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Kingdom should be wary of EBA loss

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Garment workers sew clothes at Grand Twins International Factory in 2014. post pix

Kingdom should be wary of EBA loss

The EU in October last year announced it would begin a formal procedure to withdraw its Everything But Arms (EBA) trade preferences from Cambodia in response to the Kingdom’s perceived lack of commitment to improve its current human and political rights situation.

Early last month, the EU kicked off a six-month period of intensive monitoring and engagement that could result in the temporary suspension of the Kingdom’s duty- and quota-free access to the EU market. The EBA withdrawal process will take 18 months to be completed.

The EU’s threat to withdraw the EBA trade scheme was made two months after Cambodia’s 2018 general election in which the ruling Cambodian People’s Party (CPP) won all 125 seats in the National Assembly.

This remarkable victory was made possible because the only viable opposition party, the Cambodia National Rescue Party (CNRP), was dissolved by the Supreme Court around eight months prior to the election, criticised as flawed by international observers.

One week after the EU’s announcement, the Cambodian Ministry of Foreign Affairs and International Cooperation responded in a communique, expressing the Cambodian government’s disappointment at the EU’s decision by calling it an “extreme injustice”.

An editorial in the Khmer Times has also argued that the EU apparently practised double standards with Cambodia. The editorial asked why the EU failed to take any similar action against Thailand with respect to the latter’s military coup in 2014 and against Vietnam, which is a one-party state.

Prime Minister Hun Sen, with reference to the EU’s threat to withdraw the EBA, has stressed the importance of defending national sovereignty and resisting foreign interference. He was reported to have said that Cambodia would not be impacted by the EBA withdrawal because eventually the country would lose duty-free access to the EU market as its economy grows.

Hun Sen has even threatened to retaliate against the opposition if the world’s largest trading bloc eliminates EBA from his country. He was quoted saying: “If you [the EU] want the opposition dead, just cut [the EBA]”.

Prime Minister Hun Sen’s recent narratives were seen as his message to the EU and CNRP about his near complete dominance in Cambodian politics.

The Cambodian strongman has been in power for more than 30 years and this year is the 34th anniversary of his rule as prime minister of Cambodia.

He has much first-hand experience of dealing with demands and sanctions as well as leading the country strategically and economically.

So it appears that for him, sanctions from the US and EU are one thing, but consolidation and maintenance of power in Cambodia and in his party in particular are another.

Hun Sen’s tactics of control, coercion, and cooption could not have been more effective. He has risen to power and political dominance in Cambodia due in large part to his strategies and tactical moves.

However, these strategies now leave him with a power paradox. While they enable him to consolidate power and maintain political domination in the country, they also increase his sense of political vulnerability.

His legitimacy crisis will continue to grow and become more evident over time. Cambodia’s strong economic growth, one of the solid bases for his legitimacy, will be affected if the country’s tariff and duty free access to the EU market is terminated.

Cambodia cannot afford to lose the EBA preferences because the country’s garment industry, which gives jobs to around 800,000 Cambodians, is seen as a sector too big to fail.

EBA withdrawal would result in a loss of $676 million annually, according to government estimates. Even worse is the possible collapse of the entire sector as investors have to cope with new tariff barriers in addition to the recent rising real wages in the country.

If investors find it too hard to make profit, they might consider moving to other countries with relatively low minimum wages and trade preferences. The consequences of this scenario would be particularly harmful.

That is, the close to one million garment workers might find themselves unemployed or underemployed in other low-paid jobs, as the country would not be able to absorb them all at once.

In a worst-case scenario, if this speculation is true, street demonstrations and protests by these workers and possibly their family members would inevitably ensue, which may in turn lead to social unrest and violence.

Hun Sen and his ruling elites surely would not want this to happen.

Hun Sen may think he has China’s Xi Jinping to turn to for help, especially in time of economic or legitimacy crisis; however, Hun Sen should not forget that China supports Cambodia because the two countries are in a reciprocal relationship.

The reciprocity of their patron-client relations depends on mutual interests and therefore it cannot be guaranteed that China would not abandon Cambodia in time of desperate need.

Hun Sen should also be mindful of falling into China’s debt trap, not to mention the Chinese sphere of influence. Cambodia’s foreign debt was $7.1 billion in 2017 and about $7.8 billion in 2018, according to a media report.

However, China is Cambodia’s largest bilateral creditor, accounting for 70 per cent of Cambodia’s external debt in 2016. Although the Cambodian Ministry of Economy and Finance has claimed that Cambodia’s public debt is still within safe limits, there should be concerns over Cambodia’s current foreign debt situation.

Relying too much on China’s unconditional aid and adopting a China-oriented foreign policy should not be the way forward for Cambodia.

The country’s perceived drift from democracy is of great concern for both Cambodians and the international community. Cambodia’s decades-long journey from war to peace, in which Hun Sen has played a pivotal role, is applauded and welcomed.

It is no doubt that Hun Sen was one of the architects of Cambodia’s peace and he should be genuinely recognised as a great Cambodian leader who has helped the country move from a low-income country to become a lower-middle income economy.

However, with the EU’s intention to withdraw trade preferences from Cambodia, the country’s future economic outlook appears uncertain.

If something goes wrong, it will be seen as an outcome of Hun Sen’s political manoeuvring and all of his past credibility and achievements may be damaged.

Hun Sen is the leader of Cambodia so he should continue to lead the country to prosperity, democracy, and peace – achievements in which he has taken pride. He has done a lot for Cambodia, but as long as he continues be at the helm of the Cambodian ship, all responsibilities are upon him and his ruling elite, not the opposition party and ordinary Cambodians.

As the leader of a poor country with a small economy that needs international support, Hun Sen should restrain himself from responding harshly to the EU, one of Cambodia’s largest aid donors and trade partners.

Instead, he and his team should begin engaging in dialogue as suggested by the EU and seek ways to bring the issue to the discussion table.

As one of the authors of this article has argued elsewhere, Cambodia has two options to deal with the EU regarding EBA, but a viable course of action should involve dialogue between the two parties to settle their differences.

The right way forward should be discussion and negotiation, not confrontation.

Kimkong Heng is a doctoral candidate at the University of Queensland and a recipient of the Australia Awards Scholarship.

Veasna Var is a doctoral candidate at the University of New South Wales, Canberra and a Senior Fellow at the Cambodian Institute for Cooperation and Peace.


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