ASEAN Free Trade Area (AFTA) or another term called Free Flow of Goods is one of the coreelements among the five of an ASEAN single market and production base efforts.
1
AFTAcomprises of two characteristics
–
zero tariffs and removal of non-tariff barriers among membersstates.
2
It means that all imported or exported products will flow freely among 10 ASEAN member states without imported or exported duties. In term of economic perspective, tariff is considered ascost of production and it is added on the unit cost of goods. Within this theory, ASEAN free tradearea would cause trading activities among ASEAN countries to be more competitive in term of price, quality, capital, and management. However, Cambodian Small and Medium Enterprisescurrently have limited production capacity and financing supports and other challenges
3
whichcontribute to the low competitiveness while many of the SMEs from neighboring countries are morecompetitive with their accession to superior infrastructure, higher skilled human capital, and facefewer bureaucratic barriers
4
. If any SMEs cannot maintain their competitiveness, they will result inthe loss of market share and finally bankruptcy. According to Mr. Chy Sila, CEO of CBM Corp,
“[t]his will create opportunities for local businessmen to partner
with the franchises, but it will be a
challenge for local businessmen as well.”
5
Within ASEAN Free Trade Area, CambodianGovernment cannot intervene to impose imported tariff to protect domestic products anymore, butSMEs themselves must be ready with this high competitive market. Therefore, there are reasons to believe that ASEAN free trade area will negatively affect Cambodian Small and Medium Enterprisein 2015. This paper is intended to give you an insight understanding on how ASEAN Free TradeArea would hurt Cambodian SME by comparing the competitiveness of Cambodian SME and other ASEAN member countries SME.
ASEAN Free Trade Area (AFTA) or another term called Free Flow of Goods is one of the coreelements among the five of an ASEAN single market and production base efforts.
1
AFTAcomprises of two characteristics
–
zero tariffs and removal of non-tariff barriers among membersstates.
2
It means that all imported or exported products will flow freely among 10 ASEAN member states without imported or exported duties. In term of economic perspective, tariff is considered ascost of production and it is added on the unit cost of goods. Within this theory, ASEAN free tradearea would cause trading activities among ASEAN countries to be more competitive in term of price, quality, capital, and management. However, Cambodian Small and Medium Enterprisescurrently have limited production capacity and financing supports and other challenges
3
whichcontribute to the low competitiveness while many of the SMEs from neighboring countries are morecompetitive with their accession to superior infrastructure, higher skilled human capital, and facefewer bureaucratic barriers
4
. If any SMEs cannot maintain their competitiveness, they will result inthe loss of market share and finally bankruptcy. According to Mr. Chy Sila, CEO of CBM Corp,
“[t]his will create opportunities for local businessmen to partner
with the franchises, but it will be a
challenge for local businessmen as well.”
5
Within ASEAN Free Trade Area, CambodianGovernment cannot intervene to impose imported tariff to protect domestic products anymore, butSMEs themselves must be ready with this high competitive market. Therefore, there are reasons to believe that ASEAN free trade area will negatively affect Cambodian Small and Medium Enterprisein 2015. This paper is intended to give you an insight understanding on how ASEAN Free TradeArea would hurt Cambodian SME by comparing the competitiveness of Cambodian SME and other ASEAN member countries SME.
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