Export Diversification and Value Addition For Human Development:

1
Export Diversification and Value Addition For
Human Development Addressing the Impact of the
Agreement on Textile and Clothing Expiration on
Cambodia Dourng Kakada Economic Institute of
Cambodia (EIC) Colombo, Sri Lanka
2
Content

• Part I Cambodias Garment Industry Post-ATC
  Human Development Impact Assessment
• Part II Export Diversification and Value
  Addition in Cambodia
• Part III Trade and Industry Policy Environment
  in Cambodia
• Part IV Promoting Human Development in Trade
  Negotiation An Action Plan for
  Cambodia

3

• Part I
• Cambodias Garment Industry Post- ATC
• Human Development Impact Assessment

4
Contribution of Garment Exports to the Economy
and Human Development

• Garment exports made up over 75 of the countrys
  exports
• Garment exports generated about US0.8 billion
  trade surplus
• Garment exports contribute to 26 per cent of the
  8 GDP growth during 1995-2005
• However, annual government revenue from quotas
  and export licenses declined to about US10
  million in 2005-2006 from around US40 million
  before 2005
• One job created in garment sector generated
  another job in other sectors
• Contribution to workers income and poverty
  reduction
• Contribution to workers empowerment

5
Garment Exports and Employmentin 2005
6
Trend of Garment Exports(12-month moving average)
Million dozens
/dozen
Post ATC
Prior ATC
Source MEF, Customs and Excise Department.
7
Workers Earning Export Prices(, increase)
Post ATC
Prior ATC
Source EIC, 2006.
8
Assessing the Impact of Different Scenarios on
CambodiasGarment Industry
9
Methodology

• Scenarios
• US Duty-Free Scenario.
• Flexible EU Rules of Origin Scenario.
• Model Simulation Computable General Equilibrium
  and Input/Output
• Main Assumptions
• Base year 2005
• Cambodias production capacity would be able to
  respond to the immediate increase in demand.
• Changes in Cambodias production would have no
  impact on global prices.
• Overall growth of global garment market is
  assumed at 5.

10
Potential Effect of US Duty-Free
11
Garment Exports to EU market
12
Potential Effect of EU Duty-Free with No
Condition to ROO
13

• Part II
• Export Diversification and Value Addition in
  Cambodia

14
The Selection of Potential Sectors

• Organic rice A niche market for higher farming
  income
• Cashew nuts Potential for value addition
• Rubber Potential for export earnings
• Silk Potential for rural employment
• Tourism Potential for high job creation

15
Impact on Employment and Incomes

• Organic Rice Farmer incomes increase by up to
  50
• Cashew Nuts Processing raw cashew nuts could
  create 10,000 jobs and significant incomes.
• Rubber Improving processing system and
  establishing internationally recognized Cambodian
  rubber certification will significantly increase
  export earnings.
• Silk Create rural employment incomes through
  expanding raw silk production and design
  techniques
• Tourism Create value addition and employment
  through strengthening backward linkage and
  tourism diversification

16

• Part III
• Trade and Industry Policy Environment in Cambodia

17
Cross-Sector Approach

• Fuel price
• Access to credit
• Infrastructure
• Investment Incentives
• Anticompetitive-practices
• Trade Facilitation and Governance
• Standard and Certification

18
Proposals (Selected) Cross-Sector Approach

• Competition policy/law
• Remove foreign intermediaries in Loan Vs
  Deposit transaction
• Commodity-based collateral system
• Investment incentives by sector
• Implementation of risk management approach
• Business services for standards and
  certifications

19
i. Fuel prices (US/Liter)
20
ii. Access to credit
Current Model
21
Proposals Sector Specific Approach (1)

• Organic rice
• Awareness campaigns for consumer and farmers
• Support the national organic standards
• Certifications for export organic rice
• Cashew nut
• Promote organic cashew nuts
• Establish and support farmer cooperatives
• Rubber
• Expansion of private plantation by promoting land
  title registration
• Promote local processing rubber trees
• Market access through promoting international
  recognition of certification

22
ProposalsSector specific Approach (2)

• Silk
• Promote Pure Khmer Silk Product Brand
• Improve quality combined with arts, traditions
  and innovative design
• Promote Khmer raw silk production among farmer
  cooperatives
• Tourism
• Strengthen backward linkage
• Diversify in destinations, culture and arts
• Establish supportive legislation

23

• Part IV
• Promoting Human Development in Trade Negotiation
  An Action Plan for Cambodia

24
Major findings

• Majority of target markets apply low import
  tariffs
• Most severe tariff barriers in developing
  countries like India and China
• Challenging non-tariff barriers compliance with
  product-standards and certification procedures
• Quantitative import restrictions for rice

25
Increase market access through WTO

• Agricultural and non-agricultural market access
• Harmonization of production standards and
  certification procedures for organic products
• Simplification and harmonization of rules of
  origin regulations
• Elimination of export subsidies on rice
• Secure financing for technical assistance trade
  capacity building (Aid for Trade Initiative)

26
Increase market access through ASEAN ASEAN

• Secure elimination of quantitative import
  restrictions on rice within ASEAN
• Indonesia Philippines (rice)
• (Re-)Negotiate low tariffs and technical
  assistance for ASEAN-LDCs in FTAs between the
  ASEAN and Third Countries
• India, China, Japan, EU (rice, rubber)

27
Increase market access Preferential Treatment

• Secure and deepen preferential market access
  through available trade frameworks
• Japan (GSP)
• Philippines Indonesia (AISP)
• EU (utilization of EBA)
• China (GSP)

28
Increase market access Bilateral Negotiations

• Deepen trade integration with target markets
  through Trade and Investment Agreements (TIFAs,
  FTAs)
• USA increased financing for technical
  assistance and trade capacity building
• Nigeria tariffs on rice

29

• Thank you for your attention!