An article published in the Diplomat.
By Kimkong Heng and Veasna Var
Cambodia should be more wary of Western sanctions.
Cambodia’s economic growth trajectory is facing uncertainty and challenges amid mounting international pressure, in particular the suspension of status under the EU’s Everything-But-Arms arrangement and most recently the United States’ General System of Preferences status.
The Cambodian government’s unprecedented crackdown on dissents prior to the 2018 general elections has not gone unnoticed. The international community, the United States and the European Union in particular, have imposed sanctions on Cambodia in attempts to halt what is widely perceived to be the Kingdom’s drift towards autocracy.
Prime Minister Hun Sen’s ruling Cambodian People’s Party (CPP) was apparently unopposed in the national election last July, as the country’s major opposition party, the Cambodia National Rescue Party (CNRP), was dissolved by the Supreme Court about nine months before the election that was condemned as a sham.
The CPP secured a landslide victory – sweeping all 125 parliamentary seats, while the CNRP politicians were banned from politics, only later were allowed to return to politics if they request political rehabilitation.
As Cambodia is locked in domestic politics, the country faces Western economic sanctions. The EU in October 2018 announced that it would remove its preferential trade deal, the Everything-But-Arms (EBA) scheme which grants Least Developed Countries (LDCs) full duty-free and quota-free access to the EU market for all products except for weapons. In February the EU began a six-month “period of intensive monitoring and engagement” that could lead to the temporary suspension of Cambodia’s EBA status, if no concrete actions are taken to reverse the deterioration of democracy and respect for human right in the country.
It is viewed that the Cambodian government’s response to the EU sanctions has been quite inconsistent. While Prime Minister Hun Sen and his ruling elites have tried to promulgate that Cambodia will not be adversely impacted by the consequences of losing preferential access to the EU market, the Royal Government of Cambodia has however responded to the EU’s EBA threat stating that the EU fails to take into account “the fate of nearly 1 million Cambodian female workers” and “the interest of the European businesses in Cambodia.” Hun Sen’s government regards the EU’s demands as an act of interference in Cambodia’s domestic affairs and Hun Sen himself was reported saying that Cambodia will not “exchange national sovereignty with aid.”
Considering the current political development, there is a high possibility that the EU will proceed to suspend Cambodia’s EBA privileges. Both sides seem to stick to their own terms and as it now stands compromise appears to be off the table, the result of which would be the withdrawal of Cambodia’s EBA status.
Should Cambodia lose its EBA status, despite the government’s unfounded claim of “no impact from EBA withdrawal,” there is no doubt that the country’s export-driven economy will be badly affected. In particular, Cambodia’s garment industry which respectively accounts for 40 and 60 percent of the Kingdom’s GDP and exports will experience the most impact. At the very least, the country will have to pay approximately $700 million annually in tariffs, based on government estimates. As a developing economy, Cambodia obviously cannot afford the possible collapse of its garment industry described as a sector too big to fail.
Kimkong Heng is a doctoral candidate at the University of Queensland and an Australia Awards Scholar.
Veasna Var is a doctoral candidate at the University of New South Wales, Canberra and a Senior Fellow at the Cambodian Institute for Cooperation and Peace.