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Regional Trade Deals Mean More Opportunities, Economists Say

A member of government security holds his weapon at the VIP section of Phnom Penh airport, file photo.
A member of government security holds his weapon at the VIP section of Phnom Penh airport, file photo.

Asean is pursuing a free-trade agreement with India and China, which could be a major boost to the economies of the region. But economists warn that the fiscal infrastructure, human resources and other sectors in countries like Cambodia need to be improved to take full advantage of the deal.

Some 150 business leaders are set to gather in Thailand in coming days, for a China-India-Asean summit, where this deal and other issues will be discussed.

Experts say the free trade deal could work in the favor of Asean countries like Cambodia, increasing access to some four billion people, about half the world’s population.

Pou Sovachana, deputy director of the Cambodian Institute for Cooperation and Peace, told VOA Khmer the summit will bring together countries that will be the economic hubs of Asia, creating “a strong economic region in the future.”

The potential deal follows the creation of the Chinese-led Asian Infrastructure Investment Bank, which has around $50 billion from member nations to help develop the region.

All this adds up to an enticing business opportunity, but more competition, Paul Chambers a political affairs professor at Chiang Mai University, told VOA Khmer.

“Both China and India are looking to engage much deeper in investments in Asean,” he said. “They are also in competition with each other. China is also in competition with Japan, in terms of Asean investments.”

China is already planning up to $700 billion in investment across Asean, with India willing to sign similar agreements later this year, he said.

Chan Sophal, an economist and direct of the Center for Policy Studies, said the upcoming meetings will be a great place for regional investors to network, bringing more investment and capital to the region.

Cambodian officials and business leaders will be looking for markets to export more products to Asean members. “Investment and trade are linked,” Chan Sophal said. “There must be free trade to attract investment. Cambodia is a small country, and investors are not expecting to invest in Cambodia to sell their products, but they are generally looking at Cambodia as a place to produce their products for export.”

Meanwhile, Asean Secretary-General Le Luong Minh said in a report earlier this year Asean was on track for integration by the end of 2015.

“Asean will pursue the enhancement of the investment climate of the region, building an Asean community that is competitive, fully integrated and networked into the global economy,” Le Luong Minh wrote.

But Chambers warned that countries like Cambodia, Myanmar and Vietnam, the “labor-intensive” arms of Asean, will see increased economic dependence on the region.

“Cambodian industries will become less able to develop their own industries,” he said. “Instead Cambodian companies will become more entrenched in the labor-intensive portion of Asean’s integrated economy after December 2015.”

Pou Sovachana said Cambodia must improve its skills in hard science, technology and math, to continue growth and attract investors. It will also need to improve investment regulations and watch for unsustainable development and impacts on the environment and the Cambodian people, he said.

“We should watch out with some kind of investment that could affect the environment, as well as bad investments and long-term concessions for foreign companies that will affect local companies and people,” he said.