Domestic and Foreign Market Access

Overview: Trade Policy and Business Environment

 The Kingdom of Cambodia is classified as a low income country. It is ranked 102nd out of 132 countries in the World Economic Forum (WEF) Enabling Trade Report (2012), which measures institutions, policies and services to facilitate trade in countries. Cambodia has experienced an average GDP growth rate of 9.4 per cent for the past 10 years. Despite a short economic recession in 2009, the economy has experienced a stronger recovery thereafter, with an average growth rate around 6 per cent, since 2010. The economy relies on agriculture, garments and textile manufacturing, tourism, and construction. High production costs, namely electricity, transport, customs clearance, and bureaucracy, are the main obstacles constraining the attractiveness of Cambodia to foreign investment. While the local government is trying to improve the business environment and to enable beneficial market access, significant barriers to doing business remain, primarily, poor regulation including corruption and bureaucracy issues, as well as weak infrastructure (Bertelsmann Stiftung 2014; CRDI 2013).

Bertelsmann Stiftung, 2014, Cambodia Country Report
CRDI, 2013, Impact of the Global Financial Crisis on Cambodian Economy at Macro and Sectoral Levels
WEF, 2012, The Global Enabling Trade Report
WTO, 2011, Trade Policy Review (Cambodia)

Domestic Market Access The pillar assesses the level and complexity of a country’s tariff protection as a result of its trade policy. This component includes the effective trade-weighted average tariff applied by a country, the share of goods imported duty free and the complexity of the tariff regime, measured through tariff variance, the prevalence of tariff peaks and specific tariffs, and the number of distinct tariffs. 133 2.95
Foreign Market Access The pillar assesses tariff barriers faced by a country’s exporters in destination markets. It includes the average tariffs faced by the country as well as the margin of preference in destination markets negotiated through bilateral or regional trade agreements or granted in the form of trade preferences. 1 5.26
Tariff rate (%) This indicator is calculated as a trade-weighted average of all the applied tariff rates, including preferential rates that a country applies to the rest of the world. The weights are the trade patterns of the importing country’s reference group (2012 data). An applied tariff is a customs duty that is levied on imports of merchandise goods. 125 13.03
Complexity of tariffs , index 1-7 (best) This indicator is calculated as the average of the following indicators: Tariff dispersion, Specific tariffs and Number of distinct tariffs. See description of each individual indicator for more details. Prior to averaging, values for each indicator were transformed to a 1–7 score, using the min-max method. 76 5.62
Tariffs dispersion (standard deviation) This indicator reflects differences in tariffs across product categories in a country’s tariff structure. The variance is calculated across all the tariffs on imported merchandise goods, at the 6-digit level of the Harmonized Schedule. 87 9.05
Tariffs peaks (%) This indicator is the ratio of the number of tariff lines exceeding three times the average domestic tariff (across all products) to the MFN (most-favoured nation) tariff schedule. The tariff schedule is equal to the total number of tariff lines for each country. These tariffs are revised on a yearly basis. 98 9.88
Specific tariffs (%) This indicator is the ratio of the number of Harmonized System (HS) tariff lines, with at least one specific tariff, to the total number of HS tariff lines. A specific tariff is a tariff rate charged on fixed amount per quantity (as opposed to ad valorem) 1 0.00
Number of distinct tariffs This indicator reflects the number of distinct tariff rates applied by a country to its imports across all sectors. 5 4.00
Share of duty-free imports (%) Share of trade, excluding petroleum, that is imported free of tariff duties, taking into account MFN tariffs and preferential agreements. Tariff data is from 2013 or most recent year available and imports data is from 2012 124 7.28
Tariffs faced (%) This indicator is calculated as the trade-weighted average of the applied tariff rates, including preferential rates that the rest of the world applies to each country. The weights are the trade patterns of the importing country’s reference group (2012 data). A tariff is a customs duty that is levied by the destination country on imports of merchandise goods 2 3.74
Index of margin of preference in destination markets, 0-100 (best) This indicator measures the percentage by which particular imports from one country are subject to lower tariffs than the MFN rate. It is calculated as the average of two components: 1) the trade-weighted average difference between the MFN tariff and the most advantageous preferential duty (advantage score), and 2) the ratio of the advantage score to the trade-weighted average MFN tariff level. This allows capturing both the absolute and the relative margin of preference. 28 50.48
Source : World Economic Forum, Global Enabling Trade Report 2014

Trade Policy and Market Access

 Cambodia has been a member of the WTO since 2004. Cambodia’s average applied MFN tariff was 15.2 per cent in 2012 whilst the average MFN applied rate on agricultural products (14.5 per cent) remains higher than for industrial goods (11.3 per cent). Cambodia has an escalating tariff structure with rates rising at each stage of processing (WTO 2013). Cambodia joined the Association of Southeast Asian Nations (ASEAN) in 1999 and began granting preferential treatment by reducing tariffs on goods originating in its ASEAN trading partners under the Common Effective Preferential Tariffs. Being part of the ASEAN, Cambodia is eligible to enjoy tariff reductions set in the existing free-trade agreements (FTAs) negotiated between ASEAN and Australia/New Zealand, China, India, Japan, and the Republic of Korea and the forthcoming FTA with the European Union (WTO 2011). As a Least Developed Country, Cambodia is also benefiting from the Generalized System of Preferences (GSP) schemes operated by developed countries, such as the Everything-But-Arms Initiative of the EU and the GSP programme of the US. Moreover, the Trade and Investment Framework Agreement (TIFA) between Cambodia and the US, which was signed in July 2006, set up the foundation for trade and investment promotion in both countries and positively encourage bilateral dialogues in the meantime.

WEF, 2012, The Global Enabling Trade Report

WTO, 2011, Trade Policy Review (Cambodia)

WTO, 2013, Tariff Profile (Cambodia)

Standard Compliance and Other Relevant Import/Export Restrictions

 In recent years Cambodia has prioritized full sanitary and phytosanitary (SPS) compliance, due to the importance of SPS issues for the agriculture sector development, public health as well as its access to foreign market. The deficiency of SPS management is mostly attributed to the lack of technical assistance, the lack of effective regulatory authorities and bureaucracy. To improve its SPS compliance, Cambodia established a 2010 regulation (on the Implementation of an Institutional Arrangement of Food Safety based on a farm- to- table approach), to resolve the problematic agency duplication of functions and inspections through the proliferation of subordinate legislation. With regards to its technical barrier to trade (TBT) measures, Cambodia has taken actions in upgrading its standards, technical regulations, metrology, and conformity assessment capacity, as well as in establishing a TBT enquiry point since its accession to the WTO. The 2007 Law on Standards of Cambodia, as well as the Institute of Standards of Cambodia (ISC), creates the legal basis, and is responsible for all measures related to standards and technical regulations. By 2011, 71 Cambodian standards, mainly on foods, electrical appliances, and tools, have been adopted to facilitate the economic development of Cambodia.

Bertelsmann Stiftung, 2014, Cambodia Country Report

Standards and Trade Development Facility, 2009, SPS Balance Sheet for Cambodia

WTO, 2011, Trade Policy Review (Cambodia)