Regional economic integration
Title: ASEAN Regional Integration Support – Trade-Related Technical Assistance (ARISE Plus Cambodia)
Commissioned by: European Union (EU) and German Federal Ministry for Economic Cooperation and Development (BMZ)
Co-funded by: European Union
Lead executing agency: Ministry of Commerce
Overall term: 2019 to 2023
Cambodia has seen strong economic growth in recent decades. A large proportion of this growth is due to the flourishing tourist and textiles industries. Legal and regulatory reforms have been accelerated significantly by the World Trade Organization (WTO) accession process. As a result of this, Cambodia has become one of the most liberal economic regimes in the Association of Southeast Asian Nations (ASEAN). Significant foreign investments are being made in the country. However, it has only a small production and export base and concentrated export markets – above all the EU and USA – in which preferred market access is given to Cambodian goods. These trade preferences are based on Cambodia’s status as a Least Developed Country (LDC). Current forecasts assume that the Kingdom will remain in this category until 2030. However, the World Bank already classifies the country as a lower-middle-income country.
Despite alternative trade preferences resulting from Cambodia’s free trade agreement as part of ASEAN, the country has not yet exhausted the potential benefits of regional economic integration. Only around a fifth of Cambodian exports are sold to ASEAN member states. Cambodia’s overall proportion of domestic trade and domestic investment in the ASEAN market is one of the lowest of all ASEAN member states.
The Cambodian Government’s efforts in the area of economic development have helped to increase exports within ASEAN and the wider Asian region. Despite this progress, there are still barriers preventing the creation of an environment that facilitates investment and trade in Cambodia. These are to be reduced further in order to promote more trade integration, ensure increased competitiveness and create a better environment for private investment.
Economic networking and integration between Cambodia and the ASEAN states has been strengthened.
The project supports technical cooperation in three areas of action:
For example, the project supports the implementation of agreements under the WTO Trade Facilitation Agreement (TFA). Overall, trade with Cambodia is to be made easier by modernising customs clearance. A particular focus is on integrating Cambodia into the ASEAN Economic Community.
In addition, the project helps to improve the skills and expertise of responsible organisations, with the aim of assisting the country in better coordinating, formulating and implementing trade-relevant strategies, negotiations and reforms. The Cambodian Government therefore also receives support in improving its regulatory practice, which should lead to a more transparent, predictable and competitive trade environment. The component also includes a strand of work aimed at improving national trade statistics to enable fact-based planning.
In its third area of action, the project supports small and medium-sized enterprises (SMEs) in Cambodia in identifying and realising trade potential in the ASEAN Economic Community. The goal is to promote the integration of Cambodia’s private sector into regional value chains. To this end, better access to trade-relevant information and public-private dialogue forums will be made available. A particular focus here is on companies from semi-urban and rural areas. Business associations and other intermediaries are important cooperation partners in these processes.