Still no word about EBA but rice likely unaffected

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Garment workers at a factory in Phnom Penh. The Kingdom exported $10 billion worth of apparel to the EU last year. Hong Menea

Officials on Monday said the government had not received an official statement regarding the EU’s potential withdrawal of Cambodia’s Everything But Arms (EBA) scheme.

The EU launched the EBA withdrawal procedure on February 12, citing “a deterioration of democracy [and] respect for human rights” in the Kingdom.

It completed its report in November after a three-month investigation and gave the government three months to respond. Its final decision is officially due on Wednesday.

But on February 5, a document purportedly revealing details of the EU’s decision was uploaded on the European Parliament’s website.

The document was said to have been submitted by Member of the European Parliament (MEP) Danilo Oscar Lancini, who is also on the MEP’s Committee of International Trade.

While it did not specify which products were included in the possible withdrawal, rice was apparently excluded.

The commission “decided through a delegated act to withdraw Cambodia’s EBA status on some products” but “rice is not listed among these products,” said the document, which was cited by the Japanese financial daily Nikkei Asian Review.

Government spokesman Phay Siphan and Ministry of Foreign Affairs and International Cooperation spokesman Koy Kuong declined to comment on Monday, saying only that the government had not been briefed on the EU’ final decision.

Ministry of Labour and Vocational Training spokesman Heng Sour told The Post on Monday that while he too had not seen its official response, the government had laid out measures to boost the Kingdom’s economy in the absence of the EBA scheme.

“We are not aware of it. But whatever decision the EU makes, Cambodia is prepared to act flexibly and has already outlined measures to spur its economic growth,” he stressed.

Sour said the Kingdom may see some garment factories close in March and lay-off workers, but such closures would be the result of supply disruption by manufacturers in China, and not because of the possible EBA withdrawal.

He said some garment factories in the Kingdom are facing shortages of materials after Chinese manufacturers closed their factories indefinitely since before the Lunar New Year holiday amid the 2019 Novel Coronavirus outbreak, which has claimed over 900 lives.

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The EU is the main buyer of garments from the Kingdom. Hong Menea

Citing media reports, Cambodian Apparel Workers’ Democratic Union president Ath Thorn said the EU is set to withdraw the scheme either temporarily or in part on some of the Kingdom’s main exports.

He said though the final decision on EBA is due on Wednesday, the EU may give the government more time to reconsider fulfilling its requirements.

He said the EU is the main buyer of garments imported from the Kingdom. Losing the EBA status, he said, will take a heavy toll on the sector.

Thorn stressed that of the $10 billion worth of apparel exports to the EU last year, Cambodia gained only around $4 billion from labour and tax exemption, while the remaining went to Chinese manufacturers who brought materials to be produced in the Kingdom for export.

“For employers and buyers, they are waiting to see whether the EBA will be withdrawn before planning their investments. Most factories are waiting on the EU’s decision,” he said.

Economic analyst Hong Vannak agreed that the government seemed to be prepared to offset the losses from the EBA’s withdrawal.

He said the government had begun public finance reforms by enforcing tax collection, restricting the use of funds by state institutions, diversifying sources of revenues such as the sale of personalised number plates and the first phase of oil extraction in the foreseeable future.

“Furthermore, the Ministry of Tourism can improve services to attract more tourists. Through this diversification, the national budget will not decrease too much. It can help in the absence of the EBA scheme,” he said.

Vannak said while the possible EBA withdrawal will force some factories out of business and leave workers unemployed, it remains to be seen how it will affect the sector.

The Post could not reach Garment Manufacturers Association in Cambodia secretary-general Kaing Monika for comment on Monday.