The Economic Research Institute for ASEAN and Australian Aid hosted a panel discussion on how Cambodia’s private sector can best utilize the recently ratified Regional Comprehensive Economic Partnership for its growing international trade in services sector.
The regional service sector is currently the largest recipient of the inflow for foreign direct investment across the ASEAN Member States over the past 15 years with 38% to 69% contribution to the gross domestic product of member states.
The RCEP Cambodia agreement represents the largest free trade agreement in the world and accounts for approximately 30 percent of the globe’s GDP and population and was ratified this year. To read more about RCEP opportunities for Cambodia click here.
What does the RCEP agreement allow for Cambodia’s international trade in services?
Dr. Deborah Elms Executive Director of Asian Trade Centre outlined that while many service businesses already operate across country borders in member states – the RCEP agreement provides certainty about what services can and can’t be offered.
According to Dr. Elms, individual member states either provide a positive or negative list of services that can be offered across borders under the RCEP agreement. Half of the members have used a positive list such as Cambodia and the other half are using a negative list such as Australia.
If the positive lists a type of service such as accounting or legal services companies can take advantage, for the negative list any service they don’t see they can provide.
Using an example of Cambodian-based firms wanting to provide real estate valuations in Malaysia, this would not be allowed under the negative list system as there are still restrictions to be licensed under a Malaysian valuations service.
Firms interested in offering trade in services should first identify which market they want to export to and the specific service they want to provide then seek clarification.
Dr. Elms added that RCEP negative and positive lists are set as a baseline and will be approved and changed over time as real-world experiences provide policymakers more understanding of impacts.
Are Cambodian firms ready to utilize RCEP?
Kay Lot, an active investor in technology start-ups and a shareholder in digital media explained that Cambodia’s economy was ready to embrace the RCEP agreement outlining the strong policy decision by the country’s central bank implemented during the COVID pandemic.
“Thanks to strong economic support from the central bank Cambodia is ready with many new technology companies now launching. Cambodia’s trade in services sector in comparison to Thailand and Vietnam is still developing, however, we are creating a vibrant start-up scene,” he added.
Ratana Phurik, investment specialist and chairperson of the Cambodia Community of Investment Professionals spoke about the attractiveness of Cambodia’s economic climate for foreign companies to set up in the Kingdom.
“Cambodia’s financial sector is ready to compete in the region with big players in the banking and insurance sector. The finance sector has also received lots of impact investment to provide financial inclusion. Trade in services that can offer high-value additions will be the most successful,” she said. To read more about impact investment trends in Cambodia click here.
Education and skills training most important
Harrison White CEO of CIR Media explained that to best utilize the RCEP agreement Cambodia needed to offer international standard service to high-income member states such as Singapore or Australia.
“Cambodia’s private sector must invest heavily in its workforce due to the current standards of formalized education providers not yet at international standards – in addition, the common practice of losing well-trained staff after investment to either overseas or local rival companies is also an ongoing issue,” he said.
“The Cambodian government should work with private enterprise to provide training funds and educational institutions should better partner with local businesses to facilitate on the job training – this is especially true for soft skills and cultural training,” he added.
Ashley Irving Principal at the Australian Centre for Education agreed that education was the most pressing topic for Cambodia to utilize trade in services however said the private should be prepared to invest in its workforce.
“Anyone looking to make a quick profit in Cambodia will be disappointed – investors should understand that building a quality business requires both time and investment in its workforce,” he said.
Trade-in services in Cambodia were reported at 14.69% of GDP in 2020, according to the World Bank collection of development indicators, compiled from officially recognized sources.
Developing Cambodia’s trade in service capabilities is seen as a major factor in achieving the Royal Cambodian Governments’ ambition of being an upper middle-income nation by 2030.