PHNOM PENH: Cambodia’s manufacturing sector is likely to benefit if the United States imposes tariffs on China to narrow its trade deficit with the country, a managing partner of Mekong Strategic Capital says.
In a webinar hosted by Cambodia’s Institute of Directors earlier this week, Stephen Higgins said he expected similar benefits if U.S. President Donald Trump also targeted Vietnam.
Higgins, a co-founder of the Phnom Penh-based investment and advisory firm, noted that Trump had already started a process targeting Vietnam as a “currency manipulator” towards the end of his first term.
Now in his second term following his inauguration on Jan. 20, “Trump’s focus on China (and potentially Vietnam) will result in more manufacturing shifting to Cambodia,” he said.
“This may accelerate what has already been a longer-term trend.”
At the same time, however, Higgins noted the possibility of U.S. crackdowns on companies moving production from China to other countries.
Another possibility is Chinese inputs — in garment manufacturing, for example — being subjected to U.S. tariffs.
So while Cambodia is likely to benefit initially, “there may be some second or third-order effects that could target Cambodia and actually hurt Cambodia given those linkages with Chinese companies.”
DEMOGRAPHICS BOOST LONG-TERM OUTLOOK
On the longer-term outlook, Higgins highlighted the “wonderful tailwind” of Cambodia’s demography, with the working-age population forecast to grow 24 percent between 2021 and 2050.
That compares with growth of only 1 percent in Vietnam during the same period and contractions of more than 20 percent in China and Thailand.
“Cambodia has one of the best demographic profiles in the region and indeed in the world,” he said.
At the same time, however, Higgins highlighted the need for Cambodia to fix its branding to counter negative reports about corruption and the rule of law.
Such reports cause investors to “think twice” about coming to Cambodia, he said, noting similar sentiments among some potential tourists.
A report on Chinese traveller sentiment last year, for example, showed that only 13 percent felt “safe” about visiting Cambodia.
“Cambodia has to fix its brand that it presents to the outside world,” he said. “It’s not a positive and it can do long-term damage.
FIXING ‘BRAND CAMBODIA’
Higgins, former chief executive of ANZ Royal Bank, said cracking down on scam centres was “step number one” to improve Cambodia’s image abroad.
“It’s obvious where they are so they need to be shut down, kick these people out, don’t let them back in. It’s the single most important step they can make,” he said.
He also stressed the need for a “very good international marketing campaign” to fix Cambodia’s brand.
“Bringing journalists here so they can see firsthand what Cambodia has to offer, you invariably get really great articles – great publicity – because it is such a good product.”
Another priority is “being a bit more sophisticated in how Cambodia presents itself to the world.
“A lot of the statements that get made, they’re just not sophisticated and they don’t come across well to the outside world. So they need to get a little better at that.”