China FTA to boost economy
China FTA to boost economy
The Cambodia-China Free Trade Agreement (FTA), which is expected to be finalised by the end of the year will boost the Kingdom’s export volume and also draw more investment in raw material supplies and diversify the industrial sector, analysts say.The third round of FTA negotiations has solved the remaining issues in the agreement text and approved in principle the market access of goods and services. It is expected to be signed by the end of the year, the Ministry of Commerce said on Tuesday.
“If the two country’s leaders approve the agreement text and the market access that was proposed, exports from Cambodia are expected to grow more than the average growth rate of 20 per cent per year seen in 2017, 2018 and 2019.
“Foreign direct investment is also expected to sharply increase, which will be a key source of income and jobs for Cambodian people,” said the ministry.
Garment Manufacturers Association (GMAC) in Cambodia secretary-general Ken Loo told The Post that the FTA with China will strongly stimulate the Kingdom’s exports – not only in the garment sector. There will be a greater flow of investment from China.
“From what we read from the Ministry of Commerce’s statement regarding the results of the third round of negotiations, exports from Cambodia are set to increase more than 20 per cent.
“At the same time, we will see more investment into the raw material supply for garment, footwear and travel goods, electronics and other industries . . . I believe the FTA will help other sectors much more than the garment sector,” said Loo.
Anthony Galliano, the CEO of financial services firm Cambodia Investment Management Co Ltd, told The Post that the bilateral opportunity is massive economically for the Kingdom, but more of a long-term geopolitical strategic gambit for China.
He said: “Cambodia will benefit by playing a significant role in China’s expansion plans and influence in the region, primarily through infrastructure investment, expansion of special economic zones, and by building Cambodia’s manufacturing production base as an export hub to the US and the rest of the world.
“Presently, China’s economy is slowly recovering and Cambodia is in the depths of the struggling Covid-19 economy.
“As the world progressively returns to normal, and as free trade agreements materialise and are implemented, Cambodia can expect significant upside in the trade relations between the two countries.
“But only if China expands it appetite for Cambodia’s products beyond rice and consumer goods,” said Galliano.
He said Cambodia needs to diversify its export economy and the key trade benefit will be Chinese foreign direct investment (FDI) with significant investment in the Kingdom through infrastructure, real estate, financial services, manufacturing and retail.
“The attraction of an FTA for China is more investment in Cambodia rather than the export of goods and services from Cambodia to China,” he said.
The FTA is expected to boost bilateral trade to $10 billion by 2023. Bilateral trade volume between the two countries reached $7.4 billion in 2018, a 22 per cent increase compared to 2017’s $6.04 billion, ministry data show.
