June 7, 2023
PhnomPenh – Prime Minister Hun Sen reiterated that the EU’s partial suspension of its ‘Everything But Arms’ (EBA) trade scheme did not significantly hinder the country’s exports to the bloc.
He also hinted that the programme might be completely withdrawn in 2027, when Cambodia is expected to no longer be classified as a Least Developed Country (LDC).
Addressing factory workers in Kong Pisei district, Kampong Speu province on June 4, Hun Sen said: “The EBA is a policy of developed European countries to reduce import duties for least developed countries. As our country develops, the EBA will gradually diminish. Therefore, if 20 per cent of the EBA has already been withdrawn, by 2027, the EBA will be fully withdrawn”.
Hun Sen asserted that by 2027, Cambodia will no longer be amongst the least developed countries (LDCs). In his view, this implies an inevitable shift towards taxation for goods exported to European markets. However, he confidently dismissed the effect of the EBA withdrawal.
“The loss of 20 per cent of the EBA has not impacted our country,” he said. “We used to export goods without paying taxes. We’ll continue exporting even we have to pay taxes. Our profits may lessen, but we will still profit.”
Urging greater national resilience, Hun Sen stressed: “That’s why, at the meeting in Europe, I insisted our ministers not request the return of 20 per cent of the EBA. I want to gauge Cambodia’s resilience.”
The Cambodia Chamber of Commerce (CCC) vice-president Lim Heng shared the prime minister’s stance, acknowledging that after leaving the LDCs, other preferential taxes will also be withdrawn. However, he expressed the private sector’s confidence in the free trade agreements (FTAs) that Cambodia has established, which are set to bolster the country’s economy in lieu of the EBA or other preferential tax systems.
Heng highlighted the government’s proactive efforts, stating: “We are negotiating free trade agreements with several countries like China, South Korea, and the United Arab Emirates, as well as Switzerland. All of these efforts are aimed at stimulating Cambodia’s future economy, even without the EBA.”
Economics researcher at the Royal Academy of Cambodia, Ky Sereyvath, stressed the need for Cambodia to strengthen itself as the EBA withdrawal is inevitable due to the country’s economic growth.
“When Cambodia leaves the LDCs, all preferential tax systems will cease. Therefore, Cambodia must be prepared to produce low-cost products or reduce costs,” he said.
He further explained that the full withdrawal of the EBA could result in an increase of around five per cent in the price of Cambodia’s goods. Despite this, Sereyvath believes the country’s exports will continue to thrive if it strengthens itself.
Nonetheless, Prime Minister Hun Sen disclosed Cambodia had initiated discussions with China, Japan, South Korea, and the Asian Development Bank (ADB) to continue providing Cambodia with preferential loans once it exits the LDCs.
“We aim to distance ourselves from the LDCs by 2027, which will also mark the loss of the EBA and loans will come with commercial interest rates.
We’ve requested China, Japan, South Korea, and the ADB to consider offering development-related loans at lower interest rates, even as we depart from the LDCs,” he added.