With China pledging to help Cambodia should the EU withdraw the Kingdom’s access to its “Everything But Arms” (EBA) scheme, analysts are questioning to what extent it would be able to do so.
Wang Huning, a member of the Communist Party of China’s Politburo Standing Committee and Secretary of the party’s Secretariat, told Prime Minister Hun Sen on Saturday that China will help Cambodia with all problems, including those arising from any withdrawal of the EBA.
China’s commitment came during a meeting between Hun Sen and Wang on the sidelines of the just concluded second “Belt and Road Forum for International Cooperation” in Beijing.
“Wang Huning told Hun Sen that the Chinese side has studied the issues arising from the possible withdrawal of Cambodia’s access to the EU’s EBA scheme and found no serious impacts."
“China will find different ways to help Cambodia,” said Kao Kim Hourn, delegate minister attached to the prime minister on Sunday, Agence Kampuchea Presse reported.
The EU in February announced it had launched the official EBA withdrawal process for Cambodia, claiming serious human rights violations.
The EU said exports of textiles and footwear, prepared foodstuffs and rice, and bicycles represented 97 per cent of Cambodia’s overall exports to the 28-nation bloc last year.
It said out of total exports of €4.9 billion (around $5.47 billion), 99 per cent was eligible for tariff-free import into the EU under EBA.
During a meeting with Chinese Prime Minister Li Keqiang on Saturday, Hun Sen thanked the Chinese government for expressing its interest in helping Cambodia in the event that the EBA is withdrawn.
He urged Li to encourage Chinese companies to invest and trade with the Kingdom, and open the Chinese market to take in Cambodian products.
“Hun Sen will continue to carry out internal reforms more deeply to accelerate Cambodia’s economy,” a post on the prime minister’s Facebook page said on Monday.
Hun Sen also requested Li to help in the development of Preah Sihanouk province, especially in the supply of clean water and rural development in order to make it “a role model of the Belt and Road Initiative”.
“[Li] said China has a clear will in helping Cambodia, particularly regarding Chinese companies investing in the Kingdom. The Chinese government will encourage Chinese companies to increase production chains in Cambodia."
“[Li] stressed that no matter what happens, nothing can split the strong friendship between China and Cambodia, and China will help Cambodia in all sectors,” Hun Sen said.
Kohe Hasan, a partner at Singapore-based international law firm Reed Smith with experience in emerging markets such as Cambodia and Sri Lanka, said the EU is Cambodia’s largest export market, with it accounting for around $5.8 billion a year.
To minimise the impact of a possible EBA withdrawal, she said Cambodia would need to identify new markets for exports or grow existing ones.
“Asean and China are examples of such markets where, for instance, Cambodia’s agricultural products could be exported to. I also note that the threatened withdrawal of EBA incentives has seen the announcement of a slew of economic reforms which, if fully and properly implemented, will be beneficial for the Cambodian economy in the long term,” she said.
In the same vein, Hasan said Cambodia should also seek Chinese businesses such as bicycle and motorcycle manufacturers to relocate their assembly plants to Cambodia, where production costs were much lower than in China.
“In doing so, Cambodian workers are able to upskill and move away from labour-intensive and low-skilled industries such as garment and footwear manufacturing,” she said.
Kaing Monika, the deputy secretary-general of the Garment Manufacturers Association in Cambodia (GMAC), said China could help the Kingdom in the aftermath of any EBA withdrawal, but to what extent was the question.
“I’m afraid the ability to help is very limited if we talk about a substitute market. The EU as a bloc is still a very big market for us, therefore it is best to maintain it."
“The GMAC is playing its role in making the EU trade Directorate General consider this case very carefully from the labour rights and working conditions improvement point of view,” Monika said.
He said of equal importance were the reform policies being swiftly brought in to improve the competitiveness of the Cambodian economy, with or without EBA.
Political analyst Lao Mong Hay said on Monday that China has all the capacity to help Cambodia.
“But EBA-dependent industries and the people working in them may not have an easy ride on the back of its support, at least in the short run, should the EBA scheme be withdrawn,” he said.