A top garment industry figure on June 28 reiterated a concern that the apparel manufacturing sector and broader business community still have limited understanding of the Regional Comprehensive Economic Partnership (RCEP) and are unable to take full advantage of the world’s largest trade pact.
Garment Manufacturers Association in Cambodia (GMAC) deputy secretary-general Kaing Monika was speaking at a webinar live-streamed on the ASEAN Secretariat’s YouTube channel, entitled “Unlocking RCEP for Business: Opportunities for Garment and Textile Industry”.
The RCEP is a free trade agreement (FTA) among the 10 ASEAN countries of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam, as well as five additional Asia-Pacific nations: Australia, China, Japan, South Korea and New Zealand.
The pact took effect on January 1 in 10 out of the 15 signatory states – including Cambodia – that account for about 30 per cent of the world’s population, or 2.2 billion people, and 30 per cent of global gross domestic product (GDP), at $29.7 trillion.
Total trade between Cambodia and RCEP partners, including under the Cambodia-China Free Trade Agreement (CCFTA) and other preferential schemes, topped $8.06 billion in January-March, according to the Ministry of Commerce. Of that, Cambodia’s exports amounted to $1.956 billion while imports were $6.106 billion.
Monika commented that at present, the Cambodian business community is largely overlooking the benefits of the RCEP in favour of those provided by existing FTAs and other preferential trade arrangements.
He claimed that there was low enthusiasm and regard for the agreement, citing three “obvious” reasons: first, Cambodia’s exports are mainly destined for Western markets.
The second reason is an apparent blindness to the fact that the RCEP offers more liberal rules than existing FTAs, in terms of preferential or duty-free access to member states’ markets as well as the determination of origin of goods, he said, noting that the deal treats the 15 signatories as a single economic region.
“RCEP members are allowed to source yarns and fabrics from anywhere in the world and the finished garments will still qualify for duty-free benefits as long as the 40 per cent local value content [condition] is met.
Most garment factories in RCEP member countries can immediately enjoy the RCEP benefits without adjusting their current supply chains,” Monika said.
The third reason he gave was general disregard for the possibilities that may arise from growth in the RCEP markets.
“If we look at ASEAN’s overall trade with China, it was worth $684 billion in 2020 and increased to $878 billion in 2021.
“However, China and ASEAN are still far from becoming each other’s largest trading partner in textiles and apparel. In 2020, China imported only $2.5 billion of apparel and clothing accessories from ASEAN, less than the US imported from Cambodia alone,” Monika added.
He called on ASEAN and China to explore the full range of opportunities presented by the RCEP, pointing out that the latter is reportedly the largest textile producer and has a “huge” middle class with “enormous” spending power.
At the same time, garment producing countries in the Southeast Asian bloc offer relatively cheap labour and are geographically close to the East Asian country, he said, proclaiming that Cambodia is “actually a perfect partner”.
“It’s really important to forcefully promote the understanding of RCEP among the business community,” he added.
Song Saran is co-founder and CEO of Amru Rice (Cambodia) Co Ltd and the president of the Cambodia Rice Federation, the Kingdom’s apex rice industry body.
Saran recently told The Post that effective RCEP implementation “broaden and deepen economic linkages with the additional preferential Trade in Goods market access coverage notably into China, Japan and South Korea where tariff elimination and expeditious clearance of goods access and concessions would cut down cost for sectors supplying to these markets.
“Upon the ratification by participating countries of the RCEP Agreement, an opportune platform would be in place for business-to-business negotiations. For Cambodia, the RCEP provides a strong foundation for it to spur its economy and help overcome the challenges caused by the pandemic,” he said.
As of June 29, Indonesia, Myanmar and the Philippines have yet to ratify the RCEP.
In February, the World Bank (WB) reported that Cambodia is expected to register a 6.5 per cent uptick in terms of export growth, the highest among RCEP members after Vietnam and Japan at 11.4 per cent and 8.9 per cent, respectively, it said, adding that the deal has the potential to lift 27 million additional people to middle-class status by 2035.
