the border towns of Poipet and Koh Kong

could also attract Thai investors with the prospect of using cheaper Thai electricity

and the Cambodian origin of their products to leverage better tariff deals in their

existing export markets.

"What I like about WTO is that it has put legislative reform on a fast track,"

said Brett Sciaroni, chairman of the American-Cambodian Business Council. "It

will make it a more attractive prospect for foreign direct investors."

One of the most important pieces of legislation to be approved is the setting up

of a commercial court, originally slated for enactment in December this year, but

likely to be delayed due to the year-long political deadlock that held up formation

of the current coalition government.

While few see WTO membership as a guarantee of future prosperity, many consider it

a sign the government is on the right track to address Cambodia's dire economic situation

by attracting more foreign investment and opportunities for export.

In the words of one Western diplomat: "This is not a silver bullet, this is

a chance."

0

Comments

Please, login or register to post a comment

Latest Video

Bodies of Cambodian peacekeepers returned to Kingdom

The bodies of four Cambodian peacekeepers killed by a Christian militia in Central African Republic were repatriated to the Kingdom and honoured in an airport ceremony on May 21.

Phnom Penh eats: Ptas Nak Battambang

As the name suggests, Ptsa Nak Battambang – which in English means Battambang's house – is the right place for those who want to try some of the province's typical dishes in Phnom Penh.

Military police stand guard outside a polling station that was allegedly prematurely closed to eligible voters during the 2013 general election in Kandal province. Photo supplied

The Ministry of Defence on Friday lashed out at civil society and election monitoring groups, claiming a

Opposition leader Kem Sokha uses his hat to gesture to supporters during a campaign rally yesterday in Siem Reap province. Facebook

Prime Minister Hun Sen yesterday threatened to unleash war on the opposition party if he loses patience with their campaign for the June 4 commune