A Commerce Ministry official defended the country’s accession to the World Trade Organization and discussed ways to increase the competitiveness of local industries at a meeting of donors, aid groups and private businesses Monday at the Hotel Cambodiana.
“People say Cambodia paid a high price to join the WTO,” said Sok Siphana, secretary of state at the Commerce Ministry and the lead WTO negotiator. “I don’t think so. We’ve been using the WTO as a tool for development. At the end, we felt that as a small country with no economic clout, we got a fair deal.”
The two-day meeting, organized jointly by the Ministry of Commerce, the UN Development Fund and the International Trade Center, analyzed barriers to trade now that the country has the market access it has long desired. Though government officials were optimistic that the country would retain jobs created by the volatile garment industry, which accounted for 96.5 percent of domestic exports in 2002, most speakers agreed that much work remains to improve the investment climate and add value to exports.
Worldwide garment quotas expire for WTO members at the end of 2004. When that happens, the country will be competing in cost with China—the nation most feared internationally in the garment sector.
“Whatever happens in the [garment] sector will have a tremendous impact on society as a whole,” said Sok Chenda, secretary-general of the Council for the Development of Cambodia.
As the country’s most important industry, members of the Garment Manufacturers Association of Cambodia presented current industry problems along with solutions to retain the garment industry beyond 2004.
Garment manufacturers spend more than 16 percent of their management time on “bureaucratic matters”—about 12 percent more than Bangladesh, a close competitor—according to GMAC. Also, GMAC said, in comparison to Bangladesh, shipments take twice as long to clear customs, and garment producers pay public officials twice as much money.
“Given all the numerous issues, we have to find solutions,” said David Van, deputy secretary-general of GMAC. “It takes two hands to clap. It makes no sense to complain without taking a more aggressive stance with government officials.”
The plan is to diversify markets, lobby for tariff reductions to the US, engage in nation-branding and enhance Asean ties.
Garment manufacturers want to explore markets beyond the European Union and the US, and used Canada as an example. Since Canada granted the industry duty-free, quota-free market access, which took effect in January, exports to Canada increased dramatically in the first 45 days of this year.
GMAC also plans to lobby the US to reduce tariffs on garments, which it has done with many least developed countries in Africa. Last year, the industry paid the US more than $166 million in duties.
Ray Chew, secretary-general of GMAC, told participants the industry wants to continue having the International Labor Organization inspect labor conditions at garment factories to go for the “niche” market of human rights-conscious buyers.
The tripartite agreement with the ILO and the US, designed to give additional quota if factory working conditions “substantially” comply with labor law, expires in December. The parties are negotiating to extend the agreement.
“How much we can link the ILO and labor law to increased sales remains to be seen,” said Tan Keat Chong, general manager of PCCS Garments Ltd. “If that can be achieved, there is a fighting chance this industry can survive.”
Besides the garment industry, the government is focusing on developing agriculture, handicrafts, fisheries and tourism. To do this, the Commerce Ministry plans to focus on improving specific supply-chain barriers to a limited number of products.
“We now have market access, but what does it take to get Cambodian products on shelves in other nations?” Sok Siphana said. “We cannot dream of having 5,000 products to export. No way. We are looking at 10 to 15 products that can be competitive and working on getting those to the market.”
Attracting investment remains crucial to sustaining the country’s development. Speakers argued that tax exemptions should continue to be offered, a commercial court should be created to settle business disputes, and corruption must be halted.
“Fighting corruption and improving institutions are the two most important things to increase foreign direct investment,” Robert Hagemann, the International Monetary Fund’s resident representative, told participants. “Unless real progress is made, especially in corruption, you have to wonder.”
When a new government is formed, it must ratify WTO membership. In the 1960s, Cambodia met all the requirements to become an original member of the General Agreement on Tariffs and Trade—the global trade body that preceded the WTO—but the government chose not to ratify it membership.
“We screwed up then,” Sok Siphana said. “Now we are facing the pain of going through the other door. I pray that we have a new government soon that will ratify the WTO.”