The recent free trade deal between the EU and Vietnam may prove a challenge to Vietnam’s neighbour, Cambodia. The agreement offers Vietnam duty-free exports to the EU and may not have an immediate impact, but would eat into similar advantages the region enjoys in the long-term, in the near future. The pact between the two economies, would, do away with 99 per cent of tariffs for selected Vietnamese sectors. This includes, garment and rice industries, which are the mainstays of Cambodia’s economy.

Ken Loo, Secretary General of Garment Manufacturer Association of Cambodia (GMAC), says the new agreement FTA would certainly affect Cambodia’s garment sector, though it would take time. Vietnam will enjoy duty-free exports only in seven years (after sanctioned). The Vietnamese agreement stipulates that garment exports to the EU should only use Vietnam-made fabric, while Cambodian garment exporters can source fabric from anywhere, Loo added. He feels that the impact will be good for Vietnamese items that can make use of the domestic fabric.

Vietnam also enjoys the advantage of locally made raw materials, which would be augmented considering the dearth of local supply in Cambodia, feels Piet Holten, President of Pactics Cambodia, a manufacturer of fabric cases for sunglasses in Siem Reap.