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Cambodia’s economic diplomacy key to overcoming global turbulence

Lim Menghour and Sovan Piseyrattanak / Share:
KT/Chor Sokunthea

The global economy and multilateral trading system have been under mounting pressure due to the rise of unilateralism, protectionism, isolationism, and Sino-US trade and technological war together with the Covid-19 pandemic. Similar to other countries, Cambodia is prone to these risks and their adverse impacts. While still struggling to cope with these issues, Cambodia has to face additional hardship resulting from the EU’s recent decision to withdraw partially the Everything-But-Arms (EBA), which would hit hard the country’s garment and footwear sectors. Tens of thousands of factory workers would be vulnerable to job and income losses.

In this context, economic security has become of paramount importance for the Kingdom.

Cambodia must build a more resilient economy and social system that can effectively deal with crises. Henceforth, the Royal Government of Cambodia (RGC) has identified economic diplomacy as one of the core components of the whole-of-government approach to expand opportunities and advance competitiveness.

In light of this, this article aims to illustrate the notion of Cambodia’s economic diplomacy and the challenges as well as opportunities arising from this initiative. It also offers policy recommendations for the successful implementation of economic diplomacy.

 

What is Cambodia’s Economic Diplomacy?

Economic diplomacy is an integral part of Cambodia’s foreign policy, focusing on economic security and prosperity. In other words, it incorporates economic aspects into foreign policy strategy through state-led diplomacy mechanisms and platforms to advance and maximise national economic interests via collaboration and partnership with national and international agencies/institutions as well as state and non-state actors across the world (MFA.IC 2021). It is also considered as a crucial tool for Cambodia to integrate itself into the region and the world through bilateral and multilateral cooperation so that the Kingdom can diversify its sources of growth, amplify economic potentials and obtain advantages of arising opportunities.

If successfully implemented, economic diplomacy will offer Cambodia an economic means as leverage in international negotiations. It will also enhance national prosperity and economic power as well as increase the nation’s political stability. Opportunities at the outset, economic diplomacy will provide Cambodia with more options and platforms to foster greater international engagement with major economies. It is worth mentioning that Cambodia has recently signed Cambodia-China Free Trade Agreement (CCFTA), which is perceived as a means to diversify Cambodia’s market and to reduce its over-reliance on the traditional export markets of the United States and the European Union.

The CCFTA offers Cambodia, among other benefits, more opportunities to promote and expand its exports, including agricultural and fishery products, innovative and value-added products as well as many other goods to China, the world’s largest market with a population of 1.4 billion. Besides, economic diplomacy will encourage Cambodia to reinforce and expand its engagement with other major economies such as South Korea, the United Kingdom, Japan, India, Mongolia and the Eurasian Economic Union.

All of them will potentially increase Cambodia’s export. Consequently, it will enhance Cambodia’s economic development in trade, investment, business, tourism, education and technology. Simply put, economic diplomacy could eventually modernise the country’s exporting industries, which could attract more foreign companies to use Cambodia as manufacturing sites for exports. Those companies could provide skill-trainings for local labours and especially technology transfer, all of which act as catalyst for the diversified national economy.

Moreover, the successful implementation of economic diplomacy will raise Cambodia’s reputation worldwide. As a fact, Cambodia will be able to produce and export more Cambodian brands to the international markets, thus boosting the Kingdom’s profile abroad. For instance, Kompot pepper, a renowned product awarded the EU’s Protected Geographical Indication, and other cuisines such as Khmer noodle and appetisers will be more widely known and promoted in the international markets. Through economic diplomacy, Cambodia could also further promote its rich culture, tradition and custom to world. For instance, the Kingdom’s major world heritage sites, namely Angkor Wat and Preah Vihear Temple, will gain more global attention.

Furthermore, economic diplomacy is an important vehicle enabling Cambodia to achieve its development vision as a developed country by 2050. Cambodia is currently a lower-middle income country with its gross national income (GNI) per capita rising from 290 USD in 1998 to 1,380 USD in 2018 (ADB 2019). The RGC aims at transforming Cambodia into the upper middle-income country by 2030 and a high-income nation by 2050. Under the framework of economic diplomacy, the RGC will carry out comprehensive and robust structural reforms and economic diversification that will sustain the economic growth, dynamism and prosperity of the Kingdom.

 

Challenges

To effectively implement economic diplomacy strategy, Cambodia needs to address a few main challenges. Firstly, as the country has just promoted the concept of economic diplomacy in the last few years, its diplomats still lack necessary skills and financial as well as material resources to implement the economic diplomacy strategy successfully. Under the economic diplomacy framework, the diplomats are expected to play a vital role, in addition to their traditional political role, as economists, business facilitators, and promoters of culture and tourism of the Kingdom.

Secondly, there is a lack of a mechanism to strengthen public-private partnership to implement the economic diplomacy. The engagement between the public and the private sectors in both Cambodia and host countries is of profound significance because it will cultivate goodwill and enhance trust among all relevant stakeholders, which will serve to promote the common interests between Cambodia and other countries.

Thirdly, there is an institutional challenge to be addressed. As a fact, various government’s ministries have thus far been involved in economic diplomacy at different levels. However, their involvements are still inadequate, resulting from the varying levels of commitment and conflict of interests. In other words, there is a lack of an effective coordination mechanism among relevant institutions to execute the economic diplomacy strategy.

 

Policy Recommendations

To realise the full potential of economic diplomacy, Cambodia’s diplomats and relevant stakeholders should play active roles in promoting the country’s products and services abroad.

As a fact, the diplomats should serve as salesmen, investment and tourism promoters, market researchers, business facilitators, and agents of globalisation, given their direct involvement in the creation, development and regulation of markets and capital through trade and finance negotiations. To do these tasks, Cambodian diplomats must be equipped with adequate information and knowledge of economic diplomacy and other related skills such as public communication and negotiation skills, investment and tourism promotion, digitalisation and analytical skills.

In this case, there is a need to develop a concrete concept note or standard policy paper on Cambodia’s economic diplomacy to be distributed to the diplomats, government officials and other relevant stakeholders, including the private sector and civil society. To implement the policy effectively, clear guidelines and concrete actions are needed so that Cambodian diplomats, particularly those posted at diplomatic missions overseas, can fully comprehend and execute the policy. So far, not many concrete actions have been taken to advance Cambodia’s economic diplomacy due to the absence of clear foreign policy guidelines and the lack of financial and human resources to support Cambodia’s diplomatic missions abroad.

Besides, the government should establish a comprehensive national policy on economic diplomacy that involves all relevant institutions and the private sector in Cambodia. The Ministry of Foreign Affairs and International Cooperation should assume the role as a coordinating body working in collaborations with other relevant ministries, institutions, and Cambodia’s diplomatic missions abroad to increase the country’s economic opportunities. In addition to the national policy, a centre responsible for disseminating business information should be established to provide essential information on such issues as overseas business regulations, opportunity, issues, and risks. The centre should also be responsible for Cambodia’s product exhibitions abroad.

In this context, the country’s overseas diplomatic missions should work to obtain adequate information on foreign markets, their regulations and other vital findings to contribute to the promotion of Cambodia’s economic development.

Furthermore, Cambodia’s representatives in foreign countries, including Embassies and Consulates, have to foster a favourable and conducive environment for business community engagement between Cambodia and the host countries. Doing this will ease the process and other related procedures for the cooperation between all stakeholders. Hence, the frequent meetings or contacts between the two counterparts may be of vital importance.

However, in places where there are no Cambodia’s Missions, the Cambodian diaspora communities over there should be the key player in connecting with the business communities. In this regard, Cambodian entrepreneurs will be able to receive necessary information and facilitation to minimise business risks while boosting trading and business activities.

Last but not least, Cambodia should encourage active involvement from the private sector. The country’s business community and entrepreneurs should be more united among the business circles themselves and with the public sector to be more proactive in product innovation, market research and data analysis to stay competitive in an increasingly unpredictable marketplace. Their unity will serve as a firm foundation for Cambodia to increase exporting its products and services abroad. Practically, the implementation of the economic diplomacy requires high political will and commitment, enthusiastic participation and earnest efforts from all relevant government institutions and other stakeholders, particularly the private sector, to collectively address the challenges and achieve the great economic success that will define Cambodia’s international role and reputation.

 

Conclusion

Economic diplomacy is regarded as a vital pillar of Cambodia’s foreign policy that aims to transform the external environment into opportunities for national development. It will foster greater international engagement between Cambodia with other major economies, while elevating Cambodia’s reputation in the world. It will also be a policy tool to mobilise trade, attract investment and promote tourism to transform Cambodia into a developed country by 2050.

However, to successfully implement economic diplomacy, Cambodia needs to fully prepare itself to address the challenges and capitalise on the opportunities arising from economic diplomacy by equipping its relevant stakeholders, including the government, public and private sectors, with the necessary knowledge and skills related to economic diplomacy. The country also needs to strengthen public-private partnership and build an effective cooperative framework with all relevant institutions/stakeholders. The public sector will be the primary coordinator and implementer of Cambodia’s economic diplomacy while the private sector will be the active participants in this scheme.

 

Lim Menghour is Deputy Director of Mekong Centre for Strategic Studies (MCSS), Asian Vision Institute (AVI) and SOVAN Piseyrattanak, is a Research Fellow, AVI. The opinions expressed are the author’s own and do not reflect the views of the Asian Vision Institute.

 

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