The EU Green Transition and Trade Support for Cambodia

The newly-appointed EU Ambassador to Cambodia, Igor Driesmans, has unveiled plans to bolster Cambodia’s green transition and enhance sustainable trade relations. In an effort to pursue these objectives, the European Union is set to introduce two significant initiatives that promise to foster a greener, more sustainable future for Cambodia. Driesmans emphasized that these two priorities—supporting the green transition and boosting trade competitiveness—are inherently connected, as sustainable development is fundamental to long-term economic success and competitiveness for Cambodia.

Driesmans, speaking at a press conference, articulated his vision for Cambodia. He outlined the first of these initiatives, which aims to support sustainable agriculture value chains in specific product categories and geographic regions. This initiative is designed to fortify Cambodia’s agricultural sector and promote sustainability in production and distribution. The second initiative is focused on green energy and industrial value chains, with a primary focus on catalyzing a green industrial transformation, starting with garment factories. By concentrating on these sectors, the EU aims to create jobs, enhance sustainable practices, and drive economic growth in Cambodia.

Underlining the significance of Cambodia’s relationship with the European Union, Driesmans noted that the EU stands as Cambodia’s second-largest market, with imports totaling €5.5 billion ($5.8 billion) in the previous year. These imports, he stressed, play a vital role in providing employment for around 700,000 Cambodian citizens. European companies operating within Cambodia are primarily composed of small- and medium-sized enterprises. These companies contribute significantly to the quality of services, high-added value industries, and sustainable businesses, including tourism, hospitality, green enterprises, and digital industries. Furthermore, these investments generate high-quality, sustainable jobs, which, in turn, improve labor and environmental standards in Cambodia.

Driesmans hinted at forthcoming positive developments for Cambodia following meetings between EU business leaders and the Prime Minister. He expressed his anticipation that companies would soon announce their plans. He believes that Cambodia possesses a wealth of attractive features for European investors, including a skilled labor force, a strategic geographical location, and a young population. He commended the fact that some investors who engaged with the Prime Minister have indicated their intent to increase their investments or return to Cambodia.

While Cambodia has enacted a progressive investment law in 2021, there remain challenges in implementing this legislation, as well as other pieces of legislation, such as the tax laws. Driesmans noted that addressing these issues is crucial to providing the business community with the predictability and regulatory stability needed to plan for the medium and long term.

“Everything but Arms” and Cambodia’s Ascent

Cambodia has ambitious plans to become a middle-income country by 2030 and a high-income country by 2050. However, as it progresses along this developmental trajectory, Cambodia will eventually lose preferential trade access granted by partner countries, including the European Union. Igor Driesmans acknowledged that Cambodia has benefited significantly from preferential access to the European market under the “Everything but Arms” (EBA) trade regime. This program has played a pivotal role in the growth of Cambodia’s manufacturing sector, enabling duty-free access for Cambodian goods to the European market.

Driesmans viewed Cambodia’s impending graduation from the status of a developing country to that of a middle-income country as a positive development. It signifies the nation’s progress and increasing prosperity. Nevertheless, it also implies changes in trade arrangements with the EU and other partners. As Cambodia graduates, it will lose the preferential access it currently enjoys under the EBA regime. Driesmans reassured that the measures and actions outlined earlier are designed to help Cambodia prepare for this transition and mitigate its impact.

Investing in Cambodia’s Youth

Driesmans pointed out that Cambodia boasts a young population, with 65 percent of its citizens under 30 years of age. This demographic potential presents a significant opportunity for the country’s future. The EU’s goal is to empower this young generation to play a vital role in Cambodian society, the economy, and the broader political discourse. To achieve this, the EU will support technical education to enhance employability, aligning with the objectives of the two Team Europe initiatives mentioned previously.

In addition to technical education, the EU aims to increase access to Erasmus Plus scholarships through the European Union Higher Education Fair and other related events. This would enable Cambodian students to access educational opportunities and enhance their skills and knowledge. Driesmans emphasized the importance of fostering student mobility within ASEAN and with the European Union for educational and research purposes. However, he acknowledged that the existing EU scholarship programs may not be sufficient to cater to Cambodia’s needs. Thus, the EU is committed to working on enhancing educational mobility within ASEAN and with the EU to ensure that Cambodian youth have access to quality education and research opportunities.

In summary, the European Union’s initiatives to support Cambodia’s green transition and sustainable trade demonstrate its commitment to the nation’s development and prosperity. These initiatives not only aim to strengthen Cambodia’s economic and environmental sustainability but also to prepare its youth for a brighter future. As Cambodia embarks on its journey towards becoming a high-income country, the EU stands ready to provide support and partnership in realizing these aspirations.