The 10 economies that make up the Association of Southeast Asian Nations (ASEAN) are slated to establish one single market and production base by 2015.
The move is aimed at creating a highly competitive economic region that will become a significant player in the global economy. But as 2015 is only a few years from now, questions are being raised about whether Cambodia is ready to fully participate in the ASEAN Economic Community (AEC). While Cambodia appears to have the proper policies and regulations in place for the planned integration, issues need to be addressed in such areas as the quality of some of the country’s products, production capacity, labor productivity and public administration.
“In terms of whether Cambodia is prepared, I think partly no, partly yes,” said Dr. Sok Siphana, advisor to the Cambodian government and to the Supreme National Economic Council (SNEC).
Cambodia meets all of the policy and regulatory requirements, he said. “In terms of what’s on paper—policies, laws, regulations—Cambodia is likely ready,” Sok Siphana said.
The AEC Scorecard prepared a list of the member countries in terms of readiness when it comes to legal and policy frameworks and ranked Cambodia third after only Singapore and Malaysia, he pointed out, adding that Cambodia’s entry into the WTO in 2004 was a big boost in terms of economic policy and trade liberalization policy. But there is a lot more than just having all the legal and policy-related paper work in order to get ready for becoming part of the planned trading bloc.
“I said partly no because I feel that our private sector has not fully appreciated the full potential from this regional economic enlargement. They have to make efforts to understand better the new business opportunities as well as the implications. I am of the firm view that more public private sector dialogue needs to take place to ensure that our business communities can better prepare themselves for the eventual ASEAN Economic Community”, sok Siphana added.
“Cambodia is already prepared for regional economic integration –but not yet confident enough to compete”, said chheang Vannarith, executive Director of Cambodian Institute for Cooperation and Peace (CICP).
Cambodia is not ready for AEC in 2015 given its development status compared to the six older ASEAN members, said Poch Kongchheng, a researcher at the Economic Institute of Cambodia.
There are numerous constraints that Cambodia needs to address if it wants to have a successful integration into AEC 2015. While the quality of the Kingdom’s agricultural products and garments and textiles is sufficient, the quality of some other products is not so good, said Chheang Vannarith. And there are problems with the country’s public administration, labor productivity and production costs.
“Cambodia public administration is regarded by the private sector as not yet being effective and efficient. Labor productivity remains relatively low, and the cost of production is relatively high-particularly energy and transportation costs”, said Chheang Vannarith.
While there has been an improvement of human resources, Cambodia still lacks a sufficient level of skilled labor to compete with other ASEAN members, said Poch Kongchheng, a researcher at the Economic Institute of Cambodia. Production costs are considerably high compared to neighboring countries and other ASEAN members. “For example, the cost of electricity, which is the major production input, in Cambodia is significantly higher than in Vietnam and Thailand.
Cambodia’s status as a country that imports a lot more products than it exports is another problem. Garment and textile products currently account for the majority of its total exports, and its main markets are the US and the European Union. Moreover, Cambodia’s exports to ASEAN countries are mostly agricultural products in the form of raw materials.
“In this regard, Cambodia does not have many goods for exporting to other ASEAN countries while imports keep increasing. Hence, its trade deficit is anticipated to significantly enlarge in terms of trade in the ASEAN region”, said Chheang Vannarith.
All that said, some experts suggest Cambodia needs to do more in the area of economic reform.
“First of all, Cambodia needs to speed up the economic reforms by focusing on export and investment facilitation through the strengthening of good governance, infrastructure development, human resources development plus its research and development capability”, said Chheang Vannarith.
Secondly, public-private partnerships (PPPs) need to be further developed so that strong partnerships can be achieved between the public and private sectors. Thirdly, the private sector needs more support from the state and donor agencies in developing capacity, financing, technological development, and market research analysis, he said.
“Fourthly, a knowledge-based economy needs to be introduced and gradually implemented through improving the educational system with a focus on innovation, creativity, and entrepreneurship. The last one is that the components industries needs to be developed in order to integrate Cambodia into the regional production network”, Chheang Vannarith.