Vietnam-Cambodia Trade Ties Effectively Exploiting Advantages

Vietnam and Cambodia are neigbouring countries with long-term traditional friendship and solidarity, fostered by generations of leaders and people of the two countries. In recent years, the relations between two countries have witnessed a fine development with the exchange of visits of Party and State leaders, and officials from ministries and border provinces and mass organisations. This has made a contribution to boosting friendship and co-operation between Vietnam and Cambodia. In particular, the visit to Cambodia by Party General Secretary Nong Duc Manh in March 2005 was an important event, further confirming the basic principle for the Vietnam-Cambodia relationship: ‘Fine neighbourhood, traditional friendship, comprehensive co-operation and long standing stability.’ In October, 2005, Cambodian Prime Minister Samdech Hun Sen paid an official visit to Vietnam, and the two countries signed a supplementary treaty on the 1985 border treaty. The event affirms the two countries’ policies on continuing to build border areas of peace, friendship and mutual economic development.

 

Trade exchange between the two countries have witnessed a rapid development in recent years with an average increase of 30 per cent per annum in trade turnover. In 1998, when the two countries signed their Trade Agreement, trade exchange between them was valued at US$117 million. This figure increased to US$693 million in 2005. In the past, the two countries set a target of increasing their two-way trade turnover to US$1 billion in 2010. During an official visit to Cambodia of Prime Minister Phan Van Khai, the two sides committed to boost their trade exchange, reaching US$1 billion in turnover in 2006.

 

The structure of goods exchanged by the two countries has been diversified. Vietnam exports to Cambodia consumer goods, such as food, plastics products, fertiliser, iron and steel, electrical tools, and cosmetic products. Vietnam imports rubber, wood and farm-produce from Cambodia. Vietnam is the second largest exporter to Cambodia in ASEAN, just behind Thailand and the world’s fourth largest exporter to Cambodia, just behind China, Hong Kong and Thailand.

 

Trade exchange between Vietnam and Cambodia has seen a change for the better not only in a strong increase in the quantity and value of exported goods. Enterprises of Vietnam and Cambodia have developed their trade relations into investment and joint venture forms. As a result, many effective co-operation models, such as a joint venture between the Binh Dien Fertiliser Company of Vietnam and the Yetak Group of Cambodia, a joint venture between the Southern Steel Company and the Chip Mong Company of Cambodia, and between Vina Ace Cook, Thien Long, Bitis, and Kym Dan with Cambodian partners, have been formed. 

 

In recent years, many trade fairs to introduce Vietnamese high quality goods, seminars and business forums have been held in Vietnam and Cambodia to help enterprises in the two countries contact each other and seek partners. Vietnamese goods have become a favourite choice among Cambodian consumers.

 

The international border gate of Moc Bai – Ba Vet is located on the trans-Asia highway has built up and upgraded as an important trade centre. Trade turnover via the border gate has accounted for higher proportion in trade value between Vietnam and Cambodia.

 

	2001	2003	2005
Total value (USD)	8,157,897	26,434,466	52,384,541
Export value	6,649,283	26,192,026	31,778,218
Import value	1,508,614	242,440	20,606,323

The Moc Bai border gate economic zone, whose policies and management mechanisms have been approved by the Vietnamese Government, has been completely planned. Tay Ninh province has established a management board for the border gate economic zone and issued many documents, providing the guidelines of the implementation of the Government’s policies and mechanisms for the zone. This is a good premise for boosting trade exchange via the Moc Bai border gate.

However, in terms of trade exchange with Cambodia, Tay Ninh province should learn experience from policies applied by Thailand for the international border gate of Poi Pet with Cambodia. Specifically, the province should build a border market like the Poi Pet market and create favourable conditions for Cambodian people to enter the zone to buy and transport goods to their country. For management, the province can sell tickets as at the Poi Pet border gate, which receives 10,000 Cambodian people each day entering Thai to buy goods. Each ticket is priced at 1,000 Cambodia riel, equal to US$0.25.

 

Consumer goods manufacturing industries in Cambodia have yet to develop. All domestic and foreign-invested projects in the country concentrate on making garments and footwear, or hotel and restaurant business. Therefore, all consumer goods in Cambodia are imported. Meanwhile, the country has no policies on protection of consumer goods. Imported goods to Cambodia are not constrained by quotas or hard-to-please technical requirements like in developed countries, except some goods as medicines, plant protection medicines and chemicals, which have to have licences from the authorised ministries.

 

The number of traders, who know Vietnamese, in markets and trade centres in cities and towns is very high. This is convenient condition for them to make transactions and trade Vietnamese goods.

 

Via trade fairs and exhibitions organised in Cambodia in recent years, Vietnamese high quality goods have won the heart of Cambodian consumers as they fit the taste of locals with fine samples and quality like goods of other countries in the region. For promoting the export of Vietnamese goods to Cambodia, the Ministry of Trade and exhibition and fair organising companies should promote the organisation of fairs and exhibitions of Vietnamese goods in the country, at least once or twice a year.

As Vietnam and Cambodia share a 1170 kilometre border line, it is easy for Cambodian traders to come to Vietnam and make direct contacts with plants or sign contracts to buy goods from Vietnam before distributing to retailers in Cambodia.

 

Cambodia is a member of the World Trade Organisation (WTO) and has enjoyed priorities in exporting goods to developed countries, such as the US, Japan, the EU, China and the Republic of Korea, without quotas.

 

However, there are difficulties in the Cambodian market, Vietnamese enterprises should know to develop suitable business and co-operation strategies. Concretely, Vietnam’s main exports to Cambodia include consumer goods, food, vegetables and fruit, plastics products, fuel, materials and medicines, which do not earn Vietnam high export value due to their average prices. Therefore, Vietnamese enterprises should promote the export of industrial products and goods of higher value to the market.

Also, due to high import tax rates in Cambodia, not to mention non-refundable VAT of ten per cent, the smuggling and trade fraud remain popular. This in turn will cause difficulties for Vietnamese goods in competing with smuggled goods from other countries in Cambodia. Vietnamese companies which sell their goods to Cambodia deliver and get paid in Vietnam or at border gates. Cambodian enterprises which buy goods from Vietnam are small and medium-sized, yet to adapt themselves with letter of credit transactions due to their poor knowledge on international payment or taking advantage of traditional business methods for tax evasion.  

Trade turnover of Vietnam and Cambodia:

	2001	2002	2003	2004	2005
Total value (million USD)	184	243	362	515	693
Export (million USD )	146	178	268	385	536
Import (million USD )	38	65	94	130	157