Analysis: If removing EBA, Can Cambodia’s Economy be Stalemated?

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By Yin Leangkong, Director of Propertyarea.asia

Phnom Penh: When it comes to Everything But Arms (EBA) and US GSP systems, refers to a poor country, but now Cambodia is in a higher position, so if these two systems have been withdrawn from Cambodia and will put Cambodia’s economy in a stalemate?

Before answering this question, we look at the situation of Cambodia’s economy just now: Cambodia’s economy currently relies on four pillars such as garment and footwear, construction and real estate, tourism and agriculture, and by the end of this year or early 2020 will receive a lot of oil resources which product revenues for the national development.

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However, textiles, garments, footwear and travel accessories represent about 80 percent of exports from Cambodia.

How will Cambodia’s economy be affected?
Of course, it should not be too scary, because suspending a tax system from Cambodia is to wait for another 18 months, not starting this year, and not sure whether the tax system is removed or not.

Absolutely, it depends on the intelligence of government officials in explaining to the European Union about its progress and the willingness of the European leaders to recognize Cambodia’s development progress or not.

At this stage, it is also a test of Cambodian government officials in responding to any argument in showing Europe that the dissolution of the CNRP does not damage democracy, and Cambodia respects human rights through the many policies introduced by the government. For example, the government has set up a social welfare insurance system with the provision of social security to women giving birth. The economic development reduces poverty of the people. In fact, Cambodia’s economy has grown by an average of 7 percent over the past two decades, increasing citizens’ income and turning Cambodia from low-income country to low middle-income country in 2015.

Impact
Investors and stakeholders in the sector are talking about the impact on Cambodia’s economy if the preferential tax system will be withdrawn within the next 18 months.
Economist Mey Kalyan, senior adviser to the Supreme National Economic Council, said that if the tax system is actually withdrawn, it will affect the Cambodian economy, but it was also a time for the country to wake up and work hard to reform itself and diversify its economy so that the country does not rely too heavily on it.

“Reforms hurt us, but we have to do it, and the Ministry of Economy and Finance is taking that into account. What we have to do is we have to think long-term because the cancellation of some institutions are short-term solutions,” he said.

Manufacturers of clothing, footwear and travel accessories have been employing more than 800,000 people who receive direct benefits and millions of indirect beneficial interests, including food vendors, services and rent houses owners.

But the question here is whether the factories will move out of Cambodia or not? If the tax system is taken away from Cambodia, the answer is based on these bases. All enterprises will receive additional incentives from the government by exempting them from profits tax, water and electricity cost reduction. The value of labor in Cambodia versus Vietnam, Thailand, Cambodia has the lowest prices, but if moving to Laos, the labor force is not enough and they cannot move because thy faces the tax preferential system removal like Cambodia. It cannot move Bangladesh, because with the factories there are already too much.

And, the government has been encouraging international and domestic investors by removing the export control system, abolishing the Kamsab institution and reforming Camcontrol, and the government will find a way to compensate for it to make sure investors will continue to invest in Cambodia, as the head of government will not allow the Cambodian economy to collapse economically because if collapsing disaster would have occurred and peace and political stability cannot be maintained.

Time for Communion
During Thailand’s severe flood crisis, Yingluck Shinawatra has invited former opposition leader Abhisit Vejjajiva to consult, although the two leaders have been upset with each other, but to jointly save their economy and their country as Yingluck has softened their attitude to their own nationals.

On the contrary, opposition leader Sam Rainsy has called for Europe to withdraw EBA from Cambodia, and when Europe imposed the tariff on Cambodian rice, he cheers and congratulates, and considers it as his achievement.

The political game to seize power, pressuring millions of Cambodians, should not be in the hands of him or a Cambodian politician. He does this work for himself and his group but is not appropriate and does not respond to a nation’s spirit.

As human beings, we can think differently and get different ideologies, but the people have the ability to distinguish between right and wrong, so it should be wise and based on national interests and there should be an opposition party to change its direction of its politics for national survival.

In order to gain popularity, Sam Rainsy himself can convince the European Union not to remove EBA from from Cambodia which is a good solution, and Sam Rainsy will get more popularity and support from more Khmer people, while the head The government repeatedly claimed, “Cambodia does not take national sovereignty to exchange aid.”

Cambodia’s economy is challenging but not collapsing
In fact, the undeniable fact is that Cambodia’s economic growth will be affected in a short-term impact, but not collapsing and if we say no impact, it’s a self-lie, because three key areas remain strong even though the two remaining sectors will suffer from the impact. However, through the government’s reform through increasing people’s income through growth and incentive policies for investors attract more local investors to increase their investment and aid flows directly from China and comprehensive partnership with China and other friendly countries, the economy can diversify markets and will not be stalemated and collapsed.

Therefore, the fear should not be too great because the Cambodian economy is more diversified and the government has been deeply reformed and has been making sure that “Cambodia can move to high middle-income country from low middle-income country by 2030”.

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