Cambodia Negotiating FTA with the Eurasian Economic Union

Cambodia is hoping to emulate Vietnam’s success in establishing a strong bilateral trade and investment relationship with Russia.

Op/Ed by Chris Devonshire-Ellis

Cambodian officials are travelling to Moscow next month to discuss a free trade agreement (FTA) with the Eurasian Economic Union (EAEU). The EAEU sits between China and the European Union, and comprises Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Russia. It has a combined population of 183 million and an annual GDP (PPP) of US$5 trillion.

The announcement was made yesterday, following the conclusion of the ASEAN Economic Ministers summit held in Bangkok. A major theme of that were ASEAN ministers discussing cooperation between the Southeast Asia and the Central Asia-Eastern Europe blocs.

The Cambodian government stated that it believes the EAEU offers great opportunities in terms of trade expansion and is seeking greater cooperation with the bloc, including entering into a full free trade agreement. There are already some trade openings in play between Cambodia and the EAEU – due to Cambodia being classified as a Least Developed Country, 46 Cambodian products can enter the EAEU market duty free during the next three years, including Cambodian rice, silk, textiles, meat, vegetables, and coffee.

Related Reading

Opportunities for Russian Businesses as Vietnam Bilateral Trade Continues to Rise

Cambodia will be hoping to follow the example of Vietnam, which signed an FTA with the EAEU in 2016. That has resulted in bilateral trade with Russia, in particular, growing from essentially zero to US$10 billion per annum in the past two years, while Russian investments into Vietnam total about US$1 billion.

There are advantages for Russian and EAEU investors in Cambodia and Vietnam as both are ASEAN members and as such have FTAs with both China and India. As long as ASEAN rules of origin are respected – which also permit a sizable percentage of Russian and EAEU component parts to be added to a final product mix – products can be manufactured in these countries and exported to China or India, duty free.

Other ASEAN countries are also expected to shortly sign FTAs with the EAEU. Singapore is expected to announce its EAEU FTA next month while Thailand is also understood to be negotiating an FTA.

Cambodia is one of the less expensive countries in Asia to establish a manufacturing base though costs savings in this area are offset by infrastructure issues and lack of HR resources. However, this is fast changing due to large Chinese investments in the country. Interested parties may contact us at asean@dezshira.com.

• Previous Article Why Setting Up in Singapore Makes Sense for Business in ASEAN
• Next Article Thailand Plus: New Stimulus Package for Foreign Investment