Vietnam and Cambodia have agreed to enhance their economic cooperation and intend to raise bilateral trade to $5 billion in the coming years, writes Vu Quang Minh.
The Cambodian economy is now on the right path to strong economic growth for the period between 2018 and 2019.
The Asian Development Bank (ADB), the International Monetary Fund (IMF) and the World Bank (WB) said the Cambodian Economy is predicted to grow at a rate of 6.9 or 7 percent in 2018 and 2019.
The country’s economic outlook for 2018 is marked by solid growth in the country’s main drivers of economic growth, namely the construction sector, the garment and footwear industry, strong foreign investment, sustained growth in the number of international tourist arrivals and buoyant domestic demand.
According to the latest figures put from the Ministry of Economy and Finance of Cambodia, the country has undergone impressive economic performances over the last few years. Its gross domestic product (GDP) rose by nearly $7 billion from 2013 to 2017, reaching $22.1 billion last year and it is likely to reach $24.5 billion by the end of 2018.
Thanks to strong economic growth, income per capita has risen remarkably from $393 in 2013. It expanded in 2017 to $1,435 and is expected to rise to $1,568 by the end of 2018.
Other factors include declining inflation, which slowed down to 2 percent in January; a stable current account deficit, which equalled 8.4 percent of GDP in 2017; as well as growing foreign reserves, which at the beginning of 2018, reached $8.9 billion. External debt remained relatively low at just $6.6 billion, or about 30 percent of GDP, at the end of 2017.
Public expenditure this year will amount to $6.4 billion, an increase of 15 percent over the year 2017, with the government planning to collect more than $4 billion in taxes, according to the national budget for 2018.
In the medium term, the Cambodia economy is still enjoying a large flow of foreign and public investment in infrastructure. This will greatly help promote output by boosting aggregate demand and expanding the productive capacity of the Cambodian economy.
However, according to the recent report by IMF, economic risks remain for the Cambodian economy and they include the erosion of export competitiveness due to rapidly rising real wages, a build-up of vulnerabilities from a prolonged real estate and construction boom, and periodic jolts of protectionism and escalating trade disputes between the world’s largest trading countries.
So, in order to maintain strong economic growth it is essential that Cambodia invests more in education and skills training while addressing the constraints facing small and medium businesses. It is also important that Cambodia can diversify growth and create more jobs by reducing the costs of company formalisation, operation and financing.
Cambodia-Vietnam economic relations
Vietnam and Cambodia are neighbouring countries with long-standing relations. Despite countless difficulties and challenges faced over the past five decades, the solidarity, traditional friendship and comprehensive cooperation between Vietnam and Cambodia have continually been reinforced and developed.
Economic cooperation between the two countries has yielded good results over the recent years. The bilateral trade turnover between Vietnam and Cambodia in 2017 reached about $3.8 billion, up more than 25 percent over 2016.
Of the total, Vietnam’s export turnover to Cambodia was $2.77 billion, rising 26.1 per cent against the previous year. Vietnamese key export goods to Cambodia last year included steel and iron products ($521 million, up 69.7 percent year-on-year) and oil and petrol ($375 million, up 30 per cent year-on-year).
Meanwhile, Vietnam’s imports from Cambodia reached $1 billion, a year-on-year increase of 40.6 percent, mainly with timber and wood products ($214 million, up 16.9 per cent), cashews ($168 million, up 46 percent) and rubber ($138 million, up 64 per cent).
The leaders of Vietnam and Cambodia have agreed to enhance the comprehensive co-operation between the two nations. As a result, they intend to raise the bilateral trade value to $5 billion in the coming years.
With regards to investment, up to now, Vietnam has had 196 investment projects in Cambodia with a total registered capital of $2.94 billion, primarily focusing on agriculture and forestry. Vietnam is also among the top five countries with the highest level of foreign direct investment (FDI) in Cambodia. Cambodia, in turn, is running 18 projects in Vietnam with a total investment capital of $58.12 million.
There were about 835,000 Vietnamese tourists visiting Cambodia in 2017, making Vietnam the second-largest source of tourists to Cambodia after China.
In 2017, Vietnam and Cambodia signed the Framework Agreement on Vietnam-Cambodia Economic Connectivity and the two sides are working on the details of the Master Plan.
On March 31, Vietnam and Cambodia also signed the Double Taxation Avoidance Agreement.
The two countries are also finalising the negotiations to sign the Agreement on Border Trade. Furthermore, the recent 16th Meeting of the Vietnam-Cambodia Joint Committee on Economic, Cultural and Scientific-Technological Cooperation took place in Hanoi on May 17 with great success. It laid out specific orientations for multi-faceted cooperation between Vietnam and Cambodia, especially in economic sectors.
I do believe that these economic frameworks will greatly help facilitate and further promote economic relations between the Government of the Socialist Republic of Vietnam and the Royal Government of Cambodia, especially in the fields of trade, investment, tourism.
H.E. Vu Quang Minh is the Ambassador Extraordinary and Plenipotentiary of Vietnam to Cambodia.