With the US set to lift restrictions on imports of Chinese textiles at the end of 2008, trade experts said at the start of a two-day forum in Phnom Penh on Thursday that Southest Asian countries must consider ways to diversify exports and facilitate trade.
Cambodia, specifically, will face a loss in garment exports amounting to $94 million when safeguards on China are completely removed, according to a joint policy brief from the UN Development Program and the Economic Institute of Cambodia, hosts of the forum. About 75 officials and representatives from Laos, Cambodia, Nepal, Afghanistan, Bhutan and East Timor attended.
Yumiko Yamamoto, a trade adviser at the UNDP’s regional center in Colombo, Sri Lanka, told attendees that textile-reliant economies such as Cambodia must diversify exports in the face of China’s full entry to the World Trade Organization on Jan 1, 2009.
Aside from the China threat to Cambodia’s garment industry, EIC President Sok Hach said, a mass exodus of factory workers to the provinces is currently eroding productivity and the country can no longer expect the garment industry to shoulder the economy.
“For sure, the garment sector will no longer enjoy double-digit growth,” he said Thursday during a break in the trade forum, adding that garment sector growth in 2008 will at maximum range between 5 and 10 percent, down from 13 percent in 2007.
Kaing Monika, external affairs manager for the Garment Manufacturers Association of Cambodia, said by telephone Thursday that about 20,000 garment factory workers—about 5.7 percent of all garment workers—have quit over the past eight months, many to seek more lucrative work in agri-business outside Phnom Penh, where, he said, food prices are skyrocketing.
“It’s not surprising,” said Sok Hach, as 1 hectare of farmland will yield on average $1,000 in annual profits today, a 300 percent increase from more than two years ago.
In light of this, he said, it is important for Cambodia to facilitate trade in agricultural and cultural goods.
But to do this Cambodia must reduce the graft and red tape involved in trade. “We have to reduce the cost of exports…the general cost and paperwork involved,” he said. According to the World Bank, exporting items from East Asia and the Pacific requires an average of 6.9 documents and 24.5 days. However, exporting from Cambodia requires 11 documents and 37 days.
And while imports to East Asia and the Pacific require an average of 25.8 days, it requires an average of 46 days to import items to Cambodia, as opposed to just 23 days to import items to Vietnam, according to World Bank figures published in a joint policy brief from EIC and UNDP.
Commerce Ministry Undersecretary of State Mao Thora denied Thursday that graft is inhibiting trade, though he added that the government will take measures if business or private officials raise complaints. The bigger threat to the economy right now, even more than China, Mao Thora said by telephone, is retaining garment workers as more and more flee to the agricultural sector.
One source for increasing trade outside the garment sector, UNDP Culture and Program Development Coordinator Joseph Lo said during Thursday’s trade forum, is in cultural products, which account for 70 percent of worldwide GDP but a small amount of the GDP for undeveloped countries.
Cambodia, Lo said, could consider increasing silk exports and also turning Angkor Wat into more than just a tourist destination by using it in architecture, design and even cartoons.
But Cambodia and other countries still need to export these cultural goods, and for this a one-stop window where paperwork and customs duties can be handled should be developed at all points of trade, Kanya Satyani, the Asean Secretariat’s senior officer for the trading goods unit, told the forum.
To facilitate this, infrastructure must be developed to connect these one-stop windows to the Internet, said Florian Alburo, a professor of economics at the University of Philippines specializing in trade.
Cambodia has built a one-stop window at the Sihanoukville Autonomous Port, UNDP Cambodia Assistant Country Director Wisal Hin said Thursday, but the building is not yet operational. He added that two previous deadlines to open the port’s one-stop window have expired, and the government has yet to set a new deadline.
(Additional reporting Yun Samean)
