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. 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.
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 recognises 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 not been analysed or debated and the National Assembly will now be presented with a WTO Accession Treaty, which it will presumably have to ratify on a ‘take it or leave it’ basis. Pressure to ratify will surely be 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%[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% to a level of 22.13%, which is
extraordinary low for an LDC. In terms of peak tariffs, Cambodia, a country
where 80% 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 (TA) 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 liberalisation and poverty reduction. In no way can it be said to be a credible “ex-ante poverty and social impact analysis”.
The
Need to Prepare for the End of the Multi-Fibre Agreement Quota System
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 everthing 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 her still tries to find ways to earn some money because she
know that for Srey Tuic 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
Royal 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% 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 that the World Bank
also places emphasis on dealing with such issues in its Development Policy
Review referred to above.
Recommendations
for Government:
· Provide opportunities for public debate on trade policy choices.
· Ensure there is a full debate on the WTO Accession Treaty at the National Assembly.
· Ensure that garment manufacturers are investing in their workforce by providing training opportunities.
· 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 liberalisation 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 favour.
[1]
WT/ACC/SPEC/KHM/4/Rev.1,
19 June 2003
For more information and the issues raised in this paper, please contact: Mike Bird or Khorn Dinravy at Oxfam GB (Tel: 023 720036, Email mbird@oxfam.org.kh) or Rosanna Barbero or Sam Vuthy at Womyns Agenda for Change (Tel: 023 722314, Email: rosanna@oxfam.org.hk)