As Hun Sen goads West, minister quietly notes massive cost of sanctions

Hor Kimsay and Ananth Baliga | Publication date 19 December 2017 | 06:33 ICT

p

Commerce Minister Pan Sorasak speaks at an event earlier this year. Photo supplied

With Prime Minister Hun Sen publicly daring Western countries to impose sanctions in response to the recent dissolution of the country’s main opposition, the minister of commerce has quietly expressed concern at the staggering customs bill Cambodia would incur should the EU suspend its preferential trade treatment, a leaked letter to the premier shows.

International pressure on the Cambodian government has been mounting following the Supreme Court’s near-universally condemned decision last month to dissolve the Cambodia National Rescue Party – the only viable competitor to Hun Sen’s long-ruling Cambodian People’s Party. The EU and US have already pulled funding for Cambodia’s National Election Committee, with the US also announcing visa restrictions on individuals involved in “undermining democracy”.

The EU Parliament on Thursday passed a resolution calling for a review of Cambodia’s Everything But Arms (EBA) trade preferences, even suggesting a temporary withdrawal. The EBA allows tariff-free imports to the economic bloc on account of Cambodia’s least developed country status.

The resolution prompted a fiery response from Hun Sen, who on Sunday said he would not be a “dog that acts just for only a bone or a piece of meat”, and dared the EU to “cut it!”

However, in a leaked letter dated December 4, Commerce Minister Pan Sorasak informs the prime minister that removal of these preferences would incur a $676 million tariff cost based on the $6.2 billion in exports to the EU in 2016. Suspension of preferential access to the US market for certain goods would incur a $10 million bill, he added.

Reached yesterday, Sorasak did not deny the authenticity of the letter, but downplayed its significance.

“It is just an official document sent to Samdech [Hun Sen] for sharing some information,” he said, refusing to comment further on the contents of the letter.

Maintaining a sombre tone throughout, Sorasak notes in his letter that the tariff payments to the US are “just small”, but goes on to point to the exponentially higher payments to the EU, before noting that the sector employs more than 400,000 workers.

The minister also suggests that the government should lobby “friendly” EU member states.

“Cambodia should lobby any friendly countries that are members of EU through diplomatic and business networks, because the EU mostly has soft [response] and more understanding of Cambodia’s situation,” the letter reads.

Government spokesman Phay Siphan also declined to comment on the letter’s contents, but said removal of the EBA would be a slow process and that he did not expect the EU to take a knee-jerk decision. “As per my experience, we have never seen any [EU] resolution executed against Cambodia for many years,” Siphan said.

But political commentator Lao Mong Hay said it was noteworthy that the commerce minister was sounding off to the premier on the wide-ranging economic and employment effects of any sanctions, though he conceded it was unlikely Hun Sen would change his approach to the EU and US.

“He thinks he can say what he wants and there will be no cost,” he said.

Though some firms operating in Cambodia would be able to swallow additional EU tariffs, Stephen Higgins, managing partner of Cambodia-based investment firm Mekong Strategic Partners, said others would prefer to shut shop, causing a negative domino effect.

“While some businesses might absorb the tariff, others might close and move offshore, and then you have second and third round effects, as workers have less income to spend on local businesses and so on,” he said, via email.