Cambodia’s economic growth is expected to slow down in 2020 if the European Union (EU) withdraws the Everything but Arm (EBA) trade scheme from the kingdom, the International Monetary Fund (IMF) said in a press release on Friday.
The economy is projected to grow 6.8 per cent next year, slightly lowered than 7 per cent this year, driven by continued export growth and strong construction activity, the press release said.
‘Cambodia’s economic outlook is subject to significant downside risks,’ it said. ‘The on-going EBA review by the EU, Cambodia’s primary export partner, could lead to a suspension of preferential trade access later next year, which could have a large negative impact on economic activity.’
The EU started in February the 18-month process that could lead to the temporary suspension of Cambodia’s duty-free trading access to the EU market under the EBA scheme due to concerns over human rights and labor rights. A final decision on whether to withdraw the trade privilege from Cambodia or not will be made in February next year.
As a Least Developed Country, Cambodia has, for decades, enjoyed exports of all products, except arms and ammunition, to the EU markets with duty-free.
The country’s export to EU was valued at $5.86 billion US dollars in 2018, about 95 per cent of which entered the EU duty-free taking advantage of EBA preferences, an EU data showed, adding that garment and footwear products accounted for around three quarters of EU imports from the kingdom.
The garment and footwear industry is Cambodia’s biggest export sector, employing about 7,50,000 people in some 1,100 factories.
If stripped, tariffs on garment, footwear, and bicycle products to the EU market will increase 12 per cent, 16 per cent and 10 per cent, respectively, according to a recent World Bank report.
The Cambodian government announced in March a number of measures, including lowering logistics and production costs, cutting red tape, and supporting businesses with a six-day reduction in the number of public holidays, to support local manufacturers and exporters in case the EU withdrew the EBA from the kingdom.
Cambodian prime minister Samdech Techo Hun Sen has said the measures had helped reduce operating costs for producers and exporters by about 400 million US dollars per year.
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