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Cambodia third in RCEP income gains, growth in exports, WB says

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Cambodia’s exports reached $17.21537 billion, up 16.72 per cent year-on-year from $14.74874 billion, and imports stood at $18.59048 billion, down 7.84 per cent year-on-year from $20.17181 billion in 2020. Heng Chivoan

Cambodia third in RCEP income gains, growth in exports, WB says

Cambodia ranked third in both real income gains and export growth among Regional Comprehensive Economic Partnership (RCEP) members, according to the World Bank (WB).

In its recent working paper entitled “Estimating the Economic and Distributional Impacts of the Regional Comprehensive Economic Partnership”, the Washington-based lender said the Kingdom came in third after Vietnam and Malaysia, in terms of real income gains.

On export growth, the report said Cambodia was expected to log a rise of 6.5 per cent, the highest after Vietnam and Japan at 11.4 per cent and 8.9 per cent, respectively, the 46-page research paper said.

The RCEP is the world’s largest trade pact, signed on November 15, 2020 by the 10 ASEAN countries and five other Asia-Pacific countries – Australia, China, Japan, New Zealand and South Korea – and entering into force in Cambodia on January 1, 2022.

Ratification is still pending in South Korea and four ASEAN countries – Indonesia, Malaysia, Myanmar and the Philippines.

The working paper said the deal has the potential to lift 27 million additional people to middle-class status by 2035.

“Considering the full scenario, with reductions in tariffs, non-tariff measures, and trade costs, Lao PDR, Thailand, Cambodia, Vietnam and Malaysia benefit the most. These positive gains are magnified when a productivity kick is assumed.

“Under this scenario, the real income in Vietnam and Malaysia increases almost five per cent. In Japan, the country that gains less under this scenario, the real income increases by 0.5 per cent.

“Interestingly for Japan, the impact of the four RCEP scenarios is similar, which suggests that most gains are associated with a fall in tariffs, in contrast to the rest of the countries, where the fall in tariffs leads to very small impacts, or even a negative impact as in Cambodia and Vietnam.

“In terms of total exports, the sectors that expand the most for Cambodia are wood and paper products [34.8 per cent], chemical, rubber and plastics [25.3 per cent], and electrical equipment, and machinery [24.2 per cent] expand the most.

“[This is] the result of tariff reduction in the case of chemical, and plastics [two percentage point reduction, between 2035 and 2020], and due to non-tariff measure reduction for wood and paper [14.8 percentage points decrease between 2035 and 2020],” it said.

Hong Vanak, director of International Economics at the Royal Academy of Cambodia, previously told The Post that before signing the agreement, the Cambodian government carefully weighed potential products that could meet the perceived needs of the signatories.

He suggested that the Kingdom ramp up the volume and quality of production and raise its level of diversification.

“Although the RCEP agreement links us to more trading partners and provides special conditions on the export and import of goods, what’s more important is – can our products match other countries’ needs? This is an important detail that must be seriously pondered over,” he said.

Cambodia Chamber of Commerce vice-president Lim Heng stressed that trade deals, whether bilateral or multilateral, are a net positive for the national economy, creating opportunities for exports and improving access to investments.

“Because the RCEP is a regional agreement with major markets in large countries, Cambodia must strive to expand its production with a focus on high quality to bring more revenue into the national economy,” he said.

The RCEP has a combined gross domestic product (GDP) to the tune of $26.2 trillion, or 30 per cent of global GDP, and engages 2.2 billion people, or 30 per cent of the world’s population, he said, citing 2019 data.

With RCEP negotiations and additional research as a base, the Jakarta-based Economic Research Institute for ASEAN and East Asia (ERIA) found that the RCEP would boost the Kingdom’s GDP an additional two per cent, increase exports by an extra 7.3 per cent and raise investment by an added 23.4 per cent.

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