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Greater governance needed to maximise the benefits of FTAs

Chhut Bunthoeun / Khmer Times Share:
Chinese Prime Minister Li Keqiang with Prime Minister Hun Sen in early 2018 when the duo held bilateral talks in Phnom Penh. KT/Siv Channa

Local researchers have stated Cambodia will need to make greater efforts in strengthening its governance and capacity for production and exports, in order to enjoy maximum benefits from any Free Trade Agreements (FTAs) that are signed with countries in the future.

The calls come after recent talks over a potential FTA deal between Cambodia and China that is hoped to be signed this year and provide the Kingdom with a wide choice of trading partners.

Lim Menghour, deputy director at the Mekong Centre for Strategic Studies at the Asian Vision Institute – an independent think tank based in Phnom Penh – said improved regulation and governance are required to enhance the quality of Chinese investments and ensure fair trade between both countries.

“Trade and economic deficits, reduced tariff revenues, excessive influx of Chinese products into the Cambodian market and the unsustainable exploitation of natural resources may put Cambodia in a disadvantaged position,” he said, adding that a developing country such as Cambodia needs to be well-prepared to attain maximum benefits from any trade opportunities and to minimise risks from any possible fallouts that the Kingdom may face.

He also believes that the business community here needs to make stronger connections that would allow Cambodia to enjoy more advantages from special trading preferences.

“Cambodia has faced challenges in doing direct trade with China without passing through Chinese middlemen. For instance, when Cambodia receives rice quotas from China, its businessmen often end up making deals at the mercy of Chinese traders,” Menghour noted.

To overcome such challenges, Menghour suggested the government needs to consider enhancing its governance and regulatory frameworks to improve the quality of Chinese investments coming into the country, especially China’s export-oriented investment project and to promote mutual interests based on fair trade, while the business community needs to be more united in order to maintain its competitiveness.

“More financial support and capacity building programmes for the Cambodian entrepreneurs are needed. The local government needs to create a business ecosystem to support the local Cambodian entrepreneurs

and to help them grasp the opportunities deriving from the Cambodia-China FTA,” he added.

Pan Sorasak, Minister of Commerce and the government trade negotiator, recently said doing free trade with potential partners is what the government has outlined in its “Rectangular Strategy-Phase IV”, which means the government is already joining the trade deal with potential partners, especially China.

“Having special trade deals will also help Cambodia to move forward. We need to sharpen our capacity building, integrating into the regional and global economy.

This economic integration is aimed at strengthening and widening the market access for our exports based on free-trade agreements rather than rely on bilateral trade exemptions that are easy to lose in one day,” he said.

Lim Heng, vice-president of the Cambodia Chamber of Commerce, told Khmer Times yesterday it seems to be impossible when it comes to having a fair trade, arguing that Cambodia will gain considerable benefits.

“When we talk about FTA, it is not about fair or unfair trade. For a developing economy such as Cambodia, we need such free-trade agreements to boost our exports and lure more investments,” he said.

He noted that more human resources with a well-educated workforce, especially in technology, are needed to integrate the country’s economy when conducting a trade deal, while small and medium size and enterprises (SMEs) need to sharpen up their products to maintain their competitiveness.

Heng said the recent launching of the state-run SME Bank is hoping to help boost the local SMEs so that they can gain more opportunities with any future trade deals.

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