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On 13 of October 2004 Cambodia became the 148th member of the World Trade Organisation (WTO). As one of only two Least Developed Countries (LDCs) to join the organisation through full working party negotiations (the other is Nepal), how well Cambodia manages and develops within the WTO framework will provide an important case study as to whether WTO membership is actually beneficial to Least Developed Countries.
In order to gain accession to the organisation, Cambodia's negotiation process was fraught with heavy pressure exerted by a few key WTO members. As a result Cambodia agreed to undertake commitments and obligations to so-called 'WTO-plus disciplines' in the areas of agriculture, intellectual property, trade regime transparency and market access. Cambodia has acceded to demands to hold export subsidies to zero, despite special provisions available to LDCs under the Agreement on Agriculture. It has also agreed to exempt pharmaceuticals and farm chemical products from the transition period granted to Cambodia for the implementation of TRIPS (trade-related aspects of intellectual property rights). At the close of negotiations the Minister for Commerce stated that Cambodia has paid a heavy price for global trade integration. He stated, 'we believe that the package of concessions and commitments that we have to accept certainly goes far beyond what is commensurate with the level of development of a least developed country like Cambodia'.
In order to benefit from its newfound access to international markets, Cambodia needs a commodity or service to export. Indeed, the main thrust of the Government's Five Year Poverty Reduction Program, is to stimulate economic development through expanding Cambodia's trade capacity. With January 1 ushering in the end of the WTO's Multifibre Agreement, which ends the preferential access that smaller LDC's have to Western garment markets, Cambodia's burgeoning but ultimately embryonic garment sector will likely be rendered uncompetitive and will by most estimates collapse. Likewise, the fortunes of the country's waxing and waning tourism industry, located primarily in one small province of the country, is hardly large or stable enough to sustain the country as a whole. In what is primarily a subsistence rice-growing country, Cambodia is therefore looking to launch its development and trade strategy with the only product it can, rice. However, while the majority of rice-producing nations intervene heavily within their own rice sectors to ensure food security, under the WTO arrangements, Cambodia is afforded no such luxury.
Major Government efforts are underway to modernise Cambodia's traditional subsistence rain-fed rice sector towards the cultivation and eventual export of irrigated High Yielding Rice Varieties (HYV), thereby bolstering the country's foreign currency earnings. However, it is a widely acknowledged social fact that a move from subsistence farming to modern commercial production requires a fundamental shift in the social relations of production and can have a tendency to widen existing socio-economic gaps within a society; Cambodia is no exception.
As the security situation in Cambodia continues to improve, modest rice surpluses have emerged, and in 1995 the Government began to export small quantities. While rising yields have meant that food security at a national level has officially been met, food security for many individual households remains an issue. Food shortages have emerged even in regions with overall rice surpluses. The situation in some provinces has been so bad that international donors have continued to supply food aid. In addition, commercial rice imports continue to rise. There is obviously, a food distribution problem emerging in Cambodia, resulting not from a lack of food per se, but from what Amartya Sen would term a lack of 'entitlements to food'. The FAO estimates that there is a high prevalence of child malnutrition with estimates ranging from 41 to 61 per cent around the country. Furthermore, just under a third of all women aged 15 to 49 are assessed to be below accepted Body/Mass/Index weight ranges (FAO). So, if agricultural production and trade continue to increase and do not contribute to the alleviation of poverty and hunger at the household level, what good is market access?
While some farmers in Cambodia are benefiting from agricultural extension programs, new technologies and increased production, others clearly are not. They are instead having their needs met by an ideologically diverse range of non-governmental organizations, some of which sell HYV rice seeds to farmers and others which give rice away. Meanwhile corruption continues to be widespread, highlighted by the recent discovery of a countrywide rice scam allegedly involving the selling of World Food Programme donated-rice onto the commercial market by state officials.
In discussions of the role of trade in stimulating development, much is made of the need for Developing and Least Developed Countries to gain access to Developed Country markets. Yet such an argument is ultimately misleading. Simply put, access to international markets does not necessarily translate into broad-based development. Instead export, especially of agricultural products, tends to favour traders those with the ability to buy cheap and sell high.
WATCHPOINT: A key factor in Cambodia's development is the country's rice sector. If rice trade increases and food security declines this will be indicative that access to Western markets is not enough to stimulate broad-based development, and Cambodia will need to find an alternative development path to that of trade stimulated growth.
About our company:
AFG Venture Group is an Asia and Australia based corporate advisory and consulting firm with over 20 years experience in creating alliances, relationships and transactions in Australia, South East Asia and India; including a 15 year history of corporate and equities advisory in Australia, undertaking merger, acquisition, divestment, fund raising and consulting for private and public companies.
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