The Cambodian government has begun a series of reforms intended to strengthen economic independence and promote business in the Kingdom, as they prepare for the possible loss of preferential trade access to the EU and US in the coming months.
Prime Minister Hun Sen on Friday announced one such measure, with the removal of the Kampuchea Shipping Agency and Brokers (Kamsab) – a state agency established in 1979 to facilitate trading by ship – officers from ports.
The announcement was made one day after the prime minister signed a sub-decree to terminate Camcontrol operations from all border checkpoints.
The prime minister said the actions were taken to reduce the difficulties and complexities in doing business and to facilitate the import and export of Cambodian goods to international markets.
“The removal of Kamsab is in part a response to investors who are coming to do business in Cambodia and for the survival of the national economy and its competitiveness,” he said.
In the past, Kamsab earned about $2 million per year, of which some $500,000 went to the national budget, while the remaining amount was used for the unit’s own expenditure, according to Hun Sen.
Kamsab is headquartered in Phnom Penh, with branches in Preah Sihanouk province, Koh Kong province’s Sre Ambel district and at Okhna Mong Port. The agency is under the supervision of two ministries – the Ministry of Economy and Finance and the Ministry of Public Works and Transport.
The prime minister said the disbanding of Kamsab will not result in staff losing their jobs as they will be transferred to the Ministry of Public Works and Transport.
This type of state agency currently exists in only two Asean countries – Cambodia and Myanmar – according to the prime minister.
Although the removal of Kamsab will not significantly contribute to cost reduction for investors, it is a positive sign for the private sector where high electricity prices remain a problem.
Cambodia Freight Forwarders Association (Camffa) president Sin Chanthy said the prime minister’s initiative will help the private sector and will further reduce the cost of goods transportation in Cambodia.
“The decision to remove Kamsab will further serve to encourage and attract more investment into Cambodia,” Chanthy said, adding that he previously heard a lot of complaints from investors about the high cost of Cambodian transportation compared to neighbouring countries.
Recently, the EU decided to re-impose tariffs on rice imports from Cambodia to protect European farmers’ interests. The tariffs will start at €175 ($199.51) per tonne in the first year, before being reduced slightly in the second and third years.
The Kingdom is also at risk of losing the EU’s Everything But Arms (EBA) preferential scheme and the US’ Generalised System of Preferences.
Chanthy argued that the Kingdom’s economy and Cambodians’ incomes continue to increase, therefore the loss of trade preferences from the international community is inevitable.
“The decision made by the government to help cut production costs at this time is the correct direction, done at the correct time as Cambodia has to strengthen and prepare itself for possible EBA removal by the EU."
“But, while the government takes measures, the private sector should try to develop their products and services to have a competitive advantage over other countries,” he said.
Centre for Policy Studies director Chan Sophal said the removal of Kamsab and other unnecessary institutions is the right thing to do as there are currently too many authorities in the Kingdom responsible for overlapping tasks.
He said that normally, the General Department of Customs and Excise is tasked with the inspection of goods transported across air, land and water borders, so the removal will not negatively impact the inspection of goods.
“[The removal of Kamsab] is a good thing. It helps facilitate imports and exports at the ports due to the fact that we [the department] have plenty of authority already and Kamsab is unnecessary,” he said.
He added that the government should help the private sector with more measures, especially reducing electricity prices for important enterprises such as rice millers.
Shortly after the EU decided to impose its duty on rice imported from Cambodia, China agreed to increase its rice import quota from Cambodia by 100,000 tonnes more per year, bring its total to 400,000 tonnes this year.
If Cambodia can meet Chinese demand, then this market alone would account for 63 per cent of Cambodian rice sold abroad, based on last year’s 626,225 tonnes in exports.