Special Report 4 - May 2006
Hing Vutha and Nou Keosothea
The Early Harvest Programme: Implications for Cambodian Agriculture 

Abstract 

This study examines the development, features and implications of the ASEAN-China free trade area (FTA) on regional economies. It particularly focuses on the economic benefits of the ASEAN-China FTA from the perspective of Cambodia, the potential impacts of the Early Harvest Programme (EHP) on its agricultural sector and recommended policy responses for Cambodia to derive the greatest benefits from the EHP. The analysis is primarily based on in-depth consultation with stakeholders, and secondary data analysis of current trade patterns between China and Cambodia, with some references to trade between China and Thailand and Vietnam.

The study found that the ASEAN-China FTA provides advantages and economic benefits to all member countries in terms of increased trade, economic efficiency, investment and strengthened cooperation. The removal of trade barriers between ASEAN and China may lower costs, increase intra-regional trade, increase economic efficiency and improve investment prospects in the region. The EHP, which is a provision of the Framework Agreement aimed at accelerating liberalisation of trade in most agricultural products, could provide Cambodia an opportunity to develop its agriculture as a source of growth and poverty reduction. The EHP offers promising prospects for developing agriculture through exporting products such as fresh fruits, livestock, fish, shrimps and prawns to the dynamic Chinese market. However, these benefits have not materialised yet because Cambodia has not fully met the prerequisites of a sound business climate, adequate legal framework, provision of basic infrastructure and effective public institutions. As a result, the competitiveness of Cambodia’s agriculture and enterprises continues to be relatively low.

Addressing all major constraints on agricultural development and supply-side capacity is strongly recommended if Cambodia is to derive the greatest benefits from the EHP. Administrative, legal and judicial reforms, provision of sufficient basic infrastructure and enabling policy and a regulatory framework are certainly priority issues that government should address. In addition, improving agricultural productivity, enhancing the productive capacity of enterprises, reducing the cost of conducting trade and strengthening cooperation between Cambodian and Chinese business associations are also vital to promoting Cambodia’s agricultural trade.

For the EHP to have a greater impact on poverty reduction, government support and policy responses should promote the involvement of the poor in trade liberalisation and growth. There should also be appropriate adjustment measures to mitigate potential negative impacts on the poor. The future of agriculture and the contribution of the EHP to poverty reduction in Cambodia depend on the success of the government’s policy and reform programmes to enhance agricultural and enterprise competitiveness.