Europe must hold firm on plans to suspend Cambodia from the EBA trade initiative.
Since 2001 Cambodia has benefited from an exceptional trading advantage, granted by the European Union thanks to an initiative known as “Everything But Arms” (EBA). This provides the possibility of exporting to Europe without quotas or customs duties. The advantage was given to a group of countries in the process of development and transition toward democracy. The intention of the European Commission was to help “least developed countries” to escape from poverty but also — a parallel, mandatory, criteria — to progress on the path to democracy and respect for human rights.
Since its creation, the EBA program has proved vital for Cambodia, whose economy is based on the export-oriented clothing industry (40 percent of GDP and 60 percent of exports). The European Union buys 40 percent of the clothes produced in Cambodia, through leading international brands.
In September, the European Union decided to begin the process of suspending Cambodia’s EBA participation because of the totalitarian drift of the regime in Phnom Penh. Under the leadership of Prime Minister Hun Sen — a former Khmer Rouge member who has been in power since 1985 — the only opposition party in parliament, the CNRP, was arbitrarily dissolved in late 2017 and its leader, Kem Sokha, arrested, while civil society organizations and the independent media were shut down. This set the scene for rigged elections in July 2018, with 100 percent of the seats in the National Assembly being won by the ruling party. Such a result demonstrates the return to a Communist-style, single-party system which the Paris Accords of 1991 intended to banish.
This totalitarian drift violates the conditions to benefit from EBA, and obliged the European Union to punish the Phnom Penh regime by suspending it. But the suspension will only be effective after a delay of 12 months, giving Hun Sen time — supposing that he has the political will — to return to the path of democracy.
Beyond applying pressure for the respect of democratic principles and human rights, this threatened European sanction could kill two birds with one stone by also triggering healthy economic reforms through better governance. Cambodia is, according to Transparency International, one of the most corrupt countries in the world and, according to the World Bank, one of the poorest. The correlation between corrupt governance and poverty no longer needs to be demonstrated; the former leads directly to the latter.
The most flagrant evidence of poor governance doesn’t just lie in the systematic pillage of national wealth by an elite which clings to power indefinitely. It also consists in poor strategic decisions taken by irresponsible leaders who are incapable of a clear and coherent vision for the future of their country.
The weight of the clothing industry in Cambodia and the country’s dependence on this single industry are a striking example of this poor governance. Since the start of the process of globalization and the return of peace in the 1990s, an industrial revolution has taken place in Cambodia, driven by a clothing industry characterized by low added value and low salaries (the basic salary of a Cambodian worker is currently $170 per month). But over the last 20 to 25 years, instead of using this industry as a basis from which to diversify the economy toward higher added-value industries, the regime has allowed the national economy to become ever more dependent on a single industry. This negligence has aggravated Cambodia’s relative poverty compared to neighboring countries.
Worse, productivity within this clothing industry remains very low, meaning Cambodia can’t compete internationally without the commercial advantages provided by the European Union. Weak productivity itself reflects poor governance in the form of dilapidated public and social services, notably in health, education and professional training. Cambodia’s lack of industrial competitivity results from the corruption and negligence lamented by investors, who are faced with poor road and port infrastructure, administrative costs that include bribes to be paid at every level, exorbitant prices for state-supplied electricity, and so on.
If, to be able to survive, Cambodia’s clothing industry, a pillar of the national economy, must rely indefinitely on European trading advantages to resist competition from others who lack them, then the European Union will be subsidising and financially rewarding, through the trading system, the corruption and poor governance of the regime.
This raises the question of the effectiveness of international aid, which starts from good intentions, but has perverse effects which may do the recipient country more harm than good by helping to maintain anachronistic structures.
Faced with Hun Sen, who is holding his people hostage as part of a campaign to emotionally blackmail the international community, Europe must hold firm. The dictator has feet of clay and his days are numbered in the absence of imperative and urgent reforms.
Sam Rainsy is an exiled leader of the Cambodian opposition and former minister of finance.