Tariff cuts boost Asian trade

Photo by: Bloomberg

A straddle carrier operates at the Port of Pyeongtaek in Pyeongtaek, South Korea.

via CAAI

Tuesday, 18 January 2011 19:38 May Kunmakara

Cambodia’s trade with China and South Korea climbed dramatically last year, officials said, after the implementation of two free trade agreements at the beginning of 2010.

Both China-ASEAN and South Korea-ASEAN Free Trade Areas came into force in early January last year, reducing the majority of tariffs on traded goods to zero.

The four newest members of ASEAN – Cambodia, Vietnam, Laos and Myanmar – have until 2015 to gradually reduce tariff rates.

Official figures from the Korea Trade-Investment Promotion Agency received today showed the value of bilateral trade between Cambodia and Korea rose about 30 percent year on year.

Trade hit $376 million in 2010, from $291 million in 2009.

Trade with China surged about 42 percent year-on-year to $1.124 billion in 2010 from $791 million in 2009, according to Commerce Ministry data.

“We are optimistic about the growth rate. When we have completely implemented the free trade agreements, we expect to see the flow of our exports rising a lot,” said Chea Socheat, chief of the Bureau of ASEAN and Economic Integration at the Ministry of Commerce.

“The free trade agreements helped us a lot. At first, we were afraid that we could not compete with the flow of their exports to us but, indeed, it let us have a chance to gain a greater inflow of investment. Local producers can join hands and cooperate with them [importers] too,” he said.

Khin Pisey, a researcher at the Economic Institute of Cambodia, applauded the rising value of external trade, saying it would benefit the national economy.

“Increasing foreign trade means that we can generate more revenue flow into the country,” he said.

But he raised concerns over the capability of the Kingdom’s producers to compete with an influx of foreign products.

“If local producers’ capacity is still low, they will be impacted [by imports] as our economy is still young,” he said, adding that the government is playing a vital role in assisting domestic firms to improve.

Chea Socheat recognised the issue, adding that the government is assisting businesses to improve quality in order to make the most of the new regional export opportunities.

Cambodia’s exports to Korea rose 138.7 percent to $43 million in 2010, while imports rose 26.6 percent to $333 million, according to KOTRA. According to ministry figures, Cambodia’s exports to China hit $56.7 million in 2010, up from $14.5 million in 2009, while imports from China increased about 38 percent year-on-year to $1.068 billion.

Rising trade deficits, the government said, were derived from increasing local consumption.