Cambodia must move fast to make the most of the recent tax reform in the US and its ongoing trade dispute with China, said a high-ranking official at the Ministry of Economy and Finance.
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Vongsey Vissoth, Secretary of State at the ministry, speaking to reporters during ADB’s annual meeting in Manila last week, said the tax reform in the US, a sweeping overhaul of the country’s tax system approved by the Senate in December, could be of great help to the Cambodian economy.
“An IMF representative just told me that the tax reform in the US will boost its economy and create many new opportunities for Cambodian exporters. It could help us grow our GDP by as much as 0.5 percent,” he said.
“A buoyant economy in the US multiplies opportunities for exporters in Cambodia,” he said, adding that the US has recently extended its GSP programme, which grants Cambodian companies access to duty-free privileges when exporting to the US.
The ongoing US-China trade dispute also presents a tantalising opportunity to increase exports to the US, the biggest market for Cambodian garment and footwear products, Mr Vissoth said.
“China will fight back by creating new tariffs for US products, primarily for agricultural goods. This will allow us to boost exports to China.
“As barriers to export to the US increase in China, investors from the US will turn to other countries to invest and to set up factories from which they can import. Cambodia must take advantage of this situation.
“It is a big opportunity that we can only maximise if we are willing to undergo deep structural reforms,” he said, adding that the kingdom needs to improve its competitiveness by reducing the cost of electricity and transportation, as well as streamlining and facilitating trade procedures and diversifying its industry.
The so-called ‘trade war’ between the US and China continues with no end in sight, said Mr Vissoth.
A US delegation visited Beijing last week to discuss trade with Chinese counterparts. Both sides have imposed tariffs on each others’ goods, though they’re yet to be implemented.
Kaing Monika, deputy secretary general of the Garment Manufacturers Association in Cambodia, told Khmer Times that he expects the US trade reform to have a significant impact in Cambodia.
“I think the US-China trade war will not have a big effect on our exports. However, the improvement of the US economic situation will definitely help us. It is a fact that reducing taxes increases disposable incomes which, in turn, supports retail sales,” he said.
“There is little doubt that prospects are bright for travel goods exports after the GSP programme was extended,” he added.