Participating Of Cambodia In The Regional And International Trade

Participating of Cambodia in the Regional and International Trade Prepared by Chan Bonnivoit for Cambodian Participants in IDLO’ Course Sydney, 07-28/11/2008

TABLE OF CONTENTS

A. B. C. D. E. F.

Introduction Recent economic developments Policy in promoting trade Gains from most open policy Constraints and solutions? Conclusion

2

A. Introduction ƒ Cambodia joined ASEAN (30-04-99) and ASEAN + arrangements ƒ Since 13-10-2004 the Country becomes a member of WTO. ƒ Besides, Cambodia has many bilateral negotiations and agreements. Interest in those agreements is always based on commercial as well as political considerations of all partner’s Countries. ƒ With regard to the above issues mentioned, this paper briefly presents the background, the policy, the commitments, the benefit, and constraints relating to regional and international trade arrangements, and an other trade issues of Cambodia. 3

B. Recent Economic Development

4

B. Recent Economic Development 1. GDP growth rate and inflation rate (%) 16% 14% 12% 10% 8%

GDP Inflation

6% 4% 2% 0% -2%

2000

2001

2002

2003

2004

2005

2006 5

B. Recent Economic Development (con´t) 2. Cambodian real GDP growth by sectors (%) 20%

15%

10%

Agriculture Industry Services Total GDP

5%

0% 2002 -5%

2003

2004

2005

2006 6

B. Recent Economic Development (con´t)

40 31

4100

39 00

3950

39 10

4000

2000

2001

39 35

39 80

4050

40 70

4150

41 10

3. Official exchange rate (Riel/US$)

Exchange Rate

3900 3850 3800 3750 2002

2003

2004

2005

2006 7

C. Policy in Promoting Trade

8

C. Policy in Promoting Trade (con’t) 1. The rectangular Strategy of RGC – The core of the rectangular strategy is good governance focused at four reform areas: ƒ Anti-Corruption ƒ Legal and judicial reform, ƒ Public administration reform, including decentralization and deconcentration, and ƒ Reform of the armed forces, especially demobilization

– The integration of Cambodia into the region and the world is a significant part of the rectangular strategy of RGC. 9

C. Policy in Promoting Trade (con’t) 2.

The Integrate Framework of RGC –

The Integrated Framework (IF) is the outcome of a commitment made by six multilateral Agencies (IMF, ITC, UNCTAD, UNDP, World Bank, and WTO) to coordinate their assistance in the area of trade and investment integration into the global economy among themselves and with other multilateral and bilateral donors.

–

IF came about as a result of the High Level Meeting (HLM) for LDCs organized by the WTO in October 1997 in Geneva.

–

The IF’s strategy must be fully “mainstreamed” in the country’s national strategy for poverty reduction. In other words, the country’s trade sector strategy must be fully support and coherent with national objectives of poverty reduction.

–

In the donor community based in Cambodia, UNDP has taken the lead to ensure effective implementation of IF and coordination among local donors. UNDP-Phnom Penh and the International Trade Center (Geneva) are cooperating and working directly with RGC and others to backstop work in this area.

-

Accordingly, an initial goal of IF in Cambodia is to work with Cambodian stakeholders and develop such a Pro-Poor Trade Sector Strategy. 10

C. Policy in Promoting Trade (con’t) 3.

The Pro-Poor Trade Strategy of RGC –

Preliminary evidence examined suggests that trade is making a significant positive contribution to economic growth and poverty reduction and that such contribution can be further enhanced and provided Cambodia to become proactive in promoting trade for poverty reduction.

–

Regarding this issue RGC established a Pro-Poor Trade Strategy organized around tree basic concepts: ƒ ƒ ƒ

Shifting the balance of policy emphasis from issues of market access and macro-reforms for trade to micro and meso-level issues of supply capacity Focusing strongly on the delivery of capacity-building support at the export enterprise and export sector level; and Stressing the regionalization and geographical decentralization of export business within Cambodia

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C. Policy in Promoting Trade (con’t) 3. Trade Sector wide Approach (SWAp) a.

SWAp is an instrument for better management, coordination and effectiveness of resources. Now RGC is willing to utilize SWAp in the Trade Sector.

b. The Ministry of Commerce stands ready to develop a SWAp in order (3 pillars): ƒ ƒ ƒ

To reform Legal and Institutions, To develop Production and Services Sectors, To build up the Capacity of HR

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C. Policy in Promoting Trade (con’t) 4. Special Economic Zone/Special Production Zone ƒ The main rationale of establishing SEZs is to: – – – – – –

Provide investors with adequate infrastructure and supportive facilities Diversifying the Cambodian economy and promoting export Enhance competitiveness of garment industry and other labor intensive activities Promote agro-industry, food processing Promote assembling industry Promote electronic and electric appliances industries

ƒ The following growth poles have been identified for industrial development:

ƒ

– Poipet and and Koh Kong (at the Cambodian-Thai border) – Bavet and Phnom Den (at the Cambodian-Vietnamese border) – Phnom Penh – Sihanouk Ville Sihanouk Ville port has harbor facilities and “dry ports” which have been

developed to enhance its competitive edge as an international commercial gateway. 13

C. Policy in Promoting Trade (con’t) 5. Integrating Cambodia into the international Community –

–

–

Cambodia’s membership in ASEAN (30-04-1999) and WTO (13-10-2004), as well as cooperation within the framework of the ASEM. Cambodia’s membership in Great Mekong Sub-Region, the Ayeyawadee-Chao Phraya-Mekong Economic Cooperation Strategy (ACMECS) and other Triangular Developments at sub-regional level Integrating Cambodia into the international Community will provide great opportunities to reform the investment and foreign trade regime. 14

C. Policy in Promoting Trade (con’t)

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Cambodia in ASEAN Schedules of Tariff Rate of Cambodia

Country

Industrial and AgroIndustrial Products IL

TEL

Agricultural Products IL

TEL

SL

ASEAN-6

1993-2003

1996-2003 1996-2003

1997-2003

2001-2010

Vietnam

1996-2006

1999-2006 1999-2006

2000-2006

2004-2013

Laos & Myanmar

1998-2008

2001-2008 2001-2008

2002-2008

2008-2015

Cambodia

2000-2010

2003-2010 2003-2010

2004-2010

2008-2017 16

Cambodia’s Tariffs by Product Groups for Accession into WTO

17

Cambodia’s Service Commitments for Accession into WTO ƒ Undertaken market access and national treatment commitments in at least one subsector under each of 11 different service which are communications services, construction and related engineering services, distribution services, education services, environmental services, financial services, health-related services, tourism and travel services, recreational services and transport services. ƒ Allowing foreign firm to operate in the areas of legal services (with some exceptions), accounting, auditing, bookkeeping, banking, management consulting, telecommunication and transport, but some conditions were attached to market access in areas of financial services (banking and insurance) and telecommunication services. ƒ Allowing foreign firms to provide higher education and adult education services. ƒ Reserving part of a market for Cambodian small and medium sized enterprise in areas such as banking, tourism and courier service (tourist guides services; opening hotel market only for hotels of three stars or higher; and allowing foreign supply of retailing services only a small number of specific items or for very large supermarkets or department stores. 18

C. Policy in Promoting Trade (con’t) 6. Bilateral agreement on the promotion and protection of investments between the Kingdom of Cambodia and other Countries. – Already signed: 1. Malaysia 2. Thailand 3. USA (OPIC) 4. China 5. Switzerland 6. Singapore 7. ROK

8. 9. 10. 11. 12. 13. 14.

France Philippines OPEC Croatia Cuba Vietnam Netherlands

15. 16. 17. 18. 19.

Pakistan Austria Australia Indonesia Germany

– In the pipeline: Laos, Myanmar, Czech Republic, Ukraine, Egypt, Russia, PDR Korea, Libya, UK, Algeria and Japan. 19

C. Policy in Promoting Trade (con’t) 7. Trade related to Investment: Investment Protection • • • • • •

Equal treatment of all investors No nationalization adversely affecting the property of investors No price controls on products or service No restriction on foreign equity participation No restriction on foreign convertibility Remittance of foreign currencies abroad

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D. Gains from most open trade’s policy 1. Investment in Cambodia ⇒ FDI in Cambodia (in USD Million) 30 37

3500 3000 2500 2000

Total FDI 83 1 34 2 63

14 5

14 0

19 6

500

16 0

55 4

57 8

1000

61 8

1500

20 06

20 05

20 04

20 03

20 02

20 01

20 00

19 99

19 98

19 97

19 96

0

21

D. Gains from most open trade’s policy (con’t) 1. Investment in Cambodia (con´t) ⇒ Investments by Countries 1994-1st Half 2006 (Million US$) 2,500

59 0 2,

6 95 , 1

1, 35 9

2,000 1,500

20

26 7

500

33 1

9 55

35 7

1,000

Ja pa n

Si ng ap or e

d Th ai la n

EU

SA U

or ea K

al ay si a M

C

hi na

0

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D. Gains from most open trade’s policy (con’t) 2.

Tourist Sector of Cambodia (GATS) •

The growth in tourism has been robust and is a strong contribution to the services sector of the Country. GDP of the services sectors grew at an average of 8.6% over the 2000-2005 period.

•

The number of tourists increased by 35% in 2005 relative to the year before. Tourists from the Republic of Korea ranked first in terms of tourist arrivals.

•

More than 50% of total tourist arrivals to Cambodia are from the Asian and Pacific countries, and about a quarter of the tourist arrivals are from the Europe.

•

The number of Cambodian tourists to the neighbor Countrie Countriess increases from year to year and account approximate at 800,000 persons for last year.

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D. Gains from most open trade’s policy (con’t) ƒ Tourist Receipts

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D. Gains from most open trade’s policy (con’t) 3. Cambodia’s garment exports (million US$)

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E. Constraints ƒ Constraints – Domestic problems relating to factor endowments, structural adjustment, infrastructure, bureaucracy, HR, capital etc. – The capacity of supply – The market access’s issues regarding to ROO, SPS and TBT’s issues – Trade facilitation’s issues – A huge trade deficit with some Countries. 26

E. Solutions? ƒ

Solutions? – – – – – – – –

Better sourcing of raw materials or production of raw materials locally Capacity building and education programs Improving infrastructure and structural adjustment Reducing bureaucracy and corruption Encouraging competition Regional arrangement base on impartiality benefit Further negotiations in WTO to prefer for LDCs Bilateral negotiations and agreements 27

F. Conclusion ƒ

Trade has been increasing, and the process and the results depend on the capacity, ability and feasibility of the Countries concerned.

ƒ

It is difficult to conclude that the trade is either good or bad for the concerned Countries, because the trade is not always fairness or impartiality.

ƒ

In some case, the trade will definitely have both positive and negative impacts. The positive impacts will have to be maximized, and the negative impacts will have to be well managed if the concerned Countries have to benefit explicitly from them. 28

F. Conclusion ƒ

In case of Cambodia as a LDC’s Country, the trade currently sounds a significant meaning for promoting some key sector and the economic development of the Country, even though the Country has a limitation of the resources concerned to carry out the trade in the impartial balance.

ƒ

The WTO membership of Cambodia, the ASEAN and ASEAN + arrangements create the proper conditions for trade and investment, push for outward-oriented policies to promote efficiency, promote structural reform to encourage domestic competition, and create strong institutions to foster good governance in the Country.

ƒ

The bilateral trade’s negotiations and agreements are certainly also a key instrument in pushing and promoting the key sectors which are recognized by the Country as a significant sectors to encourage its economic growth. 29

sUmGrKuN THANKS YOU

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