The value of Cambodian exports to the EU is expected to decline between $513-$654 million per annum if the country’s tariff-free access is withdrawn, according to a World Bank report released on Monday.
The World Bank’s assessment – made in a report named Cambodia Economic Update – was based on last year’s data on the value of Cambodia’s three key EU exports – clothing, footwear and milled rice.
A bank official on Monday said the figure would have been even higher if bicycle exports to the EU – which were valued at $331 million last year – had been included in the study.
In January this year, EU tariffs were introduced on Cambodian and Myanmar milled rice imports to the bloc at $200 per tonne in the first year. The measure intends to protect local rice producers following complaints from Italian and Spanish farmers that they were being undercut.
World Bank country manager for Cambodia Inguna Dobraja said improving the Kingdom’s investment climate and reducing the cost of doing business, along with building a skilled labour force, are the key priorities to sustain strong economic growth in the medium-term.
“Growing evidence highlights that investment in people [is] essential to drive economic progress and sustainable development. Investing in people and improving the quality of Cambodia’s human capital should remain at the core of Cambodia’s aspirations to reach upper-middle income economy [status] by 2030,” she said.
The World Bank report predicts that the Cambodian economy will grow seven per cent this year, driven primarily by the rapid expansion of exports and robust international demand for the Kingdom’s goods.
In the risk assessment section of the report, the bank highlighted the potential withdrawal of the EU’s Everything But Arms (EBA) scheme as a major factor impacting the Kingdom’s economic outlook, in addition to the inflow of foreign direct investment – which is currently financing many sectors in the country.
The bank’s report revealed that the Kingdom’s garment exports to the EU market were valued at $3.65 billion last year, while footwear and milled rice were valued at $508 million and $177.5 million respectively.
Should the EU withdraw Cambodia’s EBA preferential trade status – and thus introducing tariffs on a number of key exports into the bloc – garments will face a 12 per cent tax, footwear 16 per cent and bicycles 10 per cent.
Should these tariffs be imposed, the World Bank estimates that garment exports will decline between $320 million and $381 million, while milled rice exports could decline between $65 million and $144 million. In addition, footwear exports are anticipated to see a $128 million decline.
National Bank of Cambodia deputy governor Neav Chanthana, who attended an event for the report’s launch on Monday, told reporters that the government has prepared a strategy to negate the impact should the EU decide to withdraw Cambodia’s EBA status.
“We know there is [a risk] – we need to prepare to prevent it,” she said. “We hope that [the EU] will not withdraw the trade preferential scheme [EBA].”
In late March, Prime Minister Hun Sen announced large-scale economic reforms as he outlined a 17-point strategy to stimulate Cambodian economic growth that he said could save the private sector up to $400 million per year.
The strategy included a number of key money-saving initiatives for private businesses – including reducing costs associated with shipping, port service fees and electricity – as well as railway operation management reform.
Hun Sen also outlined plans to reduce the number of national holidays, introduce fiscal incentives on tax and customs, and expedite the completion of amendments to the Law on Investment and Law on Special Economic Zones. and milled rice were valued at $508 million and $177.5 million respectively.
Should the EU withdraw Cambodia’s EBA preferential trade status – and thus introduce tariffs on a number of key exports into the bloc – garments will face a 12 per cent tax, footwear 16 per cent and bicycles 10 per cent.
Should these tariffs be imposed, the World Bank estimates that garment exports will decline in value between $320 million and $381 million, while milled rice exports could decline between $65 million and $144 million. In addition, footwear exports are anticipated to see a $128 million decline.
National Bank of Cambodia deputy governor Neav Chanthana, who attended an event for the report’s launch on Monday, told reporters that the government has prepared a strategy to negate the impact should the EU decide to withdraw Cambodia’s EBA status.
“We know there is [a risk] – we need to prepare to prevent it,” she said. “We hope that [the EU] will not withdraw the trade preferential scheme [EBA].”
In late March, Prime Minister Hun Sen announced large-scale economic reforms as he outlined a 17-point strategy to stimulate Cambodian economic growth that he said could save the private sector up to $400 million per year.
The strategy included a number of key money-saving initiatives for private businesses – including reducing costs associated with shipping, port service fees and electricity – as well as railway operation management reform.
Hun Sen also outlined plans to reduce the number of national holidays, introduce fiscal incentives on tax and customs, and expedite the completion of amendments to the Law on Investment and Law on Special Economic Zones.
