Business Borrowers In Cambodia At Stake In Potential EBA Withdrawal

Cambodia PM
Cambodia's Prime Minister Hun Sen attends a groundbreaking ceremony for the Project for Flood Protection, donated by Japan, in Phnom Penh, Cambodia, March 4, 2019. (Photo: REUTERS/Samrang Pring)

The European Union (EU) has yet to decide whether or not it should officially withdraw the "Everything But Arms" deal with Cambodia. However, analysts have raised concerns about MFI borrowers who will most likely be impacted by the potential withdrawal.

According to VOA Cambodia, among the segments relying heavily on the EBA program for funding are those in the sporting goods, footwear, and apparel sectors.

They are direct beneficiaries who may lose the opportunity to borrow for financing if the EBA deal is withdrawn.

Up until February, Cambodia enjoyed preferential access to EU markets under the agreement. However, the European Commission launched a probe into the country's possible violation of human rights in some manufacturing plants.

It is worth noting that the EU is Cambodia's largest trading partner. Should the EBA get withdrawn, many companies and manufacturing segments will be affected. However, the Commission called on Prime Minister Hun Sen's government to take action about the bloc's concerns.

Cambodian borrowers can request for funding assistance if their business practices adhere to international human rights and democratic regulations. However, the new government reportedly changed from a democracy to authoritarian.

Economic development policy consultant Milford Bateman said a tweak in the EBA's rules regarding various apparel and sporting products could cause a serious breaking up in the microfinance sector of Cambodia.

Furthermore, the overall financial system is expected to break down, potentially pulling down the country's credit rating among global lenders who may see Cambodia as a nation that could not pay loans accordingly.

Late last month, outgoing EU Ambassador to Cambodia George Edgar said he is still hoping that the government will heed to concerns raised by the bloc so the withdrawal process will be overthrown.

According to the Khmer Times, Edgar pointed out that he wants to retain Cambodia's enjoyment of the EBA deal. He said the Commission's concerns should be taken seriously this time to ensure that good ties between the two sides will be retained.

Edgar further explained that while the withdrawal process has been started, the outcomes don't necessarily mean the agreement will be withdrawn as long as the government takes appropriate action.

Aside from the apparel segment, rice farmers have been appealing to the EU to have mercy on their livelihood. The Cambodian Rice Federation said their bread-and-butter will be put at stake under the EBA's withdrawal.

Before the EBA program's withdrawal process took off earlier this year, the bloc already imposed tax duties on Cambodian rice as the Commission seeks to help domestic rice farmers. 

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