Development, Trade and Foreign Affairs
This section provides information on the status of various Cambodia’s FTAs.
Cambodia has admitted into the Association of South East Asian Nations (ASEAN) in Apr 1998. After its quest to ASEAN, Cambodia has signed at least 7 regional FTAs under the ASEAN framework, and it is negotiating another regional FTAs. Those signed FTAs are including:
Figure: Number of FTAs signed and in effect by Countries
Source: ADB FTA, by country
The ongoing negotiating FTA is Regional Comprehensive Economic Partnership (RCEP). Nonetheless, so far Cambodia has neither signed and in-effect bilateral FTA with any country, nor negotiating bilateral FTA with any country. In comparison with its neighboring countries, Cambodia is the only country that does not have existing or negotiating bilateral FTA in place. It reflects Cambodia’s less diversified international trade policy which is heavily relying on only ASEAN Framework as the foundation for FTA negotiation. In adoption of the rapid changing dynamics of global growth, Cambodia shall expand its market access with a coherent market diversification strategy. However, we still see that numbers of studies have been proposed, such as:
Cambodia’s Exports (Source: MEF, 2016)
Despite the strong growth of garment exports in 2015, Cambodia’s total merchandize exports posted a somewhat softer growth last year – 14.2 percent compared to 16.1 percent in 2014. Garment exports, accounting for nearly three fourth of the country’smerchandize exports, grew by an impressive 14.5 percent in 2015 as compared to a 10.7 percent growth in 2014. Garment exports to the US market recovered from a negative growth of -5.4 percent in 2014 to a positive 2.3 percent in 2015, while export growth to EU was a sturdy 20.8 percent, only marginally lower than the 22.0 percent figure of 2014. Among the other major categories of exports, only rice and rubber turned the corner with a much faster growth in 2015. Growth in the remaining exports consisting of agricultural products, fisheries, cigarette, etc. plummeted from 50.4 percent in 2014 to 11.9 percent in 2015.
With robust growth outlook for Cambodia’s major export destinations, prospect for Cambodia’s exports remains favorable in 2016. In the first six months of the year, garment export growth remained strong at 10.8 percent. Partly due to the subdued commodity prices in the international markets, agricultural exports posted a negative growth. Current indications are that in 2017, export growth may slow marginally given the expectation that growth would be softer in many European countries (including the UK) which accounts for more than one- quarter of Cambodia’s garment exports.
Encouragingly, Cambodia’s exports have slowly but steadily diversified in recent years— from garment products to other products and from the US market to other markets.The share of garments in the country’s exports has been shrinking from 86 percent in 2011 to nearly 74 percent in 2015, while the share of other products (electronic components, bikes, etc.) has been rising from only 7.4 percent in 2011 to 21.1 percent in 2015. Data for the first half of this year 2016 also shows the same trend. Likewise, Cambodia’s garment export destinationsare also undergoing a gradual change, with the share of the US shrinking overtime, while that of EU and Japan increasing. The EU has become Cambodia’s main trading partner in garment exports, thanks to the “Everything But Arms” initiative. Moreover, export management fee4 to EU is also lower than that to the US. Recent years have also seen strong growth of garment export to Japan.
Cambodia’s Imports (Source: MEF, 2016)
Last year’s mild export slowdown has also been accompanied by a slower growth in the country’s imports, although with significant variations across the major import categories. Aggregate import bill grew by about 13.4 percent in 2015, lower than the 18.1 percent figure for 2014. While import value of construction materials, food and beverages and miscellaneous categories grew at a slower pace in 2015, imports of textiles and fabrics, petroleum products and vehicle grew faster – the latter reflecting the strong performance of the garment industry and robust consumer spending. On the other hand, the slowdown in construction materials imports reflects the moderation in domestic construction activities, just as the softening of food and beverages imports indicates the moderation of business activities of domestic hotels and restaurants as also substitution of imports by domestic production.
Data for the first half of 2016 indicates that the import bill continues to slow, and this trend is likely to persist for the second half of the year and perhaps into next year as well. In the first six months of this year, imports grew by only 8 percent, sharply down from 22 percent growth in the corresponding period of last year. Import slowdown has been across almost all the major product categories, with the sole exception of petroleum products. In a few cases such as cement, food and beverages, and electronics, the slower import growth seems to be structural as the country is now producing these products domestically thereby substituting imports by local production. Cement is an interesting case in point. Until recently, cement was almost wholly imported but with the establishment of a few cement factories in the country part of the cement consumption is now met by domestic production. As a result, volume of cement imports drastically declined by 29 percent in the first six months of this year, on top of a 3.5 percent decline last year. More cement factories are to be built in the coming years and this should further reduce imports. Similar structural changes are taking place in the case of food and beverages, with many small and medium enterprises in the country beginning to produce many of these items which were wholly imported just about a few years ago.
Cambodia’s Bilateral Investment Treaty
Other than FTAs, Cambodia has also signed Bilateral Investment Treaty (BIT) with 24 different countries, including: