Cambodia-China Free Trade Agreement: Measures must be taken for Cambodian Businesses to Benefit

Chinese President Xi Jinping (R) meets with Cambodian Prime Minister Hun Sen in Beijing, capital of China, May 17, 2017. (Photo: Xinhua)
  • Phoung Vantha and Romdoul Chetra
  • July 30, 2020 8:04 AM

According to Cambodian experts, Cambodian businesses may not be able to compete due to higher production costs

PHNOM PENH--The president of the Royal Academy of Cambodia on July 28 warned that the Cambodia-China free trade agreement (FTA) could turn Cambodia into a dumping ground for Chinese products if the country is not prepared to face Chinese competition.

Speaking during a roundtable discussion on the Cambodia-China FTA, Sok Touch said that, while the agreement will benefit both countries, Cambodia must also be well-prepared if it is to take advantage of that agreement. Otherwise, the country may become a dumping ground for China.

"I want to stress that we cannot compete with them if all the ministers do not sit together to discuss, do not look into electricity, telecommunications, agriculture [and see if] we can find common ground,” Touch said. “Our electricity is 750 riels [$0.19]—I run a milk company, I know! As our neighbors [pay] 150 riel [$0.19], how to compete with them?”

Cambodia needs to prepare and address a number of issues ranging from transportation and vocational training to electricity prices and corruption, Touch said, and especially strengthen local investment and improve farmers’ methods and techniques.

If production and shipping costs are high in addition to under-the-table administrative costs, it may not be possible to sell a product at the lowest price, Touch said,  even though the lower the cost, the higher the chances of competing on the market.

Touch urged the ministers of all the relevant ministries and institutions to find solutions and encourage the private sector to increase investment and domestic production. He also appealed to provincial governors to help set up community groups and a system between provinces to support and help boost production, and also to help stabilize agricultural markets to benefit farmers.

Ky Sereyvuth, director of the Royal Academy of Cambodia's Center for China Studies, said that Cambodia has to strategize and get ready to deal with the situation as Chinese vegetables are less expensive than local ones and, as a result, Cambodia may become a major market for vegetable products from China.

According to Sok Sopheak, secretary of state at the Ministry of Commerce, Cambodia will be able to export more than 340 products to China duty-free now that the free trade agreement (FTA) has been finalized. Cambodia’s rice, vegetables, fruit, fish and meat will be eligible for tax-free exports to China as of next year, he said without giving more details.

Sopheak also stressed that the trade agreement will not affect small and medium-size enterprises (SMEs) and the agricultural sector, and will in fact strengthen SMEs' ability to compete.

Details regarding the Chinese goods and products that will be included in the FTA or how much import duty Cambodia will lose as a result have not yet been released.

In 2019, Cambodia exported $1 billion’s worth of goods to China, whereas Chinese imports to Cambodia were worth $7 billion. The two countries aim to reach $10 billion in annual trade by 2023.

Chheng Kimlong, senior researcher at the Asian Vision Institute—a think-tank based in Cambodia—said that Cambodia needs to improve both technical skills and productivity in order to draw any benefit from the FTA with China. The government also needs to improve the investment climate and laws to attract more foreign and domestic investors, he added.


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