The structural changes that will be brought about by the Regional Comprehensive Economic Partnership (RCEP) can increase Cambodia’s exports between 9.4% and 18% per year, according to experts.
A working paper in the Comprehensive Asia Development Plan (CADP) 3.0, released recently by the Jakarta-based Economic Research Institute for ASEAN and East Asia (ERIA), said the great potential of cambodia’s export is in implementing RCEP commitments and undertaking deeper structural reforms. align the national economy with regional integration.
According to the study, the RCEP impact of a 9.4% increase in exports could have a 2% annual growth impact on GDP and a 3.2% increase in employment. The greater impact of an 18% increase in exports on the national economy can translate into a 3.8% increase in GDP and a 6.2% increase in employment.
The study indicates that Cambodia’s progressive market-oriented reforms, in both manufacturing and services, have been successful in bringing the country closer to the next stage of growth. Cambodia must maintain progressive market-based reforms in the post-pandemic recovery for deeper regional integration with the framework provided by RCEP, he suggested.
One of the paper’s authors, Shandre M Thangavelu of the Jeffrey Cheah Institute on Southeast Asia, Sunway University, Malaysia, said Khmer time that the structural transformation of the Cambodian economy is essential to reorient and position its manufacturing activities towards higher value-added activities in the global production value chain (GVC).
“Currently, the manufacturing sector is not diversified and concentrated in apparel and textiles, but overall manufacturing is showing signs of transitioning to higher value-added activities such as parts and components and transportation. “, did he declare.
“There is a need to accelerate structural transformation in terms of diversification from apparel and textile manufacturing into higher value-added GVC activities and also to invest in key fundamentals that will accelerate structural transformation such as development human capital, infrastructure (soft and hard), technology, connectivity and forward-looking institutions to facilitate trade and investment,” he said.
According to Thangavelu, this trade expansion reflects the ‘catch up’ and ‘leapfrog’ phase for Cambodia in terms of investment in human capital and key skills and the alignment of key industries in the GVC.
“It is also important to maintain and support structural transformation in terms of increasing the competitiveness of labor-intensive activities,” he said.
Thangavelu also listed several policy options – moving labor-intensive activities from Phnom Penh to other competitive regions in Cambodia that can absorb these industries. “This trickle-down effect of industries to other provinces will increase each province’s competitiveness based on their respective comparative advantages,” he said.
“Phnom Penh should be a competitive global city driving globalization and moving towards higher value-added activities in services, digitalization, technology and innovation. Connectivity, city-to-city linkages and urban agglomeration between cities and provinces in line with regional GVC activities will increase the overall potential of the Cambodian economy,” he noted.
The study found that Cambodia’s export potential is far greater than the actual value and it could have exported an additional $4.27 billion to RCEP countries every year. China, Korea and Japan offer a greater opportunity for Cambodia’s exports, with an export potential of $2.74 billion.
There is also a need to increase the competitiveness and linkages of Special Economic Zones (SEZs) with GVC activities to attract multinational activities in these industries. Recent evidence indicates that SEZs in Cambodia are losing their appeal in higher value-added activities to create linkages with regional GVCs.
The study found that Cambodian exports to China, Japan and Korea are end-use products, which are labor-intensive in terms of “cutting, making and trimming” in exports of clothes. It is important to develop more functional service activities in garment exports in services; such as branding, marketing and sourcing, which will enable the textile and garment industry in Cambodia to move up the value chain, he said.