In this article, we discuss foreign trade agreements in Cambodia in 2023.

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What should investors know about foreign trade agreements in Cambodia in 2023?

The Cambodian government is committed to foreign trade agreements in Cambodia, however, experts warn that Cambodia must prepare itself for the withdrawal of the EBA scheme as the Kingdom becomes more developed. In this article we discuss how the Kingdom must reduce production costs and increase its trade volume in order to remain competitive, and how that is being done through foreign trade partnerships in Cambodia.

How does signing foreign trade agreements in Cambodia help the country to open up new markets for Cambodian goods and services?

There has been a push towards signing foreign trade agreements in Cambodia in recent years, in an effort to open up new markets for its goods and services. These agreements have the potential to provide significant benefits to the Cambodian economy, by increasing exports, stimulating economic growth, and creating jobs.

One of the most important benefits of signing foreign trade agreements is that they can help to reduce or eliminate tariffs on goods traded between the countries involved. This makes Cambodian goods more competitive in foreign markets, as they are not subject to the same high tariffs as they would be otherwise. For example, the Cambodia-China Free Trade Agreement (CCFTA) has helped to increase exports of Cambodian agricultural products to China, by reducing or eliminating tariffs on these products.

Another benefit of signing foreign trade agreements is that they can help to establish rules of origin. This means that the products must be actually produced in Cambodia, and not simply imported from other countries and then re-exported. This helps to protect Cambodian businesses from unfair competition, and ensures that they are able to benefit from the preferential treatment offered under the agreement. For example, the Regional Comprehensive Economic Partnership (RCEP) has established rules of origin for garments and textiles, which means that Cambodian businesses must use Cambodian-made fabrics and components in order to qualify for preferential treatment under the agreement.

In addition to reducing tariffs and establishing rules of origin, foreign trade agreements can also provide for technical cooperation. This means that the countries involved can work together to help Cambodian businesses improve their production methods and meet the standards required to export their goods to foreign markets. For example, the Cambodia-Korea Free Trade Agreement (CKFTA) includes provisions for technical cooperation on footwear production. This has helped Cambodian businesses to improve their production methods and meet the standards required to export their footwear to Korea.

Overall, signing foreign trade agreements can help Cambodia to open up new markets for its goods and services, which can lead to increased exports, economic growth, and job creation. As Cambodia continues to sign more trade agreements, it is likely that even more opportunities will open up for Cambodian businesses.

What are some examples of successful foreign trade agreements?

Here are some additional examples of how signing foreign trade agreements in Cambodia have helped it to open up new markets for its goods and services:

The ASEAN-Japan Economic Partnership Agreement (CJEPA) has helped to increase exports of Cambodian rice to Japan. There has now be calls for a direct partnership between Cambodia and Japan (source)

The ASEAN-India Comprehensive Economic Partnership Agreement (CECA) has helped to increase exports of Cambodian rubber to India. (source)

The multiple Cambodia-Viet Nam Free Trade Agreement (CTFTA) have helped to increase exports of Cambodian garments and textiles to Vietnam. (source)

The Cambodia-South Korea Free Trade Agreement can help boost Cambodian exports of garments, textiles, and footwear to South Korea. (source)

As Cambodia continues to sign more trade agreements, it is likely that even more opportunities will open up for Cambodian businesses. 

What are the current foreign trade agreements in Cambodia?

Find some of the signed and/or active foreign trade agreements in Cambodia (source)

  • ASEAN Free Trade Area (AFTA) – 1992-present
  • Cambodia-China Free Trade Agreement (CCFTA) – 2009-present
  • Cambodia-India Comprehensive Economic Partnership Agreement (CECA) – 2015-present
  • Cambodia-Japan Economic Partnership Agreement (CJEPA) – 2016-present
  • Cambodia-Korea Free Trade Agreement (CKFTA) – 2016-present
  • Cambodia-Viet Nam Free Trade Agreement (CTFTA) – 2015-present
  • Regional Comprehensive Economic Partnership (RCEP) – 2020-present
  • Australia-Cambodia Free Trade Agreement (ACFTA) – 2008-present
  • Hong Kong-Cambodia Free Trade Agreement (HKFTA) – 2014-present
  • New Zealand-Cambodia Free Trade Agreement (NZCFTA) – 2021-present
  • Singapore-Cambodia Free Trade Agreement (SCFTA) – 2016-present

To note: These have been compiled from multiple sources and some may no longer be active or ongoing.

As a prominent example of a foreign trade agreements in Cambodia, How will the RCEP benefit the country?

The Regional Comprehensive Economic Partnership (RCEP) is the largest free trade agreement in the world, and it offers a number of new opportunities for Cambodian businesses. The agreement will reduce or eliminate tariffs on goods traded between RCEP member countries, which will make Cambodian exports more competitive in these markets.

In addition, RCEP will also create new opportunities for Cambodian businesses to invest in and partner with businesses in other RCEP member countries. This could lead to the creation of new jobs and businesses in Cambodia, and it could also help to boost the country’s economy.

Here are some of the specific opportunities that RCEP offers for Cambodian businesses:

  • Exports: The reduction or elimination of tariffs on goods traded between RCEP member countries will make Cambodian exports more competitive in these markets. This could lead to increased exports of Cambodian products, such as garments, textiles, agricultural products, and electronics.
  • Investment: RCEP will create new opportunities for Cambodian businesses to invest in and partner with businesses in other RCEP member countries. This could lead to the creation of new jobs and businesses in Cambodia, and it could also help to boost the country’s economy.
  • Services: RCEP will also liberalize trade in services, which could create new opportunities for Cambodian businesses to provide services to businesses in other RCEP member countries. 
  • This could include services such as logistics, transportation, and IT.

What are the challenges for businesses when entering foreign trade agreements in Cambodia?

There are some challenges that businesses will need to address in order to take advantage of the opportunities offered by any foreign trade agreements in Cambodia. For example with the RCEP, challenges include:

  • Competition: Increased competition from businesses in other RCEP member countries could put pressure on Cambodian businesses. In order to compete, Cambodian businesses will need to improve their productivity and efficiency.
  • Compliance: RCEP includes a number of rules and regulations that businesses will need to comply with. In order to do so, businesses will need to invest in training and resources.

Overall, RCEP is a significant opportunity for the Cambodian economy. By taking advantage of the opportunities offered by the agreement, Cambodian businesses can position themselves to benefit from the growth of the RCEP market and contribute to the country’s economic development. 

What does the government and experts say about the current foreign trade agreements in Cambodia?

Free trade agreements (FTAs) and the Regional Comprehensive Economic Partnership (RCEP) have provided benefits to Cambodia since they came into force, according to Lim Heng, vice president of the Cambodia Chamber of Commerce. (source)

Heng said that establishing more FTAs with potential trade partners like China and Korea would give Cambodia access to wider markets for its products.

Penn Sovicheat, Under-Secretary of State and spokesman at the Ministry of Commerce, echoed Heng’s statement, saying that bilateral FTAs and RCEP have created wider markets for Cambodia’s products. He also said that having FTAs with many developing countries like China is a positive sign for Cambodia’s economy and products.

The benefits of FTAs and RCEP for Cambodia include:

  • Increased market access: FTAs and RCEP have reduced or eliminated tariffs on goods traded between Cambodia and other countries, giving Cambodian businesses access to wider markets.
  • Attracting foreign investment: FTAs and RCEP have made Cambodia a more attractive destination for foreign investment, as they provide investors with access to a large market with preferential tariff rates.
  • Promoting economic growth: FTAs and RCEP have helped to promote economic growth in Cambodia, as they have led to increased trade and investment.

The Cambodian government is committed to expanding FTAs and RCEP, as they believe that these agreements will further benefit the country’s economy.

Aun Pornmoniroth, Deputy Prime Minister and Minister of Economy and Finance, said opening more markets, developing effective planning and negotiation strategies aims at making FTA negotiations with other Cambodia’s key partners.

“The Ministry has to conduct extensive consultations with stakeholders on the benefits of the bilateral trade agreements”, he added.

Ky Sereyvath, an economics researcher at the Royal Academy of Cambodia, said that Cambodia must prepare itself for the withdrawal of the Everything But Arms (EBA) scheme. The EBA is a preferential foreign trade agreement in Cambodia that allows Cambodia to export goods to the European Union (EU) without paying tariffs.

Sereyvath said that when Cambodia is lifted out of poverty, all preferential tax systems will come to an end. This means that Cambodian goods may become more expensive in the EU market. He added that the Kingdom must reduce production costs and increase its trade volume in order to remain competitive.

What are the latest and up-coming foreign trade agreements in Cambodia?

The Cambodian government is committed to expanding the Kingdom’s foreign trade partnerships. 

Minister of Commerce Pan Sorasak said that the government is pleased with recent trade agreements, such as the Regional Comprehensive Economic Partnership (RCEP), the Cambodia-China Free Trade Agreement (CCFTA), the Cambodia-Korea Free Trade Agreement (CKFTA), and the Cambodia-United Arab Emirates Comprehensive Economic Partnership Agreement (CAM-UAE CEPA). He added that further trade agreements are currently under negotiation and expected to be completed soon.

Sorasak said that the government’s goal is to open additional markets and help make Cambodia self-reliant. This will ensure the sustainability of a robust economy, expanded product markets, higher living standards, and more employment opportunities.