RECENT robust figures for trade with Thailand and South Korea and the start of construction at Japanese firm Minebea’s new factory in the Phnom Penh Special Economic Zone provide tangible reminders of Cambodia’s economic promise, after the negative implications of last week’s EU sugar export shame under the Everything But Arms programme.
PPSEZ Managing Director Hiroshi Uematsu has underlined in recent weeks that Cambodia is subject to rising demand from foreign firms keen to take advantage of the country’s “favourable export access to a variety of world markets and a comparably low wage level within the region”.
Certainly, Cambodia’s membership of ASEAN is proving a major economic plus for the country leading to a fall in tariffs with key markets China, South Korea, India, Japan, New Zealand and Australia prompting a corresponding rise in investor interest.
Firms like Minebea will be able to take advantage of these FTAs as and when they come into effect, a powerful incentive.
After ratifying the FTA with Australia in January, the reduction in tariffs on key exports items has already started – garments, for example, will see a fall in export taxes from this year that will keep on sliding to zero until 2021, according to the agreement. Similarly, tariffs on trade with India began reducing at the start of last year and within ASEAN this free-trade process is expected to be complete by 2015.
The impact these deals have on Cambodia’s attractiveness as a destination for investment should not be underestimated.
Including with ASEAN, the Kingdom now enjoys free trade agreements at various stages of enactment with countries that represent about half the population of the entire planet, include two of the world’s three largest economies in Japan and China, and among the fastest growing.
These are real advantages for investors, as noted by Uematsu who said a further 10 companies are in talks regarding the possibility of joining the PPSEZ. Once big names like Minebea come here, other smaller supply businesses follow, creating a virtuous circle of foreign direct investment that generates jobs and economic development.
The Everything But Arms advantages combined with these FTAs provide a unique and potent incentive for free trade and investment. After all, the EU is the largest economic entity in the world generating some US$16.2 trillion last year in economic activity, according to the International Monetary Fund. The EBA program offers Cambodia tariff-free export access.
The Cambodian government therefore has to make sure it does not let the tainted business interests of CPP Senator Ly Yong Phat undermine this excellent economic opportunity as a result of human rights abuses at sugar concessions that have rightly aggravated the EU. Rectifying the situation with a thorough investigation and improvement in land rights when it comes to concessions is the only way forward now.
If the government does not see this it will not only be failing its own people, it will also be undermining the promise of genuine economic opportunity for Cambodia