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Cambodia: ‘A delay for RCEP may be frustrating but long-term benefits more meaningful’
Cambodia’s hopes of being a member of the world’s biggest free trade bloc as early as Jan 1 may be frustrated by some signatories of the Regional Comprehensive Economic Partnership (RCEP) dragging their heels over ratification.
RCEP is the result of eight years of talks. It would create a free-trade bloc covering 30 percent of the world’s economy, exports and consumers. Members are anticipated to gain $174 billion in real income by 2030, according to the Asian Development Bank.
Cambodia is one of the 10 ASEAN members that signed the agreement in November along with China, Japan, South Korea, Australia and New Zealand. It will come into force 60 days after ratification by six ASEAN and three non-ASEAN signatories.
Cambodia’s National Assembly passed a draft law last week approving RCEP ratification. ASEAN member Singapore has signed off on it, along with China and Japan.
Many of the RCEP members economic ministers held a videoconference on Monday this week. A joint statement welcomed efforts by signatory states to “complete their internal process to have the RCEP agreement enter into force by early January 2022 as targeted”.
However a Japanese government insider told news website Nikkei Asia “implementation at the start of next year will be tricky”.
Mekong Strategic Partners Managing Director Stephen Higgins told Khmer Times a delay may not be the end of the world because RCEP’s benefits will be felt fully once the Coronavirus pandemic is over.
“Longer term, RCEP will help Cambodia play a role in global supply chains and support the shift in manufacturing from higher-cost countries to lower-cost countries like Cambodia,” he said.
“In the short term, any impacts from RCEP are significantly outweighed by Covid- related impacts, so a delay for a year or two isn’t really that meaningful.”
Even if RCEP doesn’t come into force at the start of next year, Cambodia can still benefit from bilateral free trade agreements (FTAs) with two of the signatories to the broader Asia-Pacific bloc.
An FTA with China has already opened the export door to direct sales of some Cambodian agricultural products and is likely to include more next year. Cambodia and China are committed to increasing bilateral trade to $10 billion by 2023, from $8.1 billion in 2020.
An FTA with South Korea is expected to be signed as early as next month. Bilateral trade in the first half of this year was valued at $451 million, a year-to-date increase of 6.7 percent, according to data from the Korea International Trade Association.
Cambodia is particularly keen to see RCEP up and running by Jan 1 because that is the date is takes over the chair of ASEAN and it is keen to give the members of the grouping the broader benefits of the bigger trading bloc. As evidence of their interest in getting RCEP active as soon as possible ASEAN economic ministers wrapped up a video conference last Thursday by reaffirming their commitment to the January start date.
Chheng Kimlong from the Asian Vision Institute thinktank said: “It is unlikely the RCEP trade deal will be ratified by all members in the next couple of months. Out of dozens of chapters in the deal, a number of technical and non-technical aspects of trade deal will have to be discussed and mutually agreed upon, including the rule of origin, tariff lines and products to be included in the priority list to be implemented first, and so on. Second, current geopolitical tensions among some of the RCEP members may delay the ratification. For Cambodia, there could be some potential losses in customs revenues resulting from the RCEP member countries in the first several years. But the losses can be compensated somehow by some potential increases in volumes of imports and exports of other supporting products and inbound FDIs [foreign direct investments] into Cambodia’s industrial/manufacturing and services sectors. RCEP is a greater window for Cambodia to expand economic growth base and industrialisation potential.”
Source: https://www.khmertimeskh.com/50936036/a-delay-for-rcep-may-be-frustrating-but-long-term-benefits-more-meaningful/