The Southeast Asia Country Series: Kingdom of Cambodia

In 2018, the Pakistan Business Council (PBC) as part of its initiative to encourage Pakistan’s trade with its non-traditional trading partners covered ‘6’ countries of Southeast Asia in its Southeast Asia Country Series. This is the last publication of the Southeast Asia Country series and covers the Kingdom of Cambodia.

The Kingdom of Cambodia has a strategic location in Southeastern Asia and is bordered by Laos, Thailand and Vietnam. Cambodia is home to a number of tourist sites such as Angkor Wat Temple and Preah Vihear. Around 97% of the total population are Buddhists and Khmer is the official language of the country. The present Prime Minister is Hun Sen and King Norodom Sihamoni is the head of the state.

A lower-middle income country, Cambodia has emerged as the 6^th fastest growing economy in the world with inward FDI of $2.78 billion in 2017. The table on the left shows a brief economic snapshot of both Cambodia & Pakistan for 2017. The textile industry in Cambodia has grown to become the major source of foreign exchange earnings. The industry operates in the downstream sector and accounts for 65% of total exports, textile exports are dominated by product category HS-61 and HS-62. In 2017, 643 garment factories were registered; employing more than 70% of the total workforce. The largest textile markets for Cambodia were the USA, Germany & UK. As per the Doing Business Index, Cambodia ranked 135^th in the world as of 2018.

Cambodia over the years has been facing a constant Balance of Trade deficit; this equaled $0.94 billion in 2017. The major import origins were Thailand, China and Singapore. The top export destinations were the USA, Germany and the UK. Cambodia mostly imported items such as; gold, knitted fabrics, mineral oils and motor vehicles, while its exports mainly composed of knitted and not knitted apparel, footwear and bicycles. Trade deficit with China stood at $3.78 billion. Cambodia has signed six trade agreements as a member of ASEA, and these have been implemented.

The indicative trade potential between Pakistan & Cambodia for the top 25 products at HS-06 level showed that the actual trade of these products lagged far behind their potential. Pakistan had the potential to export $1.02 billion worth of goods to Cambodia. Similarly, Cambodia’s export potential to Pakistan was $0.59 billion. Trade between the two countries has been in favor of Pakistan, resulting in a trade deficit of $27.52 million for Cambodia. Knitted and not knitted apparel constituted 69% of Cambodia’s exports to Pakistan, while cotton, raw hides and medicaments were the most imported items from Pakistan.

As this report went into print, reports started coming in that Cambodia was in danger of losing its duty free access to the European Union. Cambodia has duty free access to the EU under the Everything But Arms (EBA) provision, and its exports to the EU in 2017 were worth $7.48 billion. A comparison of Pakistan’s top exports to the EU with those of Cambodia’s show that for the top three product categories which were common to both countries, Cambodia’s exports were worth $5.84 billion or 78% of its total exports to the EU in 2017. For the top 40 common exports, Pakistan has the potential to increase its exports to the EU by $584.3 million in case Cambodia losses its duty free access to the EU

The PBC is a private sector not-for-profit advocacy platform set-up in 2005 by 14 (now 78) of Pakistan’s largest businesses. PBC’s research-based advocacy supports measures which improve Pakistani industry’s regional and global competitiveness. More information about the PBC, its members, objectives and activities can be found on its website: www.pbc.org.pk