News Analysis: Benefits of CCFTA Need Concerted Effort To Bear Fruit

AKP Phnom Penh, August 02, 2020– The Cambodia-China FreeTrade Agreement (CCFTA) expected to be inked later this month will send a powerful message to friends near and far that Cambodia has expanded its greater market to the more than 1.3 billion strong Chinese market. It has great potential but just a legal frame work alone is not enough to maximize the benefits of the deal, given Cambodia’s resources are limited in terms of human resources, technical and financial aspects, in addition to our infrastructure and logistic areas.

One must look into the different aspects needed to make it work—although the country has great potential in agriculture and others—when putting such deal into practice in a competitive and globalized world.

Cambodia and foreign investments, not just limited to China, must join hands to translate this opportunity into reality for mutual benefit. Foreign investors, such as China, may look totransfer of technologies and know-how when implementing the deal, this will help Cambodia to improve its productivity, itsvalueadded products, improve efficiency in manufacturing, services and agriculture, among factors.

Not a Bed of Roses

Even with the trade deal in place, it is not going to be a bed of roses for tens of hundreds of small and medium sized enterprises, SMEs, in Cambodia. These have to be recognized and get qualifications before securing financial support from different sources for their business operations. This will require another government’s legal, technical support and maybe loans as well, beyond what our own government can provide.

The country currently has nearly 38,000 registered companies and nearly 10,000 enterprises both local and foreign. I hope they are ready, or preparing, to take advantage of the trade deal; otherwise they must do so soon because the agreement is expected to be implemented by early 2021.

Companies operating in Cambodia need to improve in many ways, especially in the areas of human resources, to deal with digital business operations as the government shifts to the digital economy. The country’s Industrial Development Policy (2015–2025) has been put in place to address the coming challenges, promote productivity and find markets for its products, such as rice, rubber, and others.

Cambodia’s main potential is rice with commodity planting of 4 million hectares nationwide. It also has 6 million tonnes in paddy rice (or 4 million tonnes in milled rice) a year in surplus from domestic consumption.

Cambodia’s stakeholders, such as the World Bank, Asian Development Bank, Education and Labor Ministries must play their parts in developing Cambodia’s human capital and help companies achieve their goals and objectives in global trade.

However, the coming trade deal is another plus to the existinglegal framework of the ASEAN-China Free Trade Area (ACFTA) established in 2010, paving the way to the export oftens of hundreds of goods to China. Such an agreement also falls in line with the framework of the World Trade Organization (WTO) of 164 members, which Cambodia joined in 2004.

Cambodia has benefited from the ACFTA but not to the great extent, since her resources are limited. That explains theCambodia-China trade value of $8 billion, of which Cambodia’s exports were $1 billion a year. An even more positive prospect is dangling before us and the trend will contribute to developingCambodia’s economy with more jobs creation, imports of know-how and technology from China and elsewhere will help Cambodia economy to leap-frog the challenges it faces.

Although Cambodia has potential from rice to sugar, rubber, black pepper and fresh-water fish to livestock, and other products, Cambodian officials and experts have expressed to me their concerns, that Cambodia needs to work as cluster when it comes to commodities, such as rice, for export, to ensure good quality, and competitive prices.

This nation needs more seeds, silos and better equipped rice mills for rice processing, packaging, and logistics, and so forth. Although Chinese experts have recognized more Cambodianrice processing mills but Cambodia’s Rice Federation needs to be more oriented towards working as a cluster, and that will help to boost exports to China where you have a market of billions of consumers.

Cambodia has yet achieved its target of exporting one million of milled rice 2019-2021.

Let us keep our fingers crossed, although we cannot achieve everything overnight. The government does not just stand and watch and that can be understood when the government, after wrapping up the trade deal with China, took measures to provideloans and supporting other technical and legal assistance for local companies, Small Medium Enterprises (SMEs), so that they can take advantage of exporting 340 items to China, ofwhich 95 per cent are now tariff-exempt. The remaining 5 per cent will be exempted over the next five to ten years.

This week, the government announced that it has allocated $500 million in loans, and of that $300 million will be provided for financing support and $200 million will go for credit guarantee projects.

Cambodia, which is still an export oriented country, must improve its productivity, quality, packaging, valued added goods, along with a cluster community of production, otherwise she will not get much profit from the trade deal.

The agreements can show us the way but we must be committed and step up to the plate if we are to benefit.

Today, Cambodia can export more than 10,000 items to Chinawhile China can export 8,000 items to Cambodia. So far this year, Cambodia has exported more than 300,000 tonnes of milled rice to China, less than its target of 400,000 tonnes.

Two-way trade value with China alone was more than $8 billion in 2019 from $7 billion in 2018.

Phnom Penh, with the coming trade deal, hopes to increase exports to China by as much as 25 per cent a year. But, this is just a calculation alone and the reality will depend on the actual efforts with the strong commitment of Cambodia, China and others.

The bilateral trade value expects to reach $10 billion by 2023.

Fruitful Economic Diplomacy

It is fair to say that the coming free trade agreement expected to be signed in Beijing by the two commerce ministers before mid-August 2020, presided over by each country’s leaders, will beanother historical diplomatic milestone between the two nations.

Such an event would not happen without the strong political and diplomatic moves by Prime Minister Hun Sen and Chinese President Xi Jinping and their teams since early this year.

The whole trend also reaffirms the two nation’s commitmentdiplomatic ties in place since 1958. They reached acomprehensive strategic partnership in 2010 and nine years later inked a 2019-2023 action plan to build the two-country’s shared future. It covers a number of measures in the areas of economies, people-to-people relations, politics, security and mutual cooperation.  

Cambodia’s foreign policy maintains its friendly posture with countries that respects each other’s independence, sovereignty and equal footing. This South-East Asian nation goes for wealth, not war, because she has endured more than enough of fighting and wars one after another which brought nothing good for the country; but tears and blood, massive destruction of national assets, and infrastructure. It went on from the late 1960s till late 1998, the year that Premier Hun Sen championed the win-win policy that ended the Pol Pot-led Khmer Rouge political and military organization, notorious for its killing fields.

Khmer’s Ancient Smile

Some wrongly interpreted that with the CCFTA, Cambodia put aside its ties with the EU and embraced China. That is a wrong perception. Since day one, Cambodia has made it clear that she wants to make friends near and far for mutual interest base on equal treatment and respect for each other’s independence and sovereignty. Our foreign policy is open and friendly to everyone who wants to make friends with us. But if you do not want to follow those simple rules of engagement, there is nothing we can do. Recalling that Cambodia’s Prime Minister Hun Sen has said repeatedly that the U.S., China, Korea, Japan, the European Union, Arab Emirate bloc, others are Cambodia’s friends. Our ancient smile of welcome remains with us, proven by the fact that for 900 years, the smile of Angkor at the ancient Angkor complex, in Siem Reap province, that had inscribed onto the World Heritage Site since 1992.

Working as a spokesman, I do get inputs from various sources on different topics as much as possible, although I do not talk much; but I keep penning certain pieces so that the whole world can see a clearer picture of the goodwill of the Royal Government of Cambodia in many ways, starting from the national interest and contributing protecting global peace and development.

Cambodia is a member of the United Nations, the World Bank, and the International Monetary Fund, and the Asian Development Bank (ADB), ASEAN, and other key organizations.

That is to say that the government, under the great leadership of Prime Minister Hun Sen and his team, has put the interests of the country and her people before their own.

Conclusion:

China’s government, others, may also look to support Cambodia in the area of human resources, technology, and other related fields, given the fact that Cambodia’s logistics, rice warehouse/ facilities and infrastructure that help to reduce production costsare yet there. This is needed in today’s competitive world. Thus, support from China and others will enable both sides to take greater, if not full, advantage of the trade deal.

I also see that the trade agreement is considered as part of the Belt and Road Initiative that both countries are committed to, to realize joint dreams and a shared future.

The benefits of the CCFTA will not drop like ripe mangoes from the tree, we have to be pro-active, and prepare, and shake the tree.

By Ek Tha

Spokesman of the Council of Ministers, advisor to the Ministry of Information, Standing-Vice Chairman of the Royal Government Spokesperson Unit.