After two decades of being classified as one of the least developed countries, Cambodia has achieved significant economic and social development milestones, according to a recent report by the Asian Development Bank (ADB). The report states that Cambodia met the graduation criteria for the first time in 2021 and aims to officially graduate by 2027.
The achievement of graduation from the least developed country status is a major milestone for Cambodia, as it reflects the country’s progress in attaining important development goals. However, the report also highlights the challenges that accompany this transition. Graduation entails the loss of preferential trade benefits, including duty-free status and favourable “rules of origin.”
One of the key concerns raised by the ADB is the potential negative impact on Cambodia’s export performance due to the loss of preferential trade benefits. Cambodia has greatly benefited from preferential treatment and lenient rules of origin, enabling its products to enter Europe duty-free and significantly increasing its exports to the European Union. To mitigate the adverse effects of losing these preferences, Cambodia must carefully manage alternative market access and enhance its competitiveness.
The report emphasises that Cambodia has already reaped the benefits of various free trade agreements (FTAs), including the Regional Comprehensive Economic Partnership (RCEP), the Cambodia-China FTA, and the Cambodia-South Korea FTA. These agreements have not only facilitated sustainable trade growth but have also attracted foreign direct investments to the country.
Penn Sovicheat, the undersecretary of state and spokesperson for the Cambodian Ministry of Commerce, highlighted the positive impact of the RCEP agreement. He stated that the RCEP, along with other bilateral FTAs, will play a pivotal role in Cambodia’s journey towards graduation from the least developed country status. Sovicheat further explained that Cambodia aims to achieve upper-middle-income country status by 2030 and become a high-income nation by 2050, with the RCEP agreement serving as a catalyst for these goals.
The RCEP agreement consists of 15 Asia-Pacific countries, including the 10 ASEAN member states (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam) and their five trading partners (China, Japan, South Korea, Australia, and New Zealand).
As Cambodia progresses towards its graduation from the least developed country status, it must focus on forging new trade agreements with its major partners while improving the implementation and utilization of existing ones. The diversification of trade partnerships and the enhancement of competitiveness will be crucial for sustaining economic growth and ensuring a smooth transition into the next phase of Cambodia’s development.
Cambodia’s remarkable journey serves as an inspiration for other countries striving to overcome the challenges associated with the least developed country status. With careful planning and strategic measures, these nations can achieve significant progress in economic and social development, ultimately improving the livelihoods of their citizens and securing a prosperous future.