Bilateral trade cooperation between Vietnam and Cambodia has made significant strides

29/07/2024 15:51

Vietnam and Cambodia are two neighboring countries located on the Indochina Peninsula, in the lower Mekong River. The two countries have an extremely important geopolitical position, being the focal point connecting the Indian and Pacific regions. Over the years, Vietnam-Cambodia relations have been developing more and more well, going deeper, practical and effective in all fields.

On the basis of good political relations, Vietnam and Cambodia have proactively and actively promoted bilateral cooperation in a practical and effective manner. Since the signing of the Vietnam-Cambodia Economic and Trade Agreement (in 1998), trade and investment relations between the two countries have developed strongly, playing an important role, contributing to promoting the socio-economic development of each country, and at the same time creating conditions for consolidation,  strengthen the comprehensive cooperation between the two sides. Currently, Vietnam is one of Cambodia's two largest international trading partners (after China) and Cambodia's largest export market in Southeast Asia. With the advantage of geographical distance, the long-standing good relationship of the leaders of the two countries, as well as the similarity in commodity products, trade between Vietnam and Cambodia is expected to continue to grow rapidly in the coming time. Vietnam's goods are increasingly present in Cambodia's goods distribution system, from wholesale markets, people's markets to large and small supermarkets in the country; The items are relatively diverse, from consumer goods to raw materials and auxiliary materials, from food to machinery, iron and steel, chemicals, etc.

In terms of investment, according to data from the Ministry of Planning and Investment, as of June 2024, Cambodia has 35 investment projects in Vietnam with a total registered capital of 76.75 million USD; meanwhile, Vietnam is always in the top 5 countries with the largest direct investment in Cambodia.

According to statistics of the General Department of Customs, in 2023, the total bilateral trade turnover between Vietnam and Cambodia will reach 8.6 billion USD, a significant decrease of 19.45% compared to 2022; in which, export turnover reached 4.9 billion USD, down 15.94% compared to 2022; import turnover reached 3.7 billion USD, down 23.68%. In general, in the period of 2019 – 2023, bilateral trade turnover between Vietnam and Cambodia did not have many sharp fluctuations, mainly recording an upward momentum from 2019 – 2022 despite the effects of the Covid-19 epidemic; however, in 2023, export turnover will decline again, according to many experts, the reason for the decline in exports is mainly due to the impacts of the prolonged Russia-Ukraine conflict, accompanied by high inflationary pressure in many countries around the globe.

According to data from Trading Economics, Cambodia's GDP growth rate increased by 5.5% quarter-on-quarter in the fourth quarter of 2023. The annual inflation rate in Cambodia increased to 0.5% in April 2024, after little change in March. 2023 is a year in which Cambodia's growth prospects are highly dependent on external risks, especially the weakening of the global economic recovery along with a new increase in commodity prices.
In 2024, growth is expected to increase to 6.2% thanks to stable consumption and a recovery in garment exports. However, Cambodia's economy will face many difficulties on the recovery momentum, such as slowing economic growth in China, the largest contributor to Cambodia's FDI and tourism; In addition, a prolonged recession in the real estate sector could also lead to financial difficulties for the country.

Bilateral trade has been considered a bright spot in trade relations between Vietnam and Cambodia for many years. 2022 is the year of recording the highest export turnover to Cambodia in the 10-year period, with a value of 5.81 billion USD, up 20.31% compared to 2021; meanwhile, 2016 was the year with the lowest export turnover, with a value of 2.2 billion USD.   

The Vietnamese Ambassador to Cambodia said that in 2024 and the following years, Vietnam will continue to promote comprehensive cooperation with Cambodia; in particular, economic and trade cooperation... which is a key area of concern for the leaders of the two countries. At the same time, Vietnam and Cambodia will continue to coordinate the implementation of agreements and memorandums of understanding that the two sides have signed, specifically the Border Trade Agreement and the Agreement on Promoting Bilateral Trade in the 2023-2024 period.

Regarding building a sustainable supply chain when exporting, Vietnamese businesses believe that this is essential to meet the needs of the Cambodian market, comply with and promote a green industry. In addition, it is important to train and support and build the capacity of suppliers to comply with codes of conduct, regulations and standards.

In June 2024, Vietnam's export turnover to Cambodia reached 438.18 million USD, a slight decrease of 3.58% compared to the previous month but an increase of 12.98% compared to the same month in 2023; in the first 6 months of 2024 alone, the export turnover of goods to this market recorded a slight increase compared to the first 6 months of 2023 of 3.88%, reaching 2.56 billion USD. In which, the three export products with the highest turnover are textiles and garments (accounting for 16.39%); Iron and steel of all kinds (accounting for 14.52%) and petroleum of all kinds (accounting for 7.16%).

In June 2024, Vietnam's import turnover of goods from Cambodia reached 223.50 million USD, down 14.87% compared to the previous month but up significantly by 20.07% compared to the same month in 2023; in the first 6 months of 2024 alone, import turnover from this market recorded an increase of 29.47% compared to the first 6 months of 2023, reaching 2.69 billion USD. In which, the three imported products with the highest turnover are cashew nuts (accounting for 37.28%); Rubber (accounting for 13.62%) and Ores and other minerals (accounting for 1.27%). From 2022, a series of Cambodian agricultural products will be increased to be imported into Vietnam, typically cashews, vegetables, fruits, soybeans, etc.

Over the years, the work of connecting and promoting trade into the Cambodian market has always been focused on by management agencies and the business community: 

In December 2023, in Hanoi, Minister of Industry and Trade Nguyen Hong Dien had a meeting with Ms. Cham Nimul, Minister of Trade and Mr. Hem Vandy,  Cambodia's Minister of Industry, Science and Technology Innovation on the occasion of the official visit to Vietnam by Cambodian Prime Minister Hun Manet. On the basis of assessing the current difficulties, representatives of the two countries agreed on a number of measures to promote economic-trade and industrial cooperation between the two countries, towards the goal of higher turnover through reviewing, amending, supplementing and signing new legal frameworks on trade. At the same time, disseminating information about bilateral trade incentives, supporting businesses to carry out trade promotion; strengthen coordination and exchange of information on the fight against cross-border smuggling. In particular, strengthen the exchange of experiences to improve the business investment environment, mechanisms and policies to attract investment in the industrial production sector in Cambodia. Vietnam has also developed a remarkable number of projects in Cambodia to provide raw materials for the production of domestic industrial products, thereby contributing to Cambodia's stabilization of people's lives and economic development. Cambodia is also a strong consumer of iron and steel products, building materials, processed foods, and consumer goods of Vietnam.

Recently, Minister of Industry and Trade Nguyen Hong Dien signed an Agreement on Bilateral Trade Promotion with Mr. Pan Sorasak, Minister of Trade of Cambodia regulating the import of rice and dried tobacco leaves originating from Cambodia according to tariff quotas in 2023 and 2024. Accordingly, the subjects of application are traders importing rice and dry tobacco according to tariff quotas originating from Cambodia and other related organizations and individuals. The tariff quota for import of goods specified in Article 2 of this Circular shall be administered by automatic reconciliation at the customs office where the trader carries out import procedures. The automatic deduction until the end of the tariff quota shall comply with the guidance of the customs office.

In the context that the economic and trade cooperation and development between Vietnam and Cambodia is expanding in scale and improving quality, in order to boost Vietnam's exports to Cambodia, it is necessary to focus on the following solutions:
•    Create a favorable and stable business environment to support enterprises to participate in exports. In addition, promote investment in research and development (R&D) to improve product quality and competitiveness of Vietnamese goods; promote the signing of free trade agreements and economic agreements with Cambodia;
•    Businesses need to master consumption trends, legal regulations and technical standards to be able to adjust business strategies and products accordingly;
•    Businesses need to create products and services with high quality and competitive prices to attract Cambodian consumers. In particular, building a large and stable distribution network in the Cambodian market to ensure that products can reach consumers effectively.
Vietnamese and Cambodian businesses will continue to strongly implement promotion activities to find good opportunities for investment and trade exchange in 2024. This is the premise for Vietnam and Cambodia to increase bilateral trade turnover to 20 billion USD as expected.

Sources: thongtincongthuong.com