Cambodia signs free trade pact with China5 min read

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In a photo posted to Facebook, Chinese Foreign Minister Wang Yi, left, Cambodian Prime Minister Hun Sen, center, and Commerce Minister Pan Sorasak attend the signing ceremony for the Cambodia-China free trade agreement on October 12 at the Peace Palace in Phnom Penh.
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Chinese and Cambodian officials on October 12 signed the Cambodia-China Free Trade Agreement (CCFTA), allowing Cambodia greater access to the Chinese market and signifying the country’s commitment to strengthening its strategic ties to its powerful regional ally.

Speaking at the signing ceremony attended by Prime Minister Hun Sen, Chinese Foreign Affairs Minister Wang Yi, and other high-level officials, Cambodian Commerce Minister Pan Sorasak said the bilateral free-trade agreement was a milestone for the two nations. 

“The signing of this agreement signifies an even stronger tie between the two countries and marks another key historical milestone for Cambodia-China relations,” he said at the event at the Peace Palace in Phnom Penh.

“Undoubtedly, the agreement would provide a more robust economic partnership through a higher degree of market access, liberalization for goods, services, and investments,” Sorasak added. “The timely implementation of this agreement would provide economic and social benefits to people of the two countries in a mutually advantageous manner.”

He said he expected the two sides would be able to fully implement the agreement by early 2021.

Addressing attendees of the ceremony by video call from China, Commerce Minister Zhong Shan praised the signing of the agreement after a year of effort from the two nations.

“Since the beginning of this year, our two ministries have implemented the consensus reached by our leaders and have advanced and concluded the China Cambodia Free trade negotiations expeditiously,” he said.

“Our signing of the agreement today is a new milestone in the development of bilateral economic and trade relations,” Zhong continued. “China is ready to keep in close communication with Cambodia to push for the early entry into force of the agreement.”

Cambodian Commerce Ministry spokesman Long Kemvichet said the FTA would bring many benefits to Cambodia, including improved market access and investment opportunities.

“In the agreement, we agreed to open the market for goods and investment, so we discussed with the Chinese side to open the market to export a lot of goods,” Kemvichet said. “So we will receive a lot of benefits from China.”

He noted that among the goods that can be exported tariff-free to China are fish, dried meats, fresh fruits and vegetables, and other processed agricultural products like pepper and canned longan.

He also said Cambodia expects the FTA to help attract investment from companies looking to take advantage of the improved trade access to China.

He added that as the agreement would have bilateral benefits, it was not intended to make up for any lost trade with the European Union due to its partial withdrawal of the “Everything But Arms” free-trade agreement with Cambodia.

Total trade volume between Cambodia and China reached $8.5 billion in 2019, Kemvichet noted, and had hit $3.8 billion in the first six months of 2020.   

In a post on his Facebook page on October 12, Prime Minister Hun Sen thanked the Chinese minister for his assistance to Cambodia, and commended the signing of the FTA.

“The EBA will one day be lost. But the free trade agreement between Cambodia and China is forever,” Hun Sen said in the post.

During Yi’s official visit to Cambodia on October 11 and 12, Yi also met with officials including Cambodian Foreign Affairs Minister Prak Sokhonn and Deputy Prime Minister Hor Namhong to discuss bilateral cooperation and international issues of common interest to both countries.

According to an October 11 post on the deputy prime minister’s Facebook page, he and Yi had discussed the use of loans and grants this year to launch projects including a new submarine fiber optic cable link to Hong Kong, irrigation and flood protection projects, national road upgrades, and ways to boost rice exports.

Yi told Hor Namhong that after Covid-19, China would work on a joint development plan to increase investment in Cambodia.

“The Chinese side handed over 950 million yuan [about $ 140 million] in grant notes to Cambodia for an urgent development project in Cambodia,” Yi said in their meeting, according to the post.

Political analyst Em Sovannara said that although the official reason for Yi’s visit was to strengthen bilateral relations, he questioned which side would receive the most advantages.

“[Cambodia] needs to push business factors and local investments in order to be stronger and to take advantage of the opportunities from the agreement between Cambodia and China,” Sovannara said.

He said the new FTA between Cambodia and China would expand Cambodia’s market, but could not replace the value of the EBA agreement.

He added that in the wake of the new agreement and grants from China, it remains to be seen whether Cambodia would maintain strong ties with the US.

“We will see if Cambodia stands on its own two feet,” he said. “[If it chooses] a point where it seems to be facing off with America, then it is Cambodia’s loss.”

US Embassy spokesperson Chad Roedemeier said that because the United States has been a consistent partner to Cambodia in terms of both humanitarian aid and trade, he hoped there would bean “even playing field” for all international companies seeking to do business in Cambodia.

“China is a big and growing economy, and naturally has an economic presence here in Cambodia. We wouldn’t ask Cambodia to change that equation,” he said. “What we hope for, however, is a level playing field, with equal access for all companies that abide by international standards and best business practices.”

“We believe trade relationships should be mutually beneficial, transparent, and adhere to the highest standards, including labor rights,” he added.

According to the Ministry of Commerce, Cambodia imported $7.55 billion worth of goods from China in 2019, up slightly from $6.12 billion the year before. China, on the other hand, imported $1 billion worth of goods from Cambodia last year, up from $855 million the previous year. 

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