More investment and projects signals a stable Cambodian economy, but how many of these will have a long-term positive impact. Will it be able to offset the EBA withdrawal?
By Christine & Tim Liu
The Phnom Penh Post recently posted an interesting article titled ‘CDC approves $22.5B in projects over 44 months.’ It essentially talked about how the Cambodian government recently approved over 831 investment projects and that the Chinese are the number 1 foreign investor making up 35.31% of total investment projects in the Kingdom of Wonder.
All this sounds, well…great. What's the catch?
If I recall my introductory economics classes back in University correctly, increased investment means there should be more jobs created. Improved infrastructure hopefully will bring more logistical efficiency. With the increased intensity of investment, it should essentially mean more consumption that will trickle down to all facets of industry.
More, More, & More.
It sounds AMAZING. Whenever I see ‘MORE,’ of anything I buy it. Just like more relief for headaches on a medicine box, 50% more cheese or more fibre for less constipation. Yes, having more is the ideal dream for modern day consumerism.
But let’s look at this objectively. It would be interesting to see out of the 831 investment projects over the course of 44 months, how many are completed. What about jobs; How many long-term jobs were created from these projects? What is the ratio of foreign and local employees working at these workplaces? What about previous years, what was the impact on Cambodia’s development?
That’s the way we should be thinking when we are examining investment impact in Cambodia. Not all, businesses are successful and if the CDC approves 831, why not investigate the ones that failed. Is it related to legislative issues, finance, or land related disputes that resulted in the project's premature demise? What can the government do to ensure investment confidence in Cambodia?
This is where Hong Vannak, a researcher at the Royal Academy of Cambodia in the article mentions:
“With the investment growth that the CDC shows at this time, Cambodia must also be prepared in case of a change in the EU’s preferential trade status,” he said.
‘Everything But Arms,’ or EBA is a non-reciprocating trade agreement, which allows less developed countries (LDC) to export their goods to the European Union in order to stimulate LDC development without duty fees or import tax. Usually, LDC production costs are lower than developed countries, which results in EU domestic producers becoming less competitive. The production costs are usually affected by a combination of variables, but lower labour costs coupled with subsidies to tax reliefs seems like a few things Cambodia has already in place to be more competitive.
There is a total of 49 less developed countries benefiting from this agreement at the expense of EU producers. If the EU internally cannot compete with imports from LDCs of course European producers are going to start complaining about the EBA.
Considering global economic uncertainty, coupled with trade wars and the way the Trump Administration is handling global relations. Developed countries need to look out for themselves first. Is it not the general principles of a government to maintain power and uphold a standard of livelihood for their tax paying citizens first?
Since the EBA is a trade agreement and investments are investments, an EBA withdrawal of preferential trade status has a greater immediate negative impact than any positive investments the CDC has approved. Considering, that more than 70% of Cambodia’s total export value is on textiles, apparel and related accessories, that’s rather devastating to lose preferential trade status from one of the world’s highest paying markets, the EU.
Now the question is, with a protectionist manufacturing powerhouse like China, will all this increased development offset the loss from an EBA or General System of Preferences (US) trade withdrawal.
Not in the short-run, but only time will tell…
Oh…before you call me a liar and that the article has nothing to do with Jazz. Here’s an event in Phnom Penh, with one of my favourite Jazz songstresses in Cambodia.
The event is named ‘Jazz Essentials.’ Oct 24 2019 at The Bodleian 8pm, and will offer a tasteful selection of jazz traditional songs as well as adapting popular modern songs to a jazz aesthetic.
Featuring inimitable vocals of Intan Andriana back up by stunning keyboard and improvisational skills of James Atkinson that will truly captivate.
If you are a Jazz fan, why not!