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Cambodia: RCEP is key to post-pandemic recovery here
As a member of the world’s largest trade deal, Cambodia’s post-pandemic economic reality is likely to be forged by the 15-nation deal that will encompass about 30 percent of global gross domestic product, according to experts.
However, the country will have to work to on infrastructure investment, implement policy framework and coordinate efforts with foreign trade partners to take advantage of the trade deal, according to experts.
Regional Comprehensive Economic Partnership (RCEP) members are anticipated to gain $174 billion in real income collectively by 2030, according to the Asia Development Bank.
“I believe the big benefit from RCEP is that it will support diversification of value chains across the member countries and Cambodia stands to be a big winner from that diversification given its young and growing labour force, political stability and stable macro-economic environment,” Mekong Strategic Partners Managing Director Stephen Higgins told Khmer Times.
“To really take full advantage of the trade deal, Cambodia needs to do more around logistics, particularly in relation to transport, while also having a more simplified and transparent tax system which published rulings and precedents can rely on,” he continued.
Authors Hokseang Lim, Sorana Touch and Sreynou Chhoun wrote in a policy brief for the Asian Vision Institute (AVI) that the Kingdom will have to “invest heavily” in economic infrastructure, including roads, bridges, railways, ports, airports and logistics, to have a competitive advantage over other RCEP signatories.
The Kingdom currently has one of the worst logistics infrastructures in the Asia-Pacific region, according to the World Bank.
As a result, officials are prioritising the modernisation of existing seaports and work is under way for Phnom Penh to have the second smart logistics hub in ASEAN.
“Logistics is a key sector for Cambodia to achieve our target of being an upper-middle-income country by 2030 and high-income country by 2050,” Public Works and Transport Minister Sun Chanthol previously said.
The authors said: “RCEP can serve as a potential platform for structural transformation and modernisation of the Kingdom’s internal economic structure” in line with various policy frameworks, including its post-pandemic recovery strategy.
“While RCEP provides greater market access to local firms in smaller countries like Cambodia, it also opens the domestic market for foreign goods and services, which would eventually increase competition or domestic investors,” the policy brief said.
Fifteen nations, including the entire ASEAN bloc as well as China, Japan, Australia, New Zealand and South Korea signed the deal last year.
The Ministry of Commerce previously said that it is anticipated to come into force by Jan 1.
The free trade agreement is anticipated to eliminate around 92 percent of tariffs on goods progressively over the next 20 years. Crucially, it will also unify the bloc under a single rule of origin, which could offer zero duty access for exports to a number of trade partners, thereby increasing international exports.
Experts previously expressed fears that there was a lack of understanding about the benefits of the trade pact and that few companies would be able to take advantage of it unless foreign stakeholders took it upon themselves to train businesses on how to use the deal to their advantage.
Additional funding will be needed for small and medium-sized enterprises (SMEs) through the SME Bank and the Entrepreneur Development Fund, according to the AVI.
“Despite the potential risks, the benefits from RCEP outweigh the drawbacks, for it will increase FDI [foreign direct investment] influx. Cambodia’s trade in goods and service is expected to rise due to the flow of FDI, potentially from China, Japan and [South Korea], and growing domestic investment,” the policy brief read.
The AVI also stressed that efforts will be needed to “ensure effective implementation of the new Investment law”.
The new law incentivises investment in research and development and innovative industries, such as value-added manufacturing and technology.
It is currently before the Senate before being passed on to King Norodom Sihamoni for approval.
Source: https://www.khmertimeskh.com/50918763/rcep-is-key-to-post-pandemic-recovery-here/