Banks say they are prepared for the potential loss of duty-free trade with the EU under the “Everything But Arms” scheme, with some downplaying the likely economic impact while others say they are ready to activate contingency plans in case of economic slowdown.
The EU on Nov. 12 gave the Cambodian government its preliminary report on potentially suspending the EBA scheme, demanding “real and credible” improvement in human rights and political issues if it wants to retain the deal.
The EU noted the ongoing case against Cambodia National Rescue Party (CNRP) leader Kem Sokha as one of its major concerns and gave the government one month to respond. A final decision is due in February.
“I think the government has actually put in place a lot of measures to actually counter any negative impact, any potential negative impact of the withdrawal of EBA,” Raymond Sia, CEO at Canadia bank, told reporters on Monday on the sidelines of the ASEAN Banking Conference in Phnom Penh. “So I am actually very confident that despite the withdrawal of EBA, Cambodia will still be actually performing well.”
Sia said Canadia Bank didn’t have clients in the garment and textile industry, but would still be indirectly exposed to an EBA suspension.
“We certainly have some form of indirect exposure, right? To all industries, all sectors,” Sia said. “We are managing it, I would say, very well in terms of monitoring as well as periodical review of our entire portfolio.”
In Channy, president of Acleda and chairman of the Association of Banks in Cambodia, said the EBA issue was a good opportunity to revisit the question of diversifying Cambodian exports.
“If asked whether there is an impact, yes there surely is. But we ask ourselves: What have we done to prevent the effects of this loss?” Channy told reporters at the sideline of the same venue on Monday.
“Every enterprise has always thought about training its human resources, reviewing the value chain … and training people to be more productive,” he said.
“The question is, what are the implications of losing the EBA, and that’s because we rely only on the European market, the single market,” he said, adding that Cambodia should promote exports to other markets and improve its infrastructure to boost the tourism sector.
Shin Chang Moo, president of Phnom Penh Commercial Bank, said he was concerned about an EBA loss, but a “contingency plan” was already in place.
“We actually have concerns, so [since the] beginning of this year, we are running contingency plan[ning]: What if the EBA is withdrawn?” Shin told reporters at the conference. If the scenario of losing the EBA eventuates, “then we have to just immediately start out the contingency plan.”
Banks would mostly be affected by the overall impact on the Cambodian economy rather than through direct investments, he said.
“But even if the EBA situation comes in … the impact to the banking industry is not very direct because [only] some banks are heavily dependent on the manufactures especially for the export side,” he added.
An EBA withdrawal would have a ripple effect on retail and consumers, Shin added. “I think that many of the commercial banks in Cambodia adopt very similar guidelines and policies when it comes to worst situation.”