After the 18th private-public sector forum on March 29, Prime Minister Hun Sen announced a massive 17-point action plan for large-scale economic reforms, measures aimed at stimulating economic growth which he says could probably even bring about savings of up to $400 million a year to the private sector.
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These measures, though not implied openly, comes in the heels of other measures announced by the prime minister earlier, such as the abolishment of the white elephant in the shape of KAMSAB or Cambodia shipping agency. It also appears to be targeted at the possible loss of some competitiveness in Cambodia’s almost $6 billion export to EU and much more if US efforts to introduce bills to cut similar trade benefits to Cambodia kick in.
Measures to reduce the number of national holidays, that are still too many, introduce fiscal incentives on tax and customs, and expedite the completion of amendments to the Law on Investment and the Law on Special Economic Zones are all part of the reform agenda.
Cambodia is the second-biggest beneficiary of the EBA scheme after Bangladesh, accounting for 18 percent of all EBA imports to the EU, according to 2018 reports published by the EU.
The possibility of a 12 percent tax being imposed on Cambodia could see an increase in the cost of exports. However, if the 12 percent tax is imposed, it could become a moot point as Cambodian manufactures would have managed to reduce their cost of production quite significantly, thus successfully negating the EU action.
For a long time, Cambodian manufacturers, rightly or even wrongly, screamed and wailed at what they termed as unreasonable costs. It apparently added to their cost of production directly and indirectly, which caused export prices to rise. These costs ranged from informal taxes, exorbitant inland transportation costs, ludicrous customs and shipping-related costs and of course, the low productivity of Cambodian labour, compounded by the frequent labour unrest and strikes which further affected Cambodia’s export competitiveness.
That the actions on Cambodia which started with rice tax, to be followed by EU partially suspending the scheme after EU elections, and a possible full suspension on the trade benefits, would all come as a complete surprise.
The actions of EU are in reality a cruel action on a country which has begun to rebuild itself with its own brand of democracy, with across the board reforms and a young and dynamic labour force. The actions wreak of politics as it seems to punish a whole country and her population for the benefit of one recalcitrant politician.
The EBA is now nothing more than a political tool which is being thrown at Cambodia to punish it for its political policies and supposed bad human rights records when countries elsewhere in the region have totalitarian governments and far worse rights records.
Having said this, Cambodia should also stop crying foul at EU and or the US, and instead focus completely and earnestly in executing the various economic reform plans aimed at making Cambodia’s exports more competitive.
Cambodia should look inward at her own weakness rather than use neighbouring countries as comparisons to further its argument about the unfairness and uncivilised actions of the EU.
At the same time, Cambodia should also actively engage the EU and US through dialogues and negotiation missions on a continuous basis, and not on an ad hoc basis. It has to be on a reactionary manner only after the EU or US have announced their intentions to take punitive measures on trade with Cambodia.
In hindsight, a poorly organised and incapable amateurish approach towards EU’s action on imposing safeguards on rice imports should serve as an example for Cambodian negotiators on trade and even politics.
The team that was sent to the EU to argue against the imposition of the rice safeguards were unprepared and haphazardly put together. It received little importance from the Ministry of Commerce while the arguments prepared by an ill-prepared Cambodian Rice Federation seemed emotional and not technical. These are examples of such failures.
Veteran negotiators like Sok Siphana and a dedicated team of shrewd, technically sound, professional and committed members should be created to continue engaging with the EU, US and individual nations for bilateral trade deals.
They should also be dispatched to the US to dispel incorrect information and comments from one individual who is fast disappearing from the public’s interest. The team should also take on US legislators to fight Cambodia’s case, based on real achievements rather than emotional ones.
Cambodia does not lack skillful orators who are equally knowledgeable on how international trade deals are hammered out, how such negotiations are to be conducted and more importantly, how to use sound technical and logical arguments versus emotions to drive a point through.
The Prime Minister’s 17-point reform plan is welcomed by all players in the private sector. However, if the cabinet is unable to executive these plans together with their subordinates and minions, the reform agenda will fail, what with incapable ministers holding important portfolios who can make or break the reform agenda.
Prudence, professional appraisal and a sound, coherent and cohesive approach must be adopted by the cabinet as a whole and not just rely on top down directives from the Prime Minister. He too must use all the power within him, political and personal, to ensure the success of the reform agenda.
If these do not show the desired results within a given period of time, it would be time for the Prime Minister to boot out dead wood from his cabinet and replace them with capable candidates who are not only qualified but also full of ideas and dynamism to get the job done.
Dead wood have always been a bane in the Prime Minister’s reform plans, be it the 17-point economic reform agenda or even the rectangular strategy, and it is probably time for the Prime Minister to appraise his cabinet based on the implementation and success of the economic reform agenda.
To quote former British Prime Minister David Cameron, “The economy is the start and end of everything. You can’t have successful education reform or any other reform if you don’t have a strong economy.”