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Vox Pop for ASEAN Integration

While the realization of the ASEAN Economic Community (AEC) is supposed to be reached by the end of this year, will the integration really be ‘complete’ and what does that mean anyway?

Often enough, “ASEAN” and the AEC have become buzzwords associated with social and economic progress that could suddenly kick in at the turn of the year.

But, on January 1, 2016, will we wake up to a much stronger economy that provides new and dynamic opportunities for Cambodians?
Of course, the AEC is not a magic business bullet that is waiting to fire before the country can start benefitting, even though that is the way it is often portrayed.

In reality, the integration is an ongoing effort of countless public, private and individual shareholders who play a part in turning the ASEAN member states into a single economic zone that is governed by coordinated policies across all sectors. Literally, everyone within the ASEAN countries will be affected by the AEC after it comes into full effect.

Post Plus will try to shed some light on the processes of the AEC from Cambodia’s point of view in our upcoming supplement. Unlike previous supplements on specific industries, such as on banking or the telecoms, the AEC will be the common denominator.

However, we will reserve sections for every industry within the Kingdom to structure the supplement and provide space for advertising and advertorials.

To give you an idea of the diversity of content, view some quotes from political and industry leaders we have already spoken to about the AEC.

What are the opportunities and challenges for the banking sector, especially in Cambodia, and what expectations do you have regarding the ASEAN integration by the end of this year?
ASEAN Integration certainly won’t be a big bang; it will evolve over a number of years. It won’t be seamless, either—that is impossible when you have [countries] at such different stages of development. Instead, we expect that ASEAN will slip into logical segmentation based on the industrial stage and comparative advantage in the supply chains. When it comes to banking, I’d have to say I expect the sector to be amongst the least directly affected—mainly on the basis that it is very open and liberalized already. It is these indirect effects of integration that may create challenges for banks here, as local companies will compete more directly, and for some, that will be difficult.
Grant Knuckey, CEO ANZ
What kind of opportunities and challenges does agriculture and rice production in particular, have in Cambodia in the context of the ASEAN integration?
AEC 2015 is well-known for only being a subject that government officials of ASEAN member states are familiar with, while their respective national private sector people [are not familiar with it]. Thus, more needs to be [written] to raise awareness. Having said that, in its new “Harmless Harvest” report, Oxfam has warned that ASEAN economic integration, which will create a single market where goods, workforce and capital can flow freely, could slow down if it failed to calculate the impact of climate change on agriculture in the region. While helping ASEAN state members cope with a changing climate, sustainable agriculture will boost farmers' incomes and ensure food security without racking up huge quantities of greenhouse gas (GHG) emissions, which are behind global warming.
MAFF has recently launched its Agricultural Extension Policies after years of lagging behind and pressure by reforms undertaken by their other ministry peers and the agricultural sector stakeholders. Cambodia's rice industry is at a cross roads today with focus in diversification of its export markets, moving away from EU with its EBA scheme and closer to homes and markets within Asia, China, Malaysia and others. Focusing on better branding for Cambodian jasmine is well under way by the Cambodia Rice Federation (CRF), which has decentralized decision-making power to a series of EXCOs (Executive Committees) that oversee and advocate specific issues with relevant ministries directly. Other EXCOs have been tackling serious issues like logistics cost, electricity cost, pure seeds shortage, etc... These are the measures that CRF has been working on arduously in order to rise to the challenge of integration. Cambodia needs to continue working harder to improve its ports’ infrastructure so as to participate more efficiently in future rice tenders called by Philippines, Indonesia and the like.
David Van, Senior Advisor Cambodia Rice Federation
What are the opportunities and challenges for the real estate sector and CBRE Cambodia, and what expectations do you have regarding the ASEAN Integration by the end of this year?
By the end of 2015, I expect there to be little direct impact to the real estate sector as ASEAN integration will be sequential, and I do not feel the community as a whole is ready nor are substantive regulatory measures in place for Cambodia to fully take advantage of or for it to protect itself. There are already signs of business from Japan, for example, locating to Cambodia in anticipation of advantages resulting from ASEAN integration in a general positive sentiment, but so far, ASEAN integration remains a periphery reason to do business in Cambodia, and the core considerations remain the fundamentals existing now: current legislation, regulatory frameworks and businesses own financials. The truth about the real estate sector is that a sense of optimism hangs in the air with little tangible impact to day-to-day business.

A potential outflow of skilled or semi-skilled labour is a concern for the construction sector. Sourcing skilled labour is a challenge continually faced by the real estate and construction sectors (as it is for many other sectors). If skilled labourers left Cambodia for higher salaries within ASEAN, the outflow of skilled or semi-skilled workers would likely increase prices, delays and issues, while reducing the overall quality of construction. The free movement of labour represents a significant challenge to Cambodia, especially as regulatory control of immigrant labour forces for many of the ASEAN countries remains weak.
Simon Griffiths, Associate Director CBRE

What regional advantages does Cambodia have within the AEC, and how can the country bring in investment?
The business and investment aspect is very crucial. The notion of this one region matters, but because the 10 ASEAN countries are disparate and are not homogenous at all, far from it, where is the communality if we are de facto competing? The communality is in breaking of the regional supply chain. The benefits of the AEC, for a country like Cambodia, are to grab several links of the supply chain that we couldn’t get into before because of our small market size.
Now Cambodia can say that they can be a gateway into the GMS and ASEAN because the link through the southern corridor creates industrial opportunities. Where Cambodia presents investment opportunity and where it differentiates itself from Vietnam, Myanmar and Thailand is the sheer liberal economic policy that arose from the WTO a decade ago. WTO was the first wave of economic reform. Now that the trade barriers are down, I would say that AEC has given Cambodia the impetus to move for a second generation of reform and investment. Plus, why does a company come to Cambodia instead of going to Vietnam or Thailand when entering ASEAN? Because companies can own 100 per cent of their business in Cambodia. And that is our main selling point that will make us benefit from the AEC.
Dr. Sok Siphana, Sok Siphana & Associates
What are the opportunities and challenges for the labour market in Cambodia, and what expectations do you have regarding the ASEAN Integration by the end of this year?
I don’t expect to see big changes to the Cambodian labour market. There may be increased opportunities for inter-ASEAN trade and that may have some knock-on effects on the job market. I think that the biggest challenge is internal – the ongoing pay-raises in the garment industry and the effects of that on Cambodia’s competitiveness.
The main challenge will continue to be on skills shortages. I doubt that ASEAN integration will have impact on that, except on the level where perhaps there might be increased opportunity for ASEAN training providers to enter the market.
The current market already has some hot areas – for example, there is a shortage of blue-collar males in the west of Phnom Penh. I see seasonal and structural issues continuing to have the biggest impacts.
Kevin Britten, Managing Director Top Recruitment
What kind of opportunities and challenges does Cambodia face in the context of the ASEAN integration when it comes to the free flow of labour, labour rights, and proper wage structures to remain competitive within ASEAN?
As wages rise in Cambodia, the key for Cambodia will be to continue to invest in infrastructure and further expand the investment in education, particularly focusing on entrepreneurship and vocational training in order to retain its competitive edge in ASEAN.
Cambodia’s [youth] population, with relatively fewer elderly to take care of, is an unequivocal asset for the country for the time being. Investing in both the hard skills and the soft skills of this new demographic, Cambodia can take advantage of its unique position relative to its neighbors. Young people especially need the platforms and entry points to learn the required soft skills for Cambodia to be competitive: problem-solving, leading with integrity, strategic thinking, relationship management, language fluency, accountability and self-confidence. Shown by the talent displayed at the first annual Cambodia Young Entrepreneurs Award, held May 30th in Phnom Penh, there is no doubt that Cambodia’s emerging entrepreneurs have the potential to be successful in an integrated ASEAN.
Silas Everett, Asia Foundation


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