The Trans-Pacific Partnership (TPP), a United States-led trade agreement that is still under negotiation, may change the playing field of overseas investors in Cambodia, as Mi-Ho Jon, director general of the Korea Trade & Investment Promotion Agency worried in a recent interview with Post Plus.
After the bankruptcy of Lehman Brothers in 2008, which induced a financial crisis that swept through global financial markets, South Korean investment in oversea markets including Cambodia was put on hold.
But with the global economy’s recovery from the crisis and renewed investment, many Korean investors have returned to Cambodia to develop local industries including the garment sector in Cambodia.
Seeing large potential in Cambodia, South Korean investments in the country reached $4.46 billion as of March 2015, making South Korea, the second largest investor in Cambodia after China, according to CDC statistics.
In addition to Cambodia’s low labour costs, Jon said investors also enjoyed tax incentives as Cambodia is one of the beneficiaries of the EU’s Everything but Arms scheme. The EBA is a trade regime installed to support the 49 least developed nations in the world, including Cambodia, with duty free access to the EU for exports of all products, except arms and ammunition.
Vietnam, however, may have an edge over Cambodia upon the imminent completion of the Trans-Pacific Partnership, as Vietnam is among the 11 countries in Asia and the Pacific benefitting from the deal. At the same time, Vietnam has, in principle, inked a trade agreement with the European Union, which will be finalised soon. With tax incentives for trade with Europe and the United States, investors might choose Vietnam over Cambodia in manufacturing of goods for export.
According to Jon, because of Vietnam’s future trade agreements, Cambodia may become less competitive, and Korean investors might be reluctant to make new investment.