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EBA withdrawal threatens Kingdom’s bicycle industry

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The Kingdom’s bicycle exports to the EU were valued at $331 million. POST PIX

EBA withdrawal threatens Kingdom’s bicycle industry

Cambodian bicycle exports to the EU amounted to 1.52 million individual units last year valued at $331 million, according to a World Bank report released on Monday.

The report – called Cambodia Economic Update – revealed that bicycles are Cambodia’s third main export to the bloc after garments and footwear.

The Kingdom’s garment exports to the EU amounted to $3.65 billion last year, with footwear exports amounting to $508 million. Bicycle exports to the EU were valued at $331 million, while milled rice was fourth at $177.5 million.

The report did not elaborate further on the export trends of bicycles. However, according to the website Bike-EU.com, Cambodia has been the largest bicycle supplier to the EU since 2017, overtaking Taiwan which had held the number one spot for two decades.

In 2017, Cambodia exported more than 1.42 million bicycles – an increase of nine per cent from 1.29 million bicycles in 2016.

Ministry of Commerce spokesman Seang Thay on Tuesday said the Kingdom’s bicycle production has grown remarkably in the past few years, thanks to duty-free exports to the EU market under the Everything But Arms (EBA) preferential scheme.

According to Thay, bicycles need to be comprised of a minimum of 40 per cent local components to qualify for duty-free status in the EU, although goods from other Asean nations can also count as local materials in certain cases.

“We are very satisfied with the increasing exports of bicycles from Cambodia to the EU market. This proves the fruitfulness of Cambodia being a member of Asean,” he said.

Uncertain future

However, the future of Cambodia’s growing bicycle industry is uncertain due to the possible imminent withdrawal of its EBA trade privileges by the EU.

With the growth of the sector fuelled by Cambodia’s duty-free access to the bloc, EBA withdrawal could see a sharp decline in bicycle exports as they would then be subject to a 10 per cent tariff.

Thay believed that if tariffs are imposed on bicycles, exports will slow, but it does not mean Cambodia will completely lose its market.

“Exports will see a tiny decline, but I don’t think it is a major problem. The government has introduced several reforms making production costs lower. This will allow exporters to continue shipping goods to the EU market,” he said.

In a report released on Saturday by Japanese business news outlet Asian Nikkei Review, Jon Edwards – CEO of A&J Worldwide, a major bicycle producer in Cambodia – was quoted as saying that keeping EBA status was “hugely important” for the industry’s health in the Kingdom.

“Our success and continued investment has been in large part due to EBA,” Edwards said.

He added that if EU tariffs revert to the regular rate, then many countries will not only have a duty advantage over Cambodia, but in most cases they will also have lower logistical costs and bigger local supply chains with better shipping facilities.

“It will be very hard to compete with traditional bicycle producing countries like Taiwan, Thailand, Philippines and Indonesia,” he said.

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