The Asian Development Bank (ADB) has cast fresh doubt over the region’s ability to meet the ASEAN Economic Community’s (AEC) self-imposed 2015 deadline.
According to the ADB’s 2014 Economic Update, Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand have all effectively reduced tariff rates to almost zero and are now poised to introduce a one-stop shop to expedite customs clearance within ASEAN – called the ASEAN Single Window – by 2015.
Cambodia, Laos, Myanmar and Vietnam, however, are all lagging, the ADB’s September 25 update said.
“ASEAN members are progressing toward establishing an economic community. Yet many challenges must be overcome for the ASEAN Economic Community to become a reality as scheduled at the end of 2015,” the update said.
“While unlikely to meet the 2015 launch deadline, ASEAN will benefit from the steps taken.”
The ADB’s lead economist for the office of Regional Economic Integration, Jayant Menon, said that while Cambodia is lagging behind some of its more developed neighbours, it remains ahead of Laos, Vietnam and Myanmar in terms of overall preparedness.
“Cambodia needs to speed up its customs reform and to press ahead with automating processes in order to reduce trade costs and minimise the opportunities for corruption, and to be ready for live implementation of its National Single Window by 2015,” Menon told the Post.
“The other newer members are also lagging in this area, which is currently preventing the implementation of an ASEAN Single Window by the AEC deadline.”
The Single Window initiative aims to interconnect each country’s customs checkpoints and automatically share cargo-related data and information, including declarations and certificates of origin, in an effort to speed up cross-border trade.
The ADB’s scepticism at Cambodia meeting the December 2015 deadline comes after the National Assembly in May approved a draft law aimed at simplifying and modernising customs procedures in line with those of neighbouring nations. More recently, on September 9, the Ministry of Commerce announced that it would implement a simplified, automated Certificate of Origin service by March 2015.
Independent economist Srey Chanty echoed the ADB’s doubts, saying that Cambodia would need “at least” until 2017 to be fully prepared for AEC integration.
“I think they might be able to integrate only elements that are ready for integration at the 2015 deadline . . . the ADB is right, Cambodia is not ready with regards to its customs processes,” Chanty said.
“They need to be focused on the customs procedures and making sure everything is automated and computerised, and also the development of infrastructure to boost logistics within Cambodia.”
Officials from the Ministry of Economy and Finance and the Ministry of Commerce declined to comment on the progress of implementing the draft law or Cambodia’s overall standing regarding the AEC 2015 deadline.
Meanwhile, global credit ratings agency Moody’s yesterday reaffirmed the Kingdom’s credit rating of B2. Moody’s said greater ASEAN integration in 2015 stands to be a major investment draw for Cambodia and could help sustain the country’s 7 per cent annual GDP growth rate.
The Moody’s report, however, stated that preparation measures allowing a freer flow of goods and services into the country and across the region, such as the Single Window initiative, remained incomplete in Cambodia.
“[The AEC’s] ongoing implementation would help diversify Cambodia’s export base and improve its business climate, encouraging investment. Cambodia stands to benefit from intra-ASEAN trade, which is much smaller than trade with countries outside the bloc,” the report said.
Moody’s also noted that increased foreign direct investment, particularly flows from China, would help support Cambodia’s development goals of increasing foreign investment to 25 per cent of GDP.
The rating agency cautioned that the rapid expansion of credit growth would need to be monitored and that an over-dollarised economy placed restrictions on the effective use of monetary policy to control inflation.