Trade
Policy
(i)
Introduction
The section of the NPRS on Trade Development is consistent with the “Pro-Poor Trade Strategy” of the Ministry of Commerce. There have been opportunities for debate on this policy with members of the Ministry of Commerce both through the PRSP drafting process and outside this process, but there has been no full public discussion.
Cambodia’s accession to the World Trade Organisation (WTO) was announced at the Cancun Meeting of Trade Ministers in September 2003, and has since been ratified by the National Assembly. Rapid accession was the central plank of the “Pro-Poor Trade Strategy” of the Ministry of Commerce, but it is far from clear that membership of the WTO will deliver poverty reduction. HE Cham Prasidh said of the accession treaty:
"This
is a package of concessions and commitments that goes far beyond what is
commensurate with the level of development of an LDC like Cambodia. Nonetheless,
we do accept the challenges, because we see the benefits of joining the world
trading system".
It is
still not clear just what these benefits will be. Certainly there has been no
“ex-ante poverty and social impact analysis… to better predict both the
positive and negative consequences of the trade strategy, as well as ensure that
the benefits are directed to the poorest” as promised in the NPRS.
(ii)
Key Issues
The
Need for Policy Analysis and Debate
Given the commitment that “ex-ante poverty and social impact analysis will be conducted” on the trade strategy, it is regrettable that Cambodia’s WTO Accession Treaty has been negotiated without any such analysis. The NPRS recognizes that there are necessarily negative as well as positive impacts of the proposed trade strategy. The World Bank’s draft Concept Note for its Development Policy Review on “Sources of Growth and Poverty Reduction” also states that “Cambodia is expected to become a WTO member this year which would pose both challenges and opportunities.”
However these pros and cons have still not been analyzed or debated and the National Assembly was presented with a WTO Accession Treaty, and asked to ratify it on a ‘take it or leave it’ basis. Pressure to ratify was intense, yet there is much in the Treaty that is worthy of debate, given the NPRS commitments on trade development.
As an example, the NPRS states: “Measures to
reduce price fluctuations, or to protect poor producers (or poor consumers) from
the impacts of these price fluctuations, need to be considered, e.g. carefully
paced reduction of tariffs, subsidies and other complementary measures.”
However, Cambodia has had to agree in its WTO Accession Treaty to eliminate
agricultural export subsidies by binding them at 0 percent[1].
Whilst Cambodia has no previous export subsidies for agricultural products, the
Cambodian negotiator at the WTO had resisted this provision, stating that under
the Agreement on Agriculture, Least Developed Countries (LDCs) were not required
to undertake any commitments on export subsidies. Nevertheless, after sustained
pressure, Cambodia complied with the demand. As for tariffs, during WTO
accession negotiations Cambodia was forced to reduce
its initial offer on average bound tariffs by 25 percent to a level of 22.13
percent, which is extraordinarily low for an LDC. In terms of peak tariffs,
Cambodia, a country where 80 percent of the population is employed in the
agricultural sector, has been asked to provide far less protection to its
sensitive agricultural sectors than the US, the EU and Canada.
Mention is made in the NPRS of the “diagnostic study of Cambodian trade competitiveness” carried out with “the assistance of the donors of the “Integrated Framework” group (IMF, ITC, UNCTAD, UNDP, World Bank, and WTO)”. This study covers “developments in trade policy… and a selection of sector studies… A matrix of technical assistance requirements for pro-poor trade mainstreaming was developed, which lays out a range of policy, program and capacity building initiatives and their resource needs.” While this study suggests some potentially useful sectoral directions for Cambodia it is wholly unconvincing in its attempts to draw links between trade liberalization and poverty reduction. In no way can it be said to be a credible “ex-ante poverty and social impact analysis”[2].
Srey Tuic is 23 years old from Prey Veng
Province. She has been in Phnom Penh working in a garment factory for over 3
years. She does not like the work or the living conditions and is often sick
and nostalgic for the village. Despite this she continues to work and earn
money to send home to the family.
She started working in the factory because
her parents were finding it difficult to support the family. She recalls her
father explaining “before when you were younger we could grow enough rice to
fill our stomachs and sell the extra to the wholesalers, but now it costs too
much to grow.” Srey Tuic tells that she can only remember not having enough,
and sometimes it was because her family had to give away a portion of the
yield to the owner of the fertilizer shop, as payment in kind for the
fertilizer to be borrowed. Other times they had to sell a large portion of the
yield, so there was not enough to eat, she attributes this to “my brother
got sick and needed to go to the hospital”. Another time it was because the
family lost everything during a protracted drought. She recalls “even though
my family borrowed money to pay for the water pumping it was never enough and
the drought killed everything that season and we were left behind and felt
despair all the time.”
“So when I heard of another girl going to
Phnom Penh to work in the factory, I and my mother went to enquire how to also
pay my way to the job at the factory. For this my family borrowed a big sum of
money, … I think about US$100. It was after this I prepared and I knew I
would have to work to help them from despair.”
“Now my family just live from the money I
send them. It is so hard for me that now I eat fish one time a week. I am sick
because I do not eat good food, and I work hard because if you do not make the
pieces you do not get money because they count the ones you make.”
Srey Tuic explained that when her father had
some rice to sell it is very cheap, because the rice from Vietnam or Thailand
keeps the Cambodian rice low. But fertilizers from the Philippines or the USA
are very expensive and the new rice varieties are dependent on them.
She also explains that she still tries to
find ways to earn some money because she knows that it is not easy in the
factory and that she cannot do the work forever. “When I am really sick I do
not dare go to the doctor because I cannot spare the money. I never go to a
wedding or have leisure time because this would be to waste the money that my
parents need from me. I am really afraid I will lose my job. Many people are
saying that the factories will close soon, if this happens I will not know
what to do because my parents will die if I cannot support them. Many girls
also fear that their jobs are on the line, the fear is motivated by the same
concern, that their families will be hopeless without the remittances.”
The
Need to Address the High Cost of Doing Business in Cambodia
The
government should be congratulated for the expressed commitment in the NPRS of
tackling the constraints to trade posed by corruption. The section on Trade
Development mentions that “red tape and corruption continue to be pervasive”
in the area of domestic manufacturing and that “internal transportation costs
are high due to poor quality infrastructure and unofficial charges for road
users (up to 17 percent of total transport costs).” Mention is also made of
“weaknesses in the Cambodian legal, judicial and administrative systems”.
Clearly it is important that these constraints are addressed and it is
encouraging to see both the “Actions and Commitments” of the government, and
the strong analysis and recommendations of the World Bank in the “Investment
Climate Assessment and Reform Strategy” published in August 2004.
(iii)
Recommendations
Recommendations
for the Government:
Provide opportunities for public debate on trade policy choices.
Ensure that Cambodia is in a position to take advantage of any opportunities provided by WTO Accession by joining with other LDCs to demand that rich countries honour the commitment that the Doha Round of negotiations will be a “Development Round” and by commissioning independent policy research to guide decision-making on trade policy.
Ensure that garment manufacturers are investing in their workforce by providing training opportunities and continue with efforts, such as the ILO monitoring project and lobbying for improved market access into the USA, to ensure that decent garment sector jobs remain in Cambodia after the end of the MFA.
Continue with steps to eliminate corruption as a constraint to doing business in Cambodia.
Insist that a much higher proportion of donor money is used to provide opportunities for poor women and men rather than to provide expensive foreign “Technical Assistance”.
Recommendations
for Donors:
Ensure that any “Technical Assistance” on trade policy incorporates a genuine analysis of the likely impacts on poverty and presents a range of policy options rather than a trade liberalization blueprint.
Invest in Cambodia’s human capital — it is poor women and men themselves who will lift themselves out of poverty given access to appropriate training and knowledge.
Recommendations
for NGOs:
As per the second recommendation for donors above.
Ensure that NGO staff members understand the links between macro-economic policy choices and their outcomes at grassroots level.
Facilitate the organisation of poor
producers such that they are able to create and use more opportunities to
make markets work in their favor.
For more information on the issues raised in this paper, please contact:
Mike Bird or Khorn Dinravy at Oxfam Great Britain; Tel: 023 720036, Email: mbird@oxfam.org.kh, or Rosanna Barbero or Sam Vuthy at Womyns Agenda for Change; Tel: 023 722314, Email: rosanna@womynsagenda.org