Facing risks as EBA decision looms

Facing risks as EBA decision looms

Economic security defines national security. Economic success and social justice play a critical role in determining the legitimacy of the government.

Peace and stability can only be sustained if social justice, democratic institutions and economic opportunities are continuously promoted.

Cambodia’s economy in 2020 is facing a relatively high risk because of the slowdown of the tourism sector, the bubble that burst in the real estate sector in Sihanoukville and potential effects stemming from the revocation of preferential trade treatments provided by the EU and the United States.

China is not capable of supporting Cambodia’s economy because it cannot inject money to help to provide job opportunities to hundreds of thousands of people affected by both internal and external economic risks.

Cambodia needs to rely on itself to mitigate risks and stay resilient amid rising uncertainty and downward economic pressures. The socio-economic inequality will be further widened if the government does not have any effective policy with which to intervene.

Institutional reforms and leadership re-engineering are hence necessary to build a self-help strategy. The government needs to further tax the rich, especially those who own hundreds or thousands of hectares of land for speculation, in order to increase the  state budget to support building infrastructure and developing skills for the poor.

The tax regime should also be looked at again to alleviate burdens on the small and medium enterprise sector because some tax laws that were originally meant for the garment and footwear industry have now become compulsory across the board. These taxes pose extra hardship on the industry which is already reeling from a lack of human resources and, when available, uneconomical human capital.

Cambodian stakeholders are cautiously waiting for the EU’s decision on the Everything but Arms (EBA) trade deal decision that will be issued next month. Khmer Times predicts that the EU will implement a partial revocation of it, which means that the textile industry may not be affected. If this is the case, the risks and actual impacts can be managed.

The Cambodian government, under the leadership of the Ministry of Foreign and International Cooperation, has worked closely with its EU counterpart in order to respond to the demands and conditions unilaterally set by the EU.

In the negotiation process, one should not expect to achieve all expected outcomes. There is always a red line in the negotiation. With regards to the responses to the EU’s demands, Cambodia has shown good faith in cooperating with the EU.

In many largely positively ways, Cambodia has met the conditions set by the EU, except for a few conditions relating to the case of Kem Sokha and the outlawed Cambodia National Rescue Party (CNRP).

The Cambodian government consistently explains that the decision on the case of Kem Sokha and other senior members of the CNRP depends on the courts, not the government. Therefore, it is legally impossible for the government to meet the EU’s demands regarding the unconditional dropping of charges against Kem Sokha, for instance.

There are three reasons that could explain the possibility of partial suspension of the EBA from Cambodia.

First, the EU needs to save its institutional image as a “normative power” that stresses the importance of human rights and democracy in its decision making. The new leadership in Brussels is compelled to stick to the core values and principles of the EU. Therefore, the EU will be compelled to take a decision to suspend the EBA benefits from Cambodia.

Second, the suspension could be partial because the Cambodian government has positively responded to most of the demands, especially with respect to labor rights and land reforms. Social and economic rights in Cambodia have been improved remarkably.

Third, looking from a humanitarian perspective, the EU is not interested in targeting the textile industry in the Kingdom because of the fact that the industry employs more than 800,000 workers, mainly young women from rural areas.

The suspension of the EBA on this sector will seriously affect the livelihoods of at least 2 million Cambodians directly or indirectly. This will affect the Kingdom’s efforts to realize the United Nations Sustainable Development Goals (SDGs).

The EU has been accused of implementing double standards vis-a-vis Cambodia because this regional organization reached a free trade agreement with Vietnam last year notwithstanding the fact that Vietnam does not necessarily have a better democratic and human rights record when compared with Cambodia.

Such double standards have discouraged some Cambodian leaders from closely cooperating with the EU on the democracy and human rights agendas. Some have said that the EU would be much less relevant if it decides to totally suspend the EBA from Cambodia.

Furthermore, the findings of the  EU on core issues such as farmers  losing land,  deteriorating labor and union rights and last, but not least, political repression are all subjective in nature – a matter of perception.

The findings of the EU to effect a suspension of the EBA are thus subjective, predetermined to put Cambodia in a lose-lose situation. As the Generalized Scheme of Preferences regulation points out, eradicating poverty and promoting human rights are priorities for the EU.

At the same time, the EU’s capacity to support positive developments in both areas depends on good bilateral relations. The EU’s decision needs to strike the right balance between these priorities.