Development, Trade and Foreign Affairs
Phnom Penh, 24 May 2016
By Khov Ea Hai
SUBJECT: Kingdom of Cambodia has admitted itself into the regional grouping known as Association of Southeast Asian Nations (hereinafter called ASEAN) in 1999 as the youngest member among the regional family.
SIGNIFICANCE: By the end of the 2015, this regional grouping has marked a milestone achievement in its history to establish an ASEAN Community which comprising of at least three different blueprints, namely ASEAN Political and Security Community, ASEAN Economic Community, and ASEAN Socio-Cultural Community. The end of 2015 does not mean the end of game, but it is just the starting point. For the future direction, ASEAN has essentially visualised for further commitments in the Post-2015 Vision of ASEAN Community throughout the Nay Pyi Taw Declaration  for a more resilient, secure, stable, inclusive and people-oriented community. In this important circumstance for Cambodia as the latest comer, there must be a need to review on its achievements and challenges, and while at the same time, to undertake any necessary means to capture the opportunities by regulating outlooks for the future direction. In this analytical review, it will uphold the rational calculation on the review of its integration into ASEAN. They are the Strategic rationale and Economic rationale.  In this sense, this research attempts to answer: Does the Kingdom lose from its regional integration?
STRATEGIC RATIONALE: After the 1991 Paris Peace Accord,  the kingdom again was re-named by the unification of three among four different political frontiers. In July 1995, Cambodia was permitted to be an observer and it quested for membership a year after. Only after 1998, when the “Win-win” policy  was introduced by Prime Minister HUN Sen, Cambodia has been fully at peace since the remaining group, the Khmer Rouge, was politically integrated into the Royal Government. Only then, Cambodia is now fully at peace. Nonetheless, the national peace and stability alone are not enough in the eyes of leader since from the realist’s perspective, in this anarchy system, state power and power balancing determine the survival of state. Then, there is a need to align itself with the region. Cambodia decided to sign a Treaty of Amity and Cooperation (hereinafter called TAC) with all ASEAN Member States, before questing for ASEAN admission and officially became an ASEAN Member State 1999. The kingdom viewed ASEAN as the strategic opportunity to secure the external security or threat. Under this particular TAC treaty and ASEAN Charter, as ASEAN Member State, Cambodia basically, in principle, have equal say with other ASEAN Member States since the decision-making is essentially laid down on the “consultation and consensus.” On the top of that, every ASEAN Member States are bond by the principle of “non-inference,” “peaceful settlement of disputes,” “non-use of threat or use of forces,” “respect for the independence,” “territorial integrity,” and “sovereignty equity” as stipulated in its charter. From these principles, the kingdom’s national sovereignty and territorial boundaries have been fundamentally preserved since members are binding with non-interference, peaceful settlement of disputes and non-use of forces. While at the same time, these ASEAN principles are quite in line with the spirit of Cambodia’s Foreign Policies bond by its Constitutional Law in Art. 53 stipulated in principle of neutrality, non-alignment, peaceful coexistence, peaceful settlement, non-inference, and not allowing foreign countries to deploy its military bases inside Cambodia’s territory or vice-versa. The only differences between ASEAN principles and Cambodia’s Foreign Policy Principles are the three major principles: Neutrality, Non-alignment, and Peaceful coexistence. In a very conservative concept, neutrality is fundamentally “applicable only in time of war” by declaring itself neutral to armed hostilities as stated in the 1907 and 1912 Hague Conventions, but having “no rules of international law concerning how a neutral state must act in peace-time.” Nevertheless, the neutrality during war or peace-time are necessarily connected as “one principal means of promoting national security” by remaining itself out of the military alliances. Being a neutral state does not require to “refrain from taking a position on political, economic or social issues facing the international community.”  With regard to the non-alignment, it was introduced to Cambodia after the WWII in the context of the decolonizing process and especially after its interdependence throughout Asia and Africa where those leaders held the 1955 Bandung Conference as a movement of neutral states. This conference has marked a significant milestone of Afro-Asian diplomatic relations between the two continents expressing its voices on the common concerns. Meanwhile, the peaceful coexistence has been the universal principles for strengthening the international security by promoting “the basis of equality and mutual benefits” regardless of the differences in terms of ideologies, political and economic systems, cultural aspects, international status, languages and races. The fundamental norm of the peaceful coexistence is the “confident-building among nations.” These three major principles of Cambodia’s foreign policy are the basic characteristics of a national security policy which is not offensive, but defensive in nature and active in cooperation, mediation and peace-keeping.
Does Cambodia benefit from these ASEAN principles? One possibly argues that it is of cause beneficial, while another would also be able to claim it is not fully, but to some certain degree. These ASEAN principles indeed provides Cambodia a cornerstone for consolidating the regional and sub-regional security including Cambodia’s peace and stability if we examine on the condition of Cambodia’s contemporary history from the 19th century. These principles would preserve the kingdom’s independence, territorial integrity, and sovereign equity from gripping by the growing military powers of neighbours from both East and West at the time of kingdom’s declining due to number of reasons arguably. In this point of view, the continuity of engaging and empowering ASEAN principles and centrality are essentially a strategic milestone for Cambodia’s foreign policy from a wide range of policy alternatives, short, medium and long run. Nevertheless, it is also true that there is limitation or certain degree there. Given the fact, in 2008 when Preah Vihear temple was officially recognised as the World Heritage, there was also an issue immediately raised by Thailand that the vicinity of the temple is belonging to Thai, not Cambodia. The tension between the two neighbouring kingdoms, also members of ASEAN family, carried on to escalate and led to physically skirmish along the border. Thousands of people were forced to leave their home for security and safety reasons. However, what are the rationale behind of the event? Some claim that there was mis-interpretation in terms of the result of the ICJ ruling in 1962 on the temple of Preah Vihear. While at the same time, there was also an argument that it was because the coincidence of domestic political rivalry between the Red and Yellow Shirts in Bangkok where they wanted to draw the attention of their population away to the border and forgot about what was happening in capital city. No matter what was the actual calculation, but the major outcome was already effected not only Cambodia and Thailand, but ASEAN as the whole. Due to the non-interference of domestic affairs, non of ASEAN member states dared to intervene or in other word ASEAN has failed to solve its members’ problem when it comes to security matters. Finally, Cambodia decided to ask for UN framework and ultimately ICJ again for re-interpretation on its decision in 1962. Consequently, it has already established the precedented mechanism or norm of ASEAN in practice for any similar conflict in the future as ASEAN itself is not a place for solving its member states’ conflict as reflected through Cambodia and Thailand on Preah Vihear case. Thus, in this connection, there are number of important things to take away: (1). even we are in ASEAN regional grouping, but individual member state’s security is still questionable, (2). state security remains the most highly significant of all and all time, and (3). the concept of balance of power is still put in place for consideration.
ECONOMIC RATIONALE: Does Cambodia really lose from the ASEAN Economic Integration? This question is frequently asked around by number of ordinary people and even scholars. In the closer inspection, it is actually just a concern expressing due to the fear of unprecedented experiences in terms of regional integration process. It is because the regional integration is a gradual process, not all sudden. For instance, to name a few, it has a number of certain binding schedules coming from normal to sensitive list in order to indicate the timeline for tariff reduction or elimination. However, the real question should be really asked is that: What are the challenges and opportunities do we have after 2015 rather then wining or losing? And what should be done to capture more? The following will reflect the three areas for illustrate the significance of joining ASEAN Economic Community: (1) a brief overview on economic performance, (2) a geographical endowment, and (3) the future potential.
First, the economic interests of Cambodia after joining ASEAN are illustrated in an unambiguous image. In overall, one can proudly say that Cambodia has gained from the regional grouping rather than isolating from the group. Without closely examination on the progress and its context, one possibly fails to analyse whether the kingdom benefits or not. Indeed, it shall be noticed that the kingdom was become an observer in 1995, filed a quest for membership in 1996, officially admitted into the ASEAN in 1999, and WTO in 2004. Based on the Country Brief of World Bank, “at almost 10 percent per year between 1998 and 2008, Cambodia’s GDP growth was very strong. The episode of sustained growth was interrupted in 2008-09, but is recovering strongly in 2010-11 with GDP growth estimated at 6.7 percent.” From this data, we are simply able to make at least an assumption that there was a correlation with Cambodia’s engagement with the regional and the wider world since the growth was skyrocket at double digits like never ever before. The growth was only disrupted at the moment of global financial hit in 2008, but it still firmly grows after all. More or less, the rapid economic growth translated into the job opportunities and the poverty eradication. The poverty headcount has declined from 40-50 percent in 1993-94 to 30 percent in 2007, and it still continues to fall in poverty headcount rate in 2012 was 17.7 percent (source: WB). With more than 622 million population standing only after China and India’s, ASEAN combined GDP is approximately US$2.6 trillion in 2014 which is the 7th largest economy in the world and the 3rd largest in Asia. It draws US$136 billion in FDI flow in 2014 in which it accounts for 11% of global FDI inflow. In 2013, The total FDI inflows is approximately USD 122 billion in which the extra-ASEAN countries account for USD 101 billion and intra-ASEAN Countries contributing USD 21 billion. The major FDI inflows from extra-ASEAN countries are namely China, Hong Kong, Japan, EU and US. However, Singapore alone unsurprisingly attracted “almost half of FDI inflows in ASEAN,” 15% for Indonesia, 10% for both Malaysia and Thailand, 7% for Vietnam, 3% for Philippines and 4% for CLM countries. Although we capture FDI inflows less than other ASEAN Member States, especially ASEAN 6, but examining on the FDI inflows into Cambodia from year to year it helps to explain the momentum of FDI and it would see different image (see figure below). There is a progress due to the number the FDI still makes its progress and growth. That is how ASEAN Member States have to compete with one another in nature of attracting for more FDI inflow to its country, but it is also important to acknowledge that respective country has its uniquenesses for FDI attraction from population size, geographical location, historical context, and natural endowment to investment policy, human resources and development stage of each country.
Second, Cambodia has benefited from its geographical location staying in between Thailand and Vietnam. Under the “Thailand-Plus One Strategies,” due to the rising of labor cost, ongoing social and political unrest, labor shortage, and also the natural disaster in Thailand, lots of Japanese companies have begun to strategise its labor-intensive production based by moving some parts of it from Thailand to other countries, especially Thailand’s neighbours. Cambodia is more likely to be one of the most potential destination for these re-locations. Therefore, it is an opportunity for Cambodia to draw the move inside its territory. However, Thailand is wise enough to capture the outflowing investment by establishing numerous Special Economic Zone along the border areas. As reported by Bangkok Post in 2015, Thailand plans “to establish five special economic areas along the borders and have seven more in the next phase.” Additionally, another challenge is that the Kingdom is still in the process of reviewing its investment law since there might be some controversies over the degree of generous policy supporting the newly invested industries or expanded industries. Indeed, providing incentives or tax holiday is one of the tools to keep it attractive for foreign investment, but there are also number of things beside such as transportation, logistic, skilled labor and energy security. These are the additional ingredients for making even more attractive for absorbing FDI in Cambodia. Cambodia actually has made use of the regional integration process. Regional connectivity is a good example for that. Under its ambition of the 2010 Master Plan on ASEAN Connectivity and since Cambodia is geographically located in the centre of the Southeast Asia, then physical, institutional and people-to-people connectivity would largely provide a significant leverage for Cambodia to absorb from. To name a few on the physical connectivity, Cambodia has essentially connected with others through the ASEAN Highway Network and also the Singapore-Kunming Rail Link (hereinafter called SKRL). With regard to the SKRL, the only remaining challenge for Cambodia is the financial constraints in supporting the SKRL sections from Cambodia to Vietnam since the Singapore to Phnom Penh section is completed on schedule. In this light, there is an locomotive force for Cambodia to seek for more than its traditional fund providers, Asian Development Bank and World Bank to be specific, by looking for new partnership with private sector or the new emerging regional bank in which Cambodia is also one of the co-founders of Asian Infrastructure Investment Bank. On the top of that, the former Minister of Commerce and currently Minister of Public Work and Transportation, H.E. Sun Chanthol, alleged that “Cambodia stands in the heart of ASEAN” geographically, but what does it mean by this? Does it mean the kingdom will establish itself as the hub of region for logistic and transportation? Then, the challenges would come from how to construct a policy in building the best or high class infrastructure, superb airports or seaports, and how to compete with existing regional hubs like Singapore or Thailand, etc. Nonetheless, Cambodia shall have to further develop a strategic master plan as without the rational calculation this potential would be useless and would be just for others’ uses.
Third, more importantly, ASEAN Economic Integration has been a critical momentum of other Free Trade Areas, namely ASEAN-China FTA, ASEAN-Japan Comprehensive Economic Partnership, ASEAN-Korea FTA, ASEAN-India FTA, and ASEAN-Australia-New Zealand FTA. On the top of that, ASEAN is now undertaking two additional negotiation with Hong Kong for establishing another ASEAN-Hong Kong FTA and a Regional Comprehensive Economic Partnership (hereinafter called RCEP). Among all, RCEP is the largest or the mega regional free trade arrangement which comprising of 10 ASEAN Member States plus with Australia, New Zealand, India, China, Korea, and Japan. The combined population of RCEP negotiating countries could make almost half of the world population with 3.470 million people for market access with combined GDP of 30% of world GDP in 2014 (source: Australian MFA). The potential of regional opportunities are there, but how to make use of it, is the remaining challenges for Cambodia. With these potentials for market access, while the country undertakes its efforts by involving with various Free Trade Agreements, it has to strengthen its domestic small and medium enterprises (hereinafter called SMEs), skilled labor, energy security, infrastructure, and institutional building. More importantly, there is a role for government to uphold an obligation in naturing SMEs, supporting financially, and facilitating the business climate for all. For those domestic business, without knowledge, awareness and ideal of free trade arrangement that Cambodia has been part of, it would just not be able to use all available potentials. Nonetheless, recently the Royal Government of Cambodia has introduced a newly policy which known as Industrial Development Policy (IDP) for diversifying its economic bases and guiding for future direction of Cambodia advancement, in short. Based on the policy, it has provided lots of available rooms for each and every ministries and relevant institutions to build upon the common visions for realisation of achieving the industrial development stages. In this sense, it relies much more on the implementation of its IDP in line with the trade policy on how to make use of the potential regional trade and other endowments to support the momentum of its development stage. It surely needs a policy coherence.
 “Nay Pyi Taw Declaration on the ASEAN Community’s Post-2015 Vision,” Nay Pyi Taw, 12 November 2014
 These two rationales are taken from the four rationales which were developed as parameters for checking the impacts to interests, read more at Khov Ea Hai, “Constructing Cambodian Foreign Strategies,” Bandung, Indonesia, 24 Feb 2016
 The 1991 Paris Peace Accord was signed on 23 Oct 1991 which is formally known as Agreement on a Comprehensive Political Settlement of the Cambodia Conflict, having 18 signatory nations. It marked a new historical page for Cambodia by introducing the first general election the second kingdom regime, organised by the UNTAC (United Nations Transitional Authority in Cambodia.
 An Sokkhoeurn, “Conflict Resolution in Cambodia,” Cambodian Institute for Cooperation and Peace, Phnom Penh, Nov 2010
 Realism was widely introduced in similar principle by Thomas Hobbes, Hans Morgenthau, Henry Kissinger and so on.
 Charter of the Association of the Southeast Asian Nations, Jakarta, ASEAN Secretariat, in 2007
 Art. 53, Constitutional Law of Kingdom of Cambodia, adopted by Constitutional Assembly in Phnom Penh, on 21 Sept 1993 at its 2nd Plenary Session
[8;9;10] “Concepts of Security,” United Nations, New York, 1986
 “Cambodia,” the Country Brief by World Bank
 ASEAN Statistics 2014, the ASEAN Secretariat
 “ASEAN Community in Figures-Special Edition 2014: A Closer Look at Trade Performance and Dependency and Investment,” the ASEAN Secretariat, Jakarta, Oct 2014
 Board of Investment of Thailand (BOI), issued on 25 March 2015
 “ASEAN Annual Report 2013-2014,” the ASEAN Secretariat, Jakarta, July 2014