The National Assembly ratified Cambodia’s accession package to enter the World Trade Organization by an overwhelming majority on Tuesday, nearly a year after WTO ministers approved the country’s bid to join the global trade body.
“If we join the WTO, there is a 95 percent chance that the economy will be alive,” Minister of Commerce Cham Prasidh told reporters after the vote. “But if we are slow to reform, we will die.”
After debating the agreement for a little more than an hour, 106 out of 107 lawmakers present raised their hands to approve the package. Opposition lawmaker Son Chhay stepped out of the room during the vote, but said later he would have voted in favor of joining the WTO if he were present. Sixteen parliamentarians were absent.
Now the Senate must approve the Assembly’s vote and the head of state must sign the agreement. Cambodia will become a full WTO member 30 days after the government informs the trade body that the deal has been ratified. The prolonged government deadlock following last year’s national elections forced the country to ask the WTO to extend its March ratification deadline to Sept 30.
The Assembly vote cleared the last major hurdle in the country’s bid to join the WTO, which began back in 1994. Some groups, most notably Oxfam, have criticized developed countries for forcing Cambodia to make too many concessions during WTO negotiations, and Cham Prasidh scolded WTO members for forcing the country to pay “a high price” for membership after the WTO approved its membership in Cancun, Mexico, last year.
Nonetheless, business representatives lauded the Assembly’s vote Tuesday, though some economists warned that the country will not benefit from WTO membership unless the new government implements its ambitious reform agenda.
“Joining the WTO is the greatest news for the private sector,” Nang Sothy, director general of the Cambodian Chamber of Commerce said. “We were waiting for a long time to hear that.”
Now that the Assembly has ratified the WTO agreement, it must pass more than 40 laws in the next few years in order for the country to comply with its WTO commitments. As these laws are passed—especially one that establishes a commercial court—business representatives and government officials expect more foreign investment to flow in, reversing a trend that has seen foreign investment decline steadily since 1998.
“We will follow the rules of the WTO, which is what all investors need,” Nang Sothy said.
In the wake of two scathing reports on the business climate issued last month from the International Monetary Fund and the World Bank, the government has put good governance at the forefront of its agenda during the third mandate.
The World Bank report meticulously detailed the high corruption costs that particularly hurt the country’s ability to compete with other nations.
“Whether you can benefit from the WTO comes down to whether you can beat your competitor or not,” said Kang Chandararot, an economist at the Cambodia Development Resource Institute. “The country needs to clean up itself first, so we have the right conditions to be able to compete with other countries.”
Since the country is still preparing itself to compete on a global scale, the WTO will not benefit entrepreneurs in the short term, Kang Chandararot said.
Whether the country will benefit in the long term “depends on whether the government implements its [reform agenda] successfully,” he added.
Though entrepreneurs may have it rough in the beginning, garment manufacturers have been nervously waiting for Cambodia to join the WTO for months. WTO membership gives the garment industry full market access to the US, something it did not have under the quota system set to expire for WTO members at the end of the year.
“It’s a positive sign for the garment industry,” said John Lu, general manager of the Garment Manufacturers Association in Cambodia. “Buyers are more willing to place orders here now if we are in the WTO.”
Buoyed by a bilateral trade agreement with the US, the garment industry has boomed in the past five years. Exports jumped from $653 million in 1999 to more than $1.5 billion last year. The country’s nearly 200 factories employ more than 200,000 workers, most of them women.
While WTO membership helps the industry in the short term, its survival ultimately depends on reducing “unofficial fees” and other costs while increasing productivity, Lu said.
“Otherwise, we will not be competitive,” he said.
The Sam Rainsy Party voted for the WTO agreement Tuesday, but at the same time criticized the government for excessive corruption.
Joining the WTO is “necessary” because “Cambodia cannot be isolated” from the global trading system, opposition leader Sam Rainsy said.
But he called on the government to clean up the business environment so the benefits of the WTO will extend throughout the country.
“What does it mean to join the WTO if we have nothing to sell?” he asked.
Keo Remy, another opposition lawmaker who voted for the WTO, said the organization looks good on the outside, but the country will have to work hard in order to benefit from membership.
“I don’t think we can compete with other country’s products if our operation costs remain higher than in other nations,” he said. “Cambodia is known for its high transportation, water and electricity costs.”
It remains difficult to know whether Cambodia will benefit from WTO membership since no major studies have assessed the accession agreement, said Mike Bird, an official with Oxfam Great Britain. But in general, he said, Oxfam sees “no evidence that developed countries are doing anything to make trade fairer.”
“We remain skeptical of Cambodia’s ability to turn WTO membership to its advantage,” he said.
Still, argued Sok Hach, director of the Economic Institute of Cambodia, “it is better to be in than out.”
While WTO opponents say the country should close its borders and protect national industries, Sok Hach argued that Cambodia has no national industries and the markets are already swamped with foreign products.
“We have to be pragmatic,” he said, adding that the market access can help the country if the government improves the business climate.
“If the government clearly fights bureaucracy, significantly reduces corruption and strengthens public administration, I think Cambodia can benefit from the WTO,” he said.
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