top of page

The Potential Impacts of Cambodia's Graduation from LDC Status


Cambodia's graduation from Least Developed Country (LDC) status brings both opportunities and challenges. The country met the graduation criteria for the first time in 2021 and could graduate as early as 2027 or 2028, depending on the assessment by the Committee for Development Policy (CDP) in 2024.

The long-term impacts of Cambodia's graduation from Least Developed Country (LDC) status can be both positive and negative. On the positive side, graduation signifies that the country has achieved significant economic and social development goals, which can attract more foreign investment and boost its international reputation. However, there are also potential challenges and negative impacts that Cambodia may face as it graduates from LDC status.


  1. Loss of trade benefits: Graduation means the loss of trade benefits enjoyed by LDCs, including duty-free status and favorable 'rules of origin'. Cambodia has significantly increased its exports to the European Union (EU) through preferential treatment and lenient rules of origin, allowing its products to enter Europe duty-free. The loss of these preferences may hurt Cambodia's export performance if not carefully managed.

  2. Market access and competitiveness: Cambodia must work to ensure that alternative market access is available after graduation and further improve its competitiveness. The country should also use the 'specific trade concerns' mechanism of the World Trade Organization.

  3. Free Trade Agreements (FTAs): As a soon-to-be LDC graduate, Cambodia will no longer be eligible to receive the General System Preferences (GSP) and the Everything But Arms (EBA) scheme from developed countries. This loss will require Cambodia to enter the realm of economic competition to seek FTAs both bilaterally and multilateral.


As a soon-to-be LDC graduate, Cambodia will no longer be eligible to receive the General System Preferences (GSP) and the Everything But Arms (EBA) scheme from developed countries. This loss will require Cambodia to enter the realm of economic competition to seek FTAs both bilaterally and multilaterally.

  1. Impact on WTO rules and Aid for Trade: Following graduation, specific flexibilities offered to LDC members by the World Trade Organization (WTO) may not be available. This could affect Cambodia's market access, WTO rules, and Aid for Trade.

  2. National Smooth Transition Strategy: Cambodia plans to follow a National Smooth Transition Strategy to ensure that the country will not suffer due to the graduation from LDC status. The strategy will be enforced after graduation.

  3. Challenges in specific sectors: Cambodia relies heavily on the textile industry and clothing sectors, which may face higher borrowing costs. The country should be granted more time with a temporary extension of trade preferences to ensure a sustainable and irreversible graduation process.


To mitigate these potential negative impacts, Cambodia should take several actions, such as:


  • Pursuing free trade agreements and regional integration initiatives to secure alternative market access.

  • Implementing trade reforms to improve its competitiveness and address the challenges posed by the loss of LDC-specific support measures.

  • Strengthening its capacity to address development challenges that persist beyond graduation, including through external support and internal actions.

  • Engaging with international partners and organizations to ensure a smooth and sustainable graduation process, including extending international support measures for graduation-related adjustments.


Some international support measures may still be available to Cambodia after graduation. For instance, the country could continue to receive support through its membership in regional organizations like ASEAN, which has several Free Trade Agreements (FTAs) in place. Additionally, Cambodia may seek more concessional financing, external support, and internal actions to confront development challenges that persist beyond graduation.

While Cambodia will lose access to some LDC-specific international support measures after graduation, it may still benefit from regional cooperation, concessional financing, and external support to address development challenges.

Commentaires


bottom of page