Trade to grow with Aussie FTA

[PHNOM PENH POST]

INTRA Company Director Han Rutten hasn’t given much thought to Australia as a sourcing country for his Cambodian import business. At least not for commodities like steel that he can get cheaper, thanks to reduced tariffs, from China and Vietnam.

That may change now that the Kingdom in January ratified the ASEAN-Australia-New Zealand Free Trade Agreement, he said.

At a meeting yesterday in Phnom Penh held to inform businesses like Rutten about the details of AANZFTA, officials from Australia’s Department of Foreign Affairs and Trade highlighted the country’s already strong ties to the ASEAN region as well as the benefits of the new agreement.

In 2009 and 2010, trade between Australia and ASEAN totalled about US$78 billion, up from $43.8 billion in 2000 and 2001 – though Cambodia, Laos and Myanmar accounted for just $386 million of that, according to a presentation from Australia’s Department of Foreign Affairs and Trade.

But officials emphasised the agreement’s potential, saying it covers an area with a combined population of 600 million and an estimated gross domestic product of $2.7 trillion.

The main tenets of the deal included reduced tariffs on the import and export of goods and updated rules of origin, as well as investor protections, a framework for business-entry provisions and assistance in implementing AANZFTA.

The rules of origin will benefit Cambodia much in the same way as the European Union’s “Everything but Arms” program, officials said. While the Kingdom imports most of the raw materials used in its garment industry, it still enjoys lower tariffs because those exports are often viewed as originating in Cambodia and not other countries.

“I think it’s a very good thing. I believe that it’s the future of development of trade for Cambodia,” Intra Company’s Rutten said, adding that the boost in trade might, as a result, help to grow the Kingdom’s manufacturing sector.

David Carter, Chief Executive Officer at Cambodia’s Infinity Insurance and President of the Australian Business Association of Cambodia, said the agreement helps to tackle another key concern of investors looking to put their money to work here: security.

Where they once had little recourse if their Cambodian partners reneged on a deal, according to Carter, the new agreement now offers much-needed avenues for arbitration.

“So that’s got to be very good news,” Carter said.

“If you can bring confidence about Cambodia to a group of investors, they’re more likely to come in,” he said.

However, there will be challenges to overcome as the agreement is implemented, Carter said, particularly in getting all key parties – such as Cambodia’s Ministry of Commerce and Customs and Excise Department – up to speed on AANZFTA.

“No matter how hard you try there are always going to be hiccups along the way,” he said.

Intra Company’s Rutten also noted one potential problem for Cambodia resulting from the agreement, namely the loss of import duties. Given the country is a net importer of goods, the Kingdom will have to find a way to recoup the lost revenue, he said.

“So it’s not an easy ride for Cambodia,” he said. Government officials declined to comment yesterday.