After its conclusion on February 3, 2021, the Cambodia- Korea Free Trade Agreement (CKFTA) has finally come to the official signing ceremony held virtually on October 26, 2021.
The CKFTA, itself, has the purposes to liberalise the two countries bilateral trade and enhance the economic and social cooperation through reciprocal advantages and understanding of the two nations. Moreover, this free trade agreement will also bind and lay a catalyst pathway for economic recovery that has been impacted by Covid-19 in both countries.
According to Cambodian Minister of Commerce Pan Sorasak, the CKFTA will be beneficial for both the Kingdom and the Republic of Korea as the exports and imports between both nations shall be met with even lower tariffs beyond the existing ASEAN Korea FTA and the Regional Comprehensive Economic Partnership (RCEP).
In fact, Cambodia will lift tariffs on 93.8 per cent of South Korea’s goods exported to the Kingdom while South Korea will cut 95.6 per cent of the tariff-products on goods imported from Cambodia.
In a simple term, under the CKFTA, more than 10, 000 Cambodian products will be duty-free when it is exported to South Korea, making the CKFTA becomes the second bilateral free trade agreement for Cambodia after the signing of Cambodia-China FTA in October 2020.
What does this mean for Cambodia?
After the partial withdrawal of the Everything But Arms (EBA) – the preferential trade scheme set by the EU for 48 least developed nations including the CLMV countries – and amid the growing discontent of the West over Cambodia in the recent years, it is in Cambodia’s best interest to diversify its economic partnership to secure its market liberalisation abroad and ensure the continuous and active flow of supply chain within the Kingdom.
With its goal of becoming an upper-middle income country by 2030, diversifying and strengthening its relations both bilaterally and multilaterally with other countries will not only secure its market supply chain domestically and internationally but it will also foster and develop chances for the country to have stronger political cooperation with its economic partners as well. This will ensure broader investment, inflow of capital, and development from abroad into the Kingdom in the near future.
The CKFTA, in this context, is done at a perfect timing. With the reality that Covid-19 has continued to take a heavy toll on the global ecomomy, the CKFTA will help to revive Cambodia’s economy – which saw growth moderate from 7.1 per cent in 2019 to 2.3 per cent in 2020 according to the Asian Development Bank’s forecast – through the promotion of free trade between both nations creating incentives for foreign investors to look into the Kingdom for investment.
Furthermore, the CKFTA is also done at a time when South Korea is keen to cooperate with Southeast Asian states to reduce its economic and political reliance on China and the US through the New Southern Policy.
According to Oh Yoon-ah, an assistant professor at the Graduate School of International Studies at Seoul National University in South Korea, the New Southern Policy aims to expand Korea’s cooperation with Southeast Asia and India in the trade, investment, and tourism sectors to promote peace, reciprocal benefits, and the people-to-people exchanges as the region was known for its dynamic economy and its striving and large populations.
Therefore, the CKFTA will also provide South Korea’s companies and businesses with a broader market access and a growing labour market with competitive value spelling a win-win outcome for both countries.
However, despite the enforcement of the agreements in the CKFTA, it doesn’t mean that Cambodian goods will flow freely into South Korea. Cambodia’s good exported to South Korea is still under the same quality inspection standards as other products exported and imported into countries around the world.
The hygienic and sanitation standards are the procedures in which every country in the world has differently and Cambodia must be able to meet South Korea’s quality standards. Therefore, Cambodia must improve not only the quantity of productions but also the quality of its products exported to South Korea as well.
Standard certifications such as the Good Manufacturing Practice (GMP), Hazard Analysis Critical Control Points (HACCP), and other certifications must be the priority of Cambodia’s entrepreneurs, businessmen, and agricultural producers to manufacture and produce good quality products that met the requirements for exports.
Hence, the CKFTA can be a signal showing that the Kingdom is willing to cooperate both multilaterally and bilaterally to achieve mutual benefits to boost economic grwoth that has been stifled due to the Covid-19 pandemic.
It also reveals Cambodia’s ambition to diversify and bring its market to a more cooperative trading manner to create a larger pool of supply chain that ensure a non-disruptive flow of goods, and reveal a good timing of free trade agreement establishment which took place at a time when economic revival is needed and the two countries’ political and economic goals are perfectly aligned.
Bunly Ek is a research fellow at the Cambodian Institute for Cooperation and Peace (CICP), focusing on the relations between Cambodia and South Korea.