72551 v1 World Trade Indicators 2009/10 Cambodia Trade Brief Trade Policy import duties and temporarily banned rice exports.3 In December 2008, the government waived tariffs on Cambodia’s trade regime has gone through over two exports of apparel in order to assist the industry, which decades of gradual trade policy liberalization. By the has been hurt by the global economic downturn.4 early 1990s restrictions on individuals’ and firms’ abilities to participate in international trade had been largely eliminated and the country joined the WTO in External Environment 2003. Cambodia’s MFN Tariff Trade Restrictiveness According to Cambodia’s Market Access TTRI5 Index (TTRI)1 is 9.1 percent, compared to 4.8 percent (including preferences) of 10.8 percent for all goods, for the East Asia and Pacific (EAP) region and 11.6 with little difference between agricultural and non- percent for low-income countries. Based on the MFN agricultural goods, it has worse access to international TTRI, Cambodia ranks 92nd out of 125 countries markets than an average country in the EAP region (where 1st is least restrictive). Primarily a garment (3.8 percent) and low-income country group (5.6 exporter (garments account for 63 percent of its percent). The weighted average rest of the world tariff exports2), Cambodia’s trade policy reflects a system faced by Cambodian exports is 8.4 percent. Over the that is only somewhat more restrictive for non- course of 2008, the exchange rate of the Cambodian agricultural imports than for agricultural imports currency, the riel, to the U.S. dollar did not change (TTRIs of 9.6 and 8 percent, respectively). The simple significantly.6 average of the MFN applied tariff rate has decreased only slightly since 2001 to 14.2 percent in 2007. In November 2008, a free trade agreement (FTA) Cambodia has also decreased its maximum tariff between Cambodia and the Republic of Korea went (excluding alcohol and tobacco) to 35 percent. The into effect, whereby Korea dropped tariffs on over trade policy space, as measured by the wedge between 10,000 of Cambodia’s exports. As a member of bound and applied tariffs (the overhang), has remained ASEAN, Cambodia has been involved in the very low in the past decade and was 4.8 percent in negotiation of several FTAs. In March 2008, Japan 2007. Regarding its commitment to services trade signed an FTA with ASEAN member countries liberalization, Cambodia ranks 25th out of 148 whereby Japan will eliminate tariffs on 93 percent of countries on the GATS Commitments Index. goods exported from ASEAN member countries. In February 2009, a free trade deal was signed between As part of joining the Association of Southeast Asian ASEAN members and Australia and New Zealand Nations (ASEAN), Cambodia has committed to a with a comprehensive framework covering goods and gradual reduction in tariffs to a 0 to 5 percent range services as well as investment and intellectual property for goods imported from other ASEAN members by issues. It is expected to come into effect by the end of the year 2010, and has also reduced the number of 2009. In August 2009, an FTA was signed between tariff lines since 2008. In response to the rise in food India and ASEAN countries and is expected to take prices at the beginning of 2008, Cambodia reduced effect in January 1, 2010.7 Behind the Border Constraints Unless otherwise indicated, all data are as of August 2009 and are drawn from the World Trade Indicators 2009/10 Cambodia remained in the bottom 30 percent of Database. The database, Country Trade Briefs and international business environments in 2009, being Trade-at-a-Glance Tables, are available at ranked 145th out of 183 countries, in the Ease of http://www.worldbank .org/wti. Doing Business index. The Logistics Performance Index, a measure of the extent of trade facilitation, If using information from this brief, please provide the rates Cambodia at 2.5 on a scale from 1 to 5 with 5 following source citation: World Bank. 2010. ―Cambodia being the highest performance, compared with 2.58 Trade Brief.‖ World Trade Indicators 2009/10: Country Trade for the EAP region and 2.29 for countries in the low- Briefs. Washington, DC: World Bank. Available at income group. It ranked 81st in the world and 7th in http://www.worldbank.org/wti. World Trade Indicators 2009/10 Cambodia Trade Brief the EAP region (with Malaysia leading the regional Notes group). The area in which it performed the best was domestic logistics costs, while its weakest performance 1. TTRI calculates the equivalent uniform tariff that was in the efficiency and effectiveness of customs would keep domestic welfare constant. It is weighted by procedures. import shares and import demand elasticity. 2. World Bank, 2009, pp. 83. 3. FAO, 2009. Trade Outcomes 4. ESCAP, 2008. pp. 4. Cambodia’s high growth rate of total trade in goods 5. MA-TTRI calculates the equivalent uniform tariff of and services during the 2005–07 period of 15.2 trading partners that would keep their level of imports percent did not continue during 2008, when total trade constant. It is weighted by import values and import grew by only an estimated 7 percent in real (constant demand elasticities of trading partners. 2000 U.S. dollars) terms. Real exports grew by an 6. IMF, 2009 a. estimated 7.8 percent, but this was half of the growth 7. Bilaterals.org, 2008, 2009a-c. rate of the 2005–07 period. Real import growth was 8. National Bank of Cambodia, 2009, pp. 57 also halved to an estimated 6.2 percent. Expectations 9. IMF, 2009 c. are that exports and imports will fall in 2009 by 5.2 10. Economist Intelligence Unit, 2009. and 3.1 percent, respectively. Foreign direct investment as a share of GDP was also affected by the economic crisis, dropping to 8.5 percent in 2008 from References 10.4 percent in 2007. Bilaterals.org. October 31, 2008. ―FTA with Cambodia to Go into Effect in November.‖ Bilaterals.org. In nominal U.S. dollar terms, total trade grew by 17.6 ———. April 2009a. ―AANZFTA.‖ Bilaterals.org. percent in 2008, which was 4.7 percentage points higher than the 2007 growth rate.8 The global ———. August 15, 2009b. ―India-ASEAN FTA: Trade economic slowdown has hurt Cambodian exports to in Goods (2009).‖ Bilaterals.org. its two biggest export markets in 2008, as falling retail ———. April 2009c. ―Japan-ASEAN.‖ Bilaterals.org. sales in the United States and the EU decreased Economic and Social Commission for Asia and the demand for apparel.9 Despite this, total exports Pacific (ESCAP). December 2008. E-TISNET increased by 12.6 percent in 2008, driven mostly by Monthly News. United Nations, New York, NY. increases in goods exports, which grew by 15.2 Economist Intelligence Unit. August 2009. ―Country percent. Exports in services grew by 5.9 percent, a Report: Cambodia.‖ The Economist Intelligence Unit. quarter of their 2007 rate. Garment exports as a whole Food and Agriculture Association of the United Nations were down 20 percent from in the first five months of (FAO). 2009. ―Policy Measures Taken by 2009 year-on-year. Demand for Cambodian-made Governments to Reduce the Impact of Soaring Prices garments in the United States was particularly hard hit, (As of 15 December 2008).‖ FAO, New York, NY. falling 21.2 percent in the first five months of 2009 International Monetary Fund (IMF). 2009. International compared with the same time period in 2008. U.S. Financial Statistics. IMF, Washington, DC. demand has not shown signs of recovering since the ———. August 2009b. Direction of Trade Statistics largest decrease (24.2 percent) came in May.10 (Country Tables). IMF, Washington, DC. ———. March 6, 2009c. ―Statement of an IMF Mission The majority of Cambodia’s imports are from at the Conclusion of the Staff Visit to Cambodia.‖ Thailand, which supplies food and production inputs Press Release No. 09/67. IMF, Washington, DC. such as refined oil and cement. Total imports grew by National Bank of Cambodia. 2009. Annual Report 2008. 18.6 percent, largely driven by the increases in . goods imports of 19.4 percent, while services imports World Bank. April 2009. ―East Asia and Pacific Update: increased by 13.5 percent. In 2009, imports are Battling the Forces of Global Recession.‖ World expected to fall by 11.3 percent, which is entirely driven by an expected fall in goods imports. Bank, Washington, DC. ———. August 5, 2007. ―Garment Sector Competes and Thrives in Cambodia.‖ World Bank, Washington, DC. .