The Regional Comprehensive Economic Partnership (RCEP), the world's largest free trade agreement, has shown promising results for Cambodia in its first year. Its total trade with RCEP members reached nearly $30 billion, with exports growing by 28 per cent and imports falling by 13 per cent. However, the story is not without its nuances, and challenges remain for the future.
Cambodia emerges biggest gainer
RCEP has facilitated increased regional trade. Overall trade between Cambodia and other RCEP members reached nearly $30 billion in 2023, a positive sign for regional integration. Tariff reductions have benefited specific countries. Cambodia's exports to several RCEP members, like Indonesia, grew due to lowered tariffs. Indonesia emerged as the biggest gainer, becoming Cambodia's 6th largest trading partner with a 15 per cent trade volume increase. While imports also grew initially, they stabilized in 2023, potentially suggesting a shift towards higher value-added exports
|
Year |
Cambodia-RCEP Trade Value ($ billion) |
Cambodia Exports to RCEP (($ billion) |
Cambodia Imports from RCEP (($ billion) |
|
2021 (Pre-RCEP) |
N/A |
N/A |
N/A |
|
2022 |
25.8 |
6.35 |
19.45 |
|
2023 |
30.0 |
8.17 |
21.28 |
Concerns about gains
Even though RCEP promises tariff free trade among members, there are several concerns about its outcome. Viz.
Unequal benefits: Concerns exist regarding potential uneven distribution of benefits among member countries, with larger economies potentially dominating trade.
Competition: Increased regional competition within the textile and apparel sector could pressure smaller players like Cambodia to further enhance competitiveness.
Non-Tariff barriers: Simplifying non-tariff barriers remains crucial to fully unlock RCEP's potential. Concerns remain regarding non-tariff barriers. Complex customs procedures and regulations continue to hinder smooth trade flow in some regions. Some RCEP members saw declining exports from Cambodia, highlighting the need for diversification and value chain integration.
Road ahead
The RCEP is expected to further boost Cambodia's trade and economic growth. Diversifying exports beyond textiles and apparel remains crucial for long-term sustainability. Cambodia must address infrastructure gaps, improve logistics, and enhance competitiveness to fully capitalize on RCEP benefits. To move ahead, it’s important to eliminate trade barriers and foster regional cooperation to create a robust, integrated market. Streamline regulations, invest in infrastructure, and promote innovation for success. Moreover, countries need to look beyond traditional garment production and explore opportunities in higher-value segments like technical textiles and eco-friendly apparel.
