Commerce minister Cham Nimul addresses celebrations of the 20th anniversary of Cambodia's entry into the World Trade Organisation (WTO) on October 14. - Photo: Commerce ministry
PHNOM PENH: The Cambodian government has shown its determination to lead the country out of its Least Developed Country (LDC) status by 2029, despite knowing that this graduation could result in several negative impacts, such as the loss of preferential tariffs and stricter rules of origin for goods.
While these changes may affect the competitiveness of Cambodian products in the international market, the Ministry of Commerce has identified eight key strategies as priorities for the future.
During the 20th-anniversary celebration of Cambodia’s membership in the World Trade Organisation (WTO), held in Phnom Penh on Monday (Oct 14), Minister of Commerce Cham Nimul highlighted that since becoming a WTO member in 2004, Cambodia has achieved many benefits from integration and economic development, leading to its current strong growth.
She outlined that significant accomplishments in recent years include a rise in the gross domestic product (GDP) from approximately $5.3 billion in 2004 to $29.61 billion in 2022. Over the past two decades, the poverty rate has steadily declined by an average annual rate of 1.6%, dropping from 60% in 2000 to 16% in 2022. Meanwhile, Cambodia’s economy has grown by more than 7% annually.
“This high growth enabled Cambodia to exit the category of low-income countries and become a lower-middle-income country in 2015. Foreign direct investment (FDI) increased from $110 million in 2000 to $4.9 billion in 2023. Additionally, Cambodia’s trade volume was around $4.5 billion in 2004 but reached $47.88 billion in 2023, with total exports amounting to $23.47 billion,” she added.
The minister also noted that, with Cambodia’s many achievements, the UN Committee for Development Policy has recommended that the country graduate from LDC status by 2029, having been classified as such since 1991.
However, she emphasised that while there have been numerous accomplishments, the plan to graduate from LDC status by 2029 could bring some challenges. These include the loss of preferential tariffs and stricter rules of origin for goods, which could negatively impact Cambodia’s competitiveness in key markets.
“Nevertheless, Cambodia must turn these challenges into opportunities to strengthen and further enhance competitiveness in regional supply chains and global value chains through market diversification and improving competitiveness. This includes expanding the production base, increasing added value, connecting to global value and supply chains, strengthening trade facilitation, and attracting more investment in new industries, which are fundamental to supporting sustainable growth and resilience,” she said.
“These efforts are outlined in the second and third pillars of the Pentagon Strategy, phase 1, which the Ministry of Commerce and other relevant ministries and institutions are diligently implementing,” she added.
What strategies have been prepared for 2029?
To address challenges and promote trade in the new context, the Ministry of Commerce has developed and is implementing the following strategies:
1. Maximise the benefits of free trade agreements, including the Asean Free Trade Agreement, Asean Plus One agreements, the Regional Comprehensive Economic Partnership (RCEP) and bilateral free trade agreements with China, South Korea and the United Arab Emirates.
2. Continue negotiations to establish free trade agreements with potential trading partners to expand new markets and strengthen Cambodia’s export base to be more resilient and diversified by preparing to adapt and find solutions to new issues in high-level free trade agreements.
3. Fully implement the strategy for the development of Cambodia's garment, footwear and bag sectors for 2022-2027.
4. Strengthen private sector governance and continue efforts to promote a favorable business environment for trade, investment and commerce by providing trade facilitation and faster, more efficient and transparent automated trade services.
5. Promote e-commerce and digital business by preparing online market platforms and developing a digital trade policy.
6. Strengthen domestic trade by promoting the development and processing of products to meet local demand and export needs.
7. Continue to draft and strengthen the implementation of laws, policies and regulatory frameworks related to trade.
8. Collaborate with development partners to conduct detailed studies on the impacts on trade and Cambodia’s strategies for a smooth transition out of LDC status, while preparing roadmaps and action plans to mitigate these impacts and promote sustainable, resilient economic growth.
Economists optimistic, based on past economic growth
Economist and professor at the Royal School of Administration, Duch Darin, expressed optimism about Cambodia's economic growth achievements.
He noted that Cambodia's future transition from LDC status is not just a testament to its economic success but also represents a strategic shift toward long-term sustainable development and strengthened economic independence.
Darin believed that the government’s policies, coupled with the benefits of increasing economic self-reliance, will ensure that this transition is a positive step for the Cambodian people and the country's future competitiveness on the global stage.
“Cambodia's preparation for the transition reflects the country’s significant economic progress over the past two decades. In 2004, Cambodia’s GDP was approximately $5.34 billion, while in 2023, it rose to $31.77 billion. Cambodia has sustained an average economic growth rate of 7% from 1995 to 2023, with notable improvements in infrastructure, and expansion in key sectors like manufacturing, agriculture, tourism, finance, electronics and the automotive industry,” he said.
“This growth demonstrates that Cambodia has built a strong economy capable of sustaining itself,” he added.
According to the professor, through its membership in the WTO, Cambodia has benefited from its integration into the global economy and access to international markets. The country's export diversification has expanded beyond textiles and garments to include manufacturing and agricultural products, reducing its vulnerability to external shocks.
Cambodia has also made significant reforms that align with economic freedom, improving the business environment to attract foreign direct investment. These reforms are crucial in fostering investor confidence, and help to reduce the country's reliance on foreign aid.
He claimed that Cambodia's journey from a less developed country to a more prosperous state has been supported by the effective implementation of sound policies, particularly with regard to trade and the economy. Cambodia's ability to meet the regulatory requirements of the WTO and adapt to global trade potential demonstrates the effectiveness of these policies.
“I believe that transitioning from LDC status should be a source of national pride, reflecting years of hard work and progress. This transition could also strengthen Cambodia’s resolve to continue its national development journey,” he added.
‘Strive to improve the quantity, quality of goods and services’
Lim Heng, vice-president of the Cambodia Chamber of Commerce, expressed similar optimism. He noted that Cambodia’s current positive economic trajectory indicates that the country is on track to exit LDC status, which will elevate Cambodia’s standing on the international stage, allowing it to compete with many nations globally.
He acknowledged that while Cambodia may lose some preferential trade benefits such as GSP and EBA, the country has been gradually adjusting to these changes.
“Exiting the LDC status is a source of pride and honour for Cambodia,” he said.
He encouraged manufacturers and stakeholders to strive for better diversification and improvement in the quantity and quality of their products and services, to ensure that Cambodia’s growth continues post-LDC transition. - The Phnom Penh Post/ANN
