Minister of Commerce Pan Sorasak and his South Korean counterpart Yeo Han-koo during the virtual signing ceremony on October 26. PHOTO SUPPLIED
The South Korean National Assembly on September 27 ratified the Cambodia-Korea Free Trade Agreement (CKFTA), fuelling hopes for an export boom to Asia’s fourth largest economy.
The CKFTA is to become effective 60 days after both sides have completed their internal procedures and deposited their respective instrument of ratification (IoR), a document by which a country formally agrees to be bound by a treaty.
After the Cambodia-China Free Trade Agreement (CCFTA), the CKFTA is slated to become the Kingdom’s second bilateral free trade agreement (FTA). The CCFTA entered into force on January 1, the same day that the Regional Comprehensive Economic Partnership (RCEP) took effect in Cambodia.
The RCEP, an ASEAN initiative, is the world’s largest trade pact and includes the Southeast Asian bloc’s 10 member states, along with five additional Asia-Pacific countries: Australia, China, Japan, New Zealand and South Korea.
Under the CKFTA, coupled with the RCEP, the Kingdom will lift tariffs on 93.8 per cent of goods traded, with South Korea scrapping duties on 95.6 per cent, according to the Yonhap News Agency. Ministry of Commerce spokesman Penn Sovicheat has also noted that the CKFTA will provide more than 10,000 Cambodian items duty-free access to South Korea.
Speaking to The Post on September 28, Sovicheat listed some of the goods set to benefit from preferential and zero tariffs and other special conditions under the CKFTA, including raw and processed agricultural products, garments, textiles, footwear, travel goods, general components and spare parts, and other industrial goods.
He affirmed that the pact would entail reductions in tariffs, in addition to other favourable export conditions for certain Cambodian items not offered by the RCEP, granting the Kingdom even wider access to the South Korean market.
Cambodia Chamber of Commerce (CCC) vice-president Lim Heng praised South Korea’s unicameral legislative body for the ratification of the CKFTA, commenting that the deal would drive economic growth in both countries, and especially stimulate Cambodian goods exports to the Korean market.
Coupled with the RCEP, the CKFTA would eliminate tariffs on “almost 100 per cent” of Cambodian agricultural exports to South Korea, translating into a massive draw for foreign investors to put their money into production and processing for export to the Korean market, or major sectors such as garments, electrical equipment and furniture, he suggested.
The CKFTA would also make importing raw materials from South Korea for processing for export elsewhere easier and cheaper, he said, remarking on the particularly beneficial nature of bilateral FTAs among trade deals.
Ky Sereyvath, economics researcher at the Royal Academy of Cambodia (RAC), surmised that as more South Korean investors enter the Cambodian market on the back of the FTA, a plethora of modern technologies would be introduced to the Kingdom, spurring industrial development.
He argued that the agreement would create a gateway for market diversification and for the Kingdom to expand its export footprint.
The CKFTA was signed by Minister of Commerce Pan Sorasak and his then-counterpart Yeo Han-koo on October 26, 2021 via video link. The agreement was initiated by Prime Minister Hun Sen during an official visit to South Korea in March 2019 to meet with then-President Moon Jae-in.
According to the General Department of Customs and Excise of Cambodia, trade between the two countries totalled $549.930 million in the first eight months of 2022, up by 6.42 over the same period last year.
Between January and August, the Kingdom’s exports to South Korea totalled $156.619 million, up 21.0 per cent year-on-year, and imports were $393.312 million, up 1.54 per cent. Cambodia’s trade deficit with South Korea for the period narrowed 8.23 per cent to $236.693 million.
