News

• 24 March, 2023
• Posted by: EuroCham Cambodia

This week, we spoke with Chris Humphrey, the Executive Director of the EU-ASEAN Business Council. Mr. Humphrey and his team are next planning a visit to Cambodia in October to meet with delegations from the EU, private sector stakeholders, and governmental leaders.

Mr. Humphrey has led the EU-ABC for nine years, and has visited Cambodia frequently during his tenure. Currently on the agenda for the EU-ABC are visits to the Philippines for a mission trip and a Global Anti-Illicit Trade Summit. Mr. Humphrey will moderate a panel discussion on the energy transition in ASEAN on 5 April. Register for the webinar and find more about the EU-ABC here.

EuroCham: What is the current EU business sentiment towards Cambodia?

Chris: The sentiment towards the region is in general, extremely positive. According to our last business sentiment survey done last year, over 60 percent have a positive view of the region and believe it’s the region with the best economic opportunity. (take the 2023 survey here). There’s a business-friendly environment in Cambodia and think the country is aiming to be more friendly towards Europe in general. So I think there are big opportunities for European business in Cambodia.

Cambodia has one of the smaller economies in Southeast Asia, but it’s developing extremely fast, especially in Phnom Penh. The population is very young and there are lots of things that are positives for European industry. The fact that there are positive feelings from the government -- it’s a very open and easy to talk to government -- that’s always a good thing for industry. There’s forward-thinking economic policies and a desire to get more FDI in, particularly from Europe.

Geographically, Cambodia really is at the centre of Southeast Asia. They provide a source of labour as well, something for example Thailand is struggling to provide at the moment.

I think one other area where EU business can play a role in Cambodia is on things like energy transition, helping to green the energy supply in the country. European business are leaders in that field, and Cambodia clearly has a need for it, based our own discussions previously with The Ministry of Mines and Energy.

EuroCham: How do you see the economic impact of SEA Games?

This is a good thing for Cambodia, as it helps put them on the map. It’s quite a major event, with 11 countries competing across various disciplines. It will really help in highlighting what a great country Cambodia is, and hopefully will be a further boost for tourism.
Cambodia’s ASEAN Chairmanship went very smoothly and was very well-organised, and I expect the SEA Games will be the same. A successful management of the Games will also enhance Cambodia’s reputation in the eyes of Europe.

Concerning tourism, the country needs to diversify their base a bit. When we were in Siem Reap last year for the ASEAN Economic Minister’s meeting, it was great being a tourist because it was empty, but for the locals, that wasn’t a good sign. They do need to promote more, the country has so much to offer. It’s a great destination to relax and there’s a huge market for eco-tourism. Some of our members, such as booking.com, are doing a big push on sustainable tourism. For a country like Cambodia, it’s a great opportunity.

EuroCham: How do you see Cambodia’s auto industry evolving?

Chris: I don’t see it becoming a major automotive production hub, not in the same way that Thailand is. Thailand has the infrastructure and history, what it perhaps lacks now is engineers and manpower.

The whole mood in the auto industry is of course shifting towards non-internal combustion engines in favour of electric or hydrogen-powered vehicles. And that’s the niche that a country like Cambodia needs to start looking at and exploring. Internal combustion engines are now on a shortened timeline everywhere, particularly in Europe. They need to start thinking, what can we do in Cambodia? Can we afford to put in place the infrastructure to support electric vehicles? They can probably do it easier than elsewhere simply because they’re starting form a lower base perhaps than many others.

If the country can position itself to start to manufacture, whether its motorbikes, tuk tuks or commercial vehicles, they should probably look to start doing so. They have the land, and I think they have the people for it. It’s a question of persuading companies that manufacturing in Cambodia for export – because the domestic market is not big enough – is a better option than what they have in other countries.

If you look around the region, Thailand is the Detroit of Southeast Asia, and then you’ve got significant industries in Indonesia, Malaysia, and Vietnam. Can Cambodia get part of that? Setting up a car plant is an expensive business. So anybody looking at it needs to be assured that they can manufacture, can export to the region and elsewhere, and make sure the right staff with the right expertise. 

EuroCham: What are your thoughts on the recent deal that will see Cambodia export renewable energy to Singapore?

Chris: Singapore has an absolute need to green its power supply. Being a small country, there’s a limit to what they can do themselves. You can’t put too many wind turbines up in Singapore, the land’s not there for it. They’re covering almost every rooftop they can with solar panels, but it’s not enough.  So they need to do more, the deal with Cambodia, and other deals with countries in the region, it’s the only way they can go.

This also boosts the whole idea of an ASEAN grid in the process, which can only be a good thing for everybody.

On a more general note, sustainability  initiatives coming from Europe will impact all businesses who export to the EU. It’s going to force European companies and local firms to clean up their act, green their supply chains, and make sure there’s no forced labour in their supply chains. I think overall that will be a good thing for a country like Cambodia. It will help improve levels of employment and the transfer of different technologies. There may be costs involved but I’m sure that good EU businesses, as they are do everywhere in the region, will make sure that their supply chains are properly equipped and supported.

EuroCham: How can Cambodia effectively navigate its planned graduation from LDC status in 2027?

Chris: Cambodia will continue to develop and lose its LDC status, along with EBA breaks and preferential tariffs. They need to develop fast enough to make sure they don’t caught into a trap of losing preferences and not having FTAs in place. A Europe-Cambodia FTA is a long way away, and may never happen. Cambodia’s best hope is that the EU makes rapid progress on FTAs with countries in the region, in order that a future region-to-region FTA is considered.

The bilateral lFTAs might also allow for some ASEAN accumulation to allow access to preferential tariffs for companies outside of the direct deal. For example, something could be made in Cambodia, finished in Thailand, and then sent to the EU. The country should also move up the value chain on manufacturing to produce higher quality goods, while still maintaining a low price point, but that is not an easy task.