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Ministry: EBA decision ‘politically driven’

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Garment factory owners are unsure how the partial cancellation of the EBA will affect business. Hong Menea

Ministry: EBA decision ‘politically driven’

The Ministry of Foreign Affairs and International Cooperation has reacted to the European Commission’s (EC) decision to partially suspend the Everything But Arms (EBA) scheme, saying it did not reflect the reality in Cambodia.

An analyst also said the suspension would not make the Cambodian economy falter much.

The reactions came after the European Commission suspended one-fifth of the EBA, citing serious and systematic violation by Cambodia of principles in the four core human and labour rights.

The Ministry of Foreign Affairs said the application of the concept of “serious and systematic violation” was trigged by many misperceptions and misunderstandings about the reality in Cambodia, and had been applied arbitrarily to launch the withdrawal procedure.

The ministry further said the decision was politically driven and devoid of objectivity and impartiality.

It said the decision was nothing less than the application of double standards and that the EC had failed to recognise and respect the fundamental issue of Cambodia’s sovereignty, which can neither be the subject of negotiation for trade preference nor be a trade-off for any development assistance.

“The government remains firm in its principled position of rejecting any attempt by external parties to use trade and development assistance as pretexts to justify their interference in Cambodia’s internal affairs,” the ministry said.

It said in the area of land disputes, labour rights, and media freedom, all of which were acknowledged by the EC as having tangible progress, the government is and will continue to address the few remaining shortcomings, with the exception being related to the judicial process, which is carried out in full compliance with Cambodian laws and within the clear purview of Cambodia’s independence and sovereignty.

“Notwithstanding the EC’s decision on this trade matter, Cambodia remains firmly committed to further enhancing its relations with the EU based in the spirit of mutual respect and interest, all the while reaffirming its full aspiration to remain within the region a multiparty liberal democracy,” the ministry said.

The Ministry of Commerce on Thursday night issued a press release saying that there are only 40 items of Cambodian goods that are subject to tax in the EU. Another 9,000 items can continue to be exported to the EU as usual without paying tax.

The press release came after the ministry received a letter from the EU through the EU Embassy in Cambodia relating to the procedure for the temporary suspension of the EBA scheme on some goods.

The ministry’s press release said: “The content of the letter underscored 40 items of goods produced in Cambodia that can compete, and Cambodian exporters can pay tax on such exports to the EU.

“There also remains some 9,000 items of goods that receive tax preferences from the EU under EBA to continue to help Cambodia diversify its economy, maintain jobs and the source of income for workers and their families.”

The ministry added that as per regulatory procedures on the framework of the general preferential tax of the EU, the temporarily suspended 40 items would be forwarded to the European Council and the European Parliament for them to review the formalities of the law.

“This review takes some two months from February 12. In this sense, the European Parliament has the right to take issue with a bill asking for a temporary suspension from the EC. When necessary, the European Parliament can take a further two months to consider it.”

Economic analyst Chan Sophal said Cambodia has to pay 20 per cent tax for exports to the European Community with 80 per cent of the items still being exempt from tax.

The primary assessment of 20 per cent tax on exports amounts to about $100 million a year. This amount is not too much in terms of the current context of the Cambodian economy.

Put in perspective, he said the tax accounts for just 1.1 per cent of the total export of clothes and shoes, 1.2 per cent of the expenditure of the National Budget, and 0.3 per cent of Cambodia’s gross domestic product (GDP).

“It doesn’t make the Cambodian economy weak or falter much. In my opinion, it is a good opportunity for Cambodia, including the government, private sector and workers to learn to live without preferential treatment from others.

“Gradually, Cambodia will be required to pay tax on everything and then it can be sure to have grown out of the least developed countries status.

“Each person always wants his country to grow up to be one of medium to high income. Therefore, we have to make efforts together,” he said.

A representative of a factory whose Chinese employer asked not to be named said on Thursday that the EC’s decision could affect his factory’s exports. But he said the impact would not be much as the factory employer was already prepared.

“They have been prepared for the EBA from the beginning. So, if it affects the factory, the effect of the EBA decision will just be minor. We will export our products to the US and Japan.

“We will just stop exporting our products to Europe. According to our product plans, most are to be exported to the US since the EU has been speaking about the EBA matter for some time,” he said.

Neither a representative of the Garment Manufacturers Association in Cambodia (GMAC), Ministry of Labour and Vocational Training spokesman Heng Sour, nor government spokesman Phay Siphan could be reached for comment on Thursday.

Former Cambodia National Rescue Party lawmaker Ou Chanroth said the EC’s decision to suspend just one-fifth of Cambodian exports to Europe represents EU’s gesture of understanding for the Kingdom.

“If affecting workers, it doesn’t affect them too seriously. I see that they [EC] chose only some trademarks [goods] rather than general goods.

“I think that it is the strategy and the policy of the European Community as we didn’t change our attitude. They will still put pressure little by little. So, they allow us to prepare ourselves,” he said.

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