The Cambodian business community is largely confident that exports to Malaysia will see appreciable gains in the coming years, underpinned by a wave of new investors from ASEAN’s third-largest economy, as the Kingdom pushes to upgrade production chains as well as expand and diversify its export basket.

This affirmation comes after the General Department of Customs and Excise of Cambodia (GDCE) reported that the Kingdom’s trade deficit with Malaysia for the first half (H1) of 2022 expanded by an astonishing 67.88 per cent to $222.310 million.

For reference, bilateral trade between the two countries over the January-June period grew by 42.03 per cent year-on-year to $325.601 million – Cambodian exports to Malaysia edged up just 6.67 per cent to $51.645 million, while imports ballooned by 51.50 per cent to $273.955 million.

Keo Mom, director-general of industrial park developer Kampong Seila Special Economic Zone Co Ltd, told The Post on August 3 that the majority of the goods that Cambodia exports to Malaysia are produced by foreign-owned entities.

The current advancements made by Cambodia in production technology, processes and controls will bolster the value of the Kingdom’s exports to Malaysia, and play a part in attracting investors from there, contended Mom, who is also CEO of LY LY Food Industry Co Ltd (Lyly Food), one of the Kingdom’s largest food processors.

Although acknowledging the lacklustre performance of Cambodian exports to Malaysia, Mom stressed that the Kingdom is exploring ways to enter new export markets and unlock further expansion into its existing ones.

Moreover, she said, improvements in diplomatic and trade relations between the two countries –bilaterally and regionally, as well as within the ASEAN framework – have steadily pushed up their overall goods trade volumes.

Hong Vanak, an economist at the Royal Academy of Cambodia, remarked that trade between the two countries remained relatively healthy during Covid-19, and explained that the current trade deficit is largely due to the Kingdom’s lower production capacity versus its ASEAN peer.

“Cambodia must strive to diversify production to reduce the trade gap,” Vanak said, expressing a desire to see a meaningful rise in the Kingdom’s exports to Malaysia. “When more goods are imported, more cash will flow out of the national economy,” he cautioned.

Major Cambodian exports to Malaysia comprise milled rice, oil palm fresh fruit bunches (FFB), peppercorn, rubber, fabrics, electrical components, and other industrial and agricultural products, while key imports include auto parts, food and beverages, and electronics, he said.

At a February meeting between Minister of Commerce Pan Sorasak and Malaysian trade and industry minister Mohamed Azmin Ali, both sides pledged to further boost bilateral trade and committed to maintaining open markets and facilitating investment to achieve that end.

The minister called on Azmin’s delegation to encourage existing and new Malaysian players to explore more investment opportunities in the Kingdom, citing as examples milled-rice and other agricultural exports, as well as training in food production techniques for domestic and international supply, particularly those compliant with halal requirements.

Halal processes and procedures are those deemed permissible under Islamic Law as defined in the religion’s holy book, the Quran.

Sorasak also highlighted Cambodia’s favourable investment climate, which he said is supported by the new and improved associated legal framework as well as the Kingdom’s rather large number of trading partners.

In 2021, bilateral trade between Cambodia and Malaysia was worth $503.004 million, up 13.028 per cent over 2020, according to the GDCE. Cambodian exports to Malaysia were $101.318 million, up 2.22 per cent, and imports $401.686 million, up 16.1 per cent. The Kingdom’s trade deficit with Malaysia for last year expanded by 21.708 per cent to $300.368 million.