Association of Banks in Cambodia president In Channy on Tuesday said the Kingdom’s banking sector will remain strong and not be directly affected by the potential suspension of its access to the EU’s “Everything But Arms” (EBA) trade agreement.
Channy, who is also the president of the largest locally-owned bank – Acleda Bank Plc – was talking to reporters on the sidelines of the 22nd Asean Banking Conference and 49th Asean Council Meeting.
The EU launched the EBA withdrawal procedure on February 12, citing “a deterioration of democracy [and] respect for human rights” in Cambodia.
The European Commission completed its report on November 12 after a three-month investigation that ended on August 12 and has given the government one month to respond.
Channy said: “This year the banking sector is growing as anticipated – in line with economic growth [projections] of around 6.9 per cent.
“I don’t think the EBA issues will hinder the growth of the economy as a whole because it is just one of the factors [contributing to] the growth.”
Referring to the EU withdrawing the status as a result of the Kingdom’s graduation from the UN’s Least Developed Countries category, he said: “EBA status will be withdrawn automatically anyway as our economy moves to another level.
“At the same time, investors look at many factors – a sound macroeconomy, political and social stability, as well as the investment friendliness of the country.
“All investors know that one day it [EBA access] will be gone. What is important is the soundness of the regulatory frameworks that allow their investments here to be sustainable as our economy remains strong, [growing annually at] around eight per cent over the last two decades.
“Another important factor is our strategic partnership with China. The government just announced that we will sign a free trade agreement in December. We will benefit from the partnership, and it will [help] sustain the economy in the long term,” Channy said.
Canadia Bank Plc CEO Raymond Sia said potential EBA withdrawal was not a concern for the banking sector.
“The government has put in place a lot of measures to curb any potential negative effects of EBA withdrawal. I am very confident that Cambodia will continue to perform well,” he said.
He noted that Cambodia’s economic growth continues to be a lot stronger than other Asean countries.
“We have a supportive, pro-business government that implements pro-business policies to ensure growth, not just in the banking sector, but in other industries and business segments.
“[Canadia Bank] doesn’t have direct exposure to any garment or textile companies but of course, as the largest bank in Cambodia today, we certainly have some form of indirect exposure to all industries and all sectors.
“We are managing this very well in terms of monitoring and periodical review of our portfolio,” he said.
Channy called on businesses to improve productivity and competitiveness by upskilling workers and reducing production.
“We have to look at what are the quantifiable responses we have taken to curb the effect. When doing business, we can’t rely only on trade preferences from others. We have to mainly rely on domestic economic power and exports to global markets.
“What we should do is have all enterprises reassess their labour force and provide them with more training to build their capabilities in order to increase their supply chain and minimise production losses,” he said.
Cambodia is the second largest beneficiary of EBA trade preferences, accounting for 18 per cent of all imports to the EU market under the EBA scheme last year, the European Commission said on November 12.
The Kingdom’s exports to the EU totalled €5.3 billion ($5.8 billion) last year, 95 per cent of which entered the EU duty-free.