MAY KUNMAKARA
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| Bottles of wine made from wild grapes. Supplied |
When the Asean Economic Community came into effect, it opened up a market of more than 600 million consumers to winemaker Meas Vireak, but brought fears that a wave of competition would wipe out his business.
However exactly one year on, the owner of the Wild Grape Wine company in the Krokor district of Pursat province feels that nothing has changed.
His company has been turning wild grapes into good quality wine for 10 years. But he is uncertain what to do to take advantage of their duty-free and quota-free status among other Asean member states.
“I don’t see any side effect or benefits from the materialization of the Asean Economic Community,” he said.
“I don’t see any positives for my business because I don’t see any encouragement and ways on how to expand our products into the big market of the AEC. I don’t even know who will help us with that.
“Of course, I do say that since I heard about the AEC coming into force, by the end of 2015 we prepared ourselves well in response to what kinds of challenges and risks for our business there would be.
“But so far I don’t see any impact or even benefits from the AEC. I don’t know who is going to help us and bring our products there, but I still prepare myself for that,” he added.
The AEC created new markets with free movement of goods, services, investment, skilled labor and freer flow of capital.
Import duties for 99.20 percent and 90.85 percent of tariff lines have been eliminated by Asean-6 (the older members) and CLMV (Cambodia, Lao, Myanmar and Vietnam) respectively, while the Asean tariff elimination across all 10 Asean members stands at 95.99 percent. CLMV has committed to abolishing import duties with some flexibility until 2018.
Song Saran, president of Amru Rice, a leading rice miller and exporter, echoed Mr. Vireak’s remarks, saying the AEC had minimal effects on Cambodian exports.
Cambodia was still growing thanks to its quota-free status under the European Union’s Everything But Arms trade scheme.
“As the CEO of the company and the management team, we developed a comprehensive integrated strategy, business unity strategy as well as diversification plan to be ready before the AEC was fully enforced,” Mr. Saran said.
“We acknowledged the potential markets lost to the other members of AEC due to lack of competitiveness in the global market, but we still enjoy export growth in the region.
“I believe small and medium-size companies are still limited on their understanding of the AEC, and to what extent we should be positioned among the AEC members,” he said.
“The government has to play a critical role providing frequent seminars and focus on what is unique and the strength of each member to avoid the wrong direction or investment as in the proverb ‘egg against stone’,” he added.
One expert said the AEC has been hyped much by media and Asean governments, but the issue is that in most Asean states, the private sector has little understanding and comprehension of the implications for them businesswise.
It still required most governments to enhance awareness of AEC implications for the business community.
David Van, the managing director of Consultancy Bower Asia Cambodia, said that the more advanced Asean member states would reap any benefits more quickly. But he agreed that most Asean governments needed more educational processes for their business communities.
“Cambodian SMEs in general are weak and only a handful of our local companies could be viewed as acceptable for partnership with foreign businesses that can bring in both capital and professionalism on how to operate in the international arena,” Mr. Van said.
“Competitiveness is the key factor for any given Asean member state to extract as much benefits as possible from the AEC and Cambodia’s ranking in all these years reflected the fact that we need to work harder on our ability to compete considering we have neither an adequate infrastructure nor a skilled labor to address demands of investors,” he said.
“But at least we compensate with among the most liberal investment legislation, though it still needs to be overhauled to suit the rapidly changing requirements from FDI. The public is still awaiting the passage of the new law on investments promised years ago.”
He said that despite the AEC pledging a “freer flow of services and investments”, intra-Asean movement of goods is still pretty much confronting remaining non-tariff measures imposed by most member states to protect their local specific sector, in particular the agriculture sector.
Commerce Minister Pan Sorasak said the AEC has had a positive impact rather than a negative one on local producers and urged them to improve their capacity.
“I have seen only the positive signs and there are no negative impacts to local producers because the inflow of products is of a high standard,” he said.
“This is the way local producers learn from those imported products.If we compete with only local rivals, we will learn nothing. Asean integration pushes local producers to work hard to compete with others in the region and globally.”
Although both Mr. Vireak and Mr. Saran have not seen any positive impacts on their business, they are committed to improve their businesses and produce good quality products to avoid any accidental impact from the AEC.
“I will still improve the technology innovation and diversification strategy to ensure our competitive edge and unique products to maintain the markets and growth,” Mr. Saran said.
Mr. Vireak, who already exports to China, also planned to export more products to other members of Asean, likely Thailand and Vietnam, after he had learned about the markets.
“I will export to Thailand next year because I just took part in an expo in Thailand and about 70 percent of Thais who tasted my wine support us,” he said.
Mr. Sorasak said the Ministry of Commerce is ready to help local producers.
“Exporters normally have problems due to misunderstandings about the demand of markets. Commerce needs to communicate with each other to find competitiveness,” he said.
“In order to help local producers, we have established business registration automation, we issue certificates of origin for export. These are made via the internet. For all payments we use an e-payment system, so we don’t pay under the table.
“This helps facilitate local producers for exports. However, we still see local products not complying with quality standards and processing is still limited.
“The ministry will keep on this issue to help local producers,” he added.
Asean’s total merchandise trade stood at $2.53 billion in 2014, of which $608 million was intra-Asean trade. Asean is one of the key destinations for FDI into the Asia region with $136 billion in 2014.
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