(Phnom Penh): The recent U.S. decision to reduce tariffs on Cambodian exports from 36% to 19% marks more than a revision of trade policy. It comes amid a broader realignment of global supply chains, as countries reposition to attract the next wave of investment and production. Although the 19% rate remains a trade barrier, it is comparable to the tariffs imposed on other countries in the region which level the play field. In this context, Cambodia retains a competitive cost structure particularly in labour-intensive industries, where even small differences in total production costs can influence export pricing and investment decisions. Combined with Cambodia’s preferential access to major markets such as the EU, China, and RCEP partners, this strengthens its position as a cost-effective base for manufacturers aiming to serve multiple export destinations.
This opportunity arises at a pivotal juncture in Cambodia’s economic evolution. As global manufacturers recalibrate operations to prioritize stability and proximity to end markets, Cambodia is actively positioning itself as a credible and responsive manufacturing alternative in the region. Yet while enhanced market access is a critical enabler, it must be supported by internal capabilities including sectoral focus, compliant production systems, and institutional mechanisms that provide a conducive environment for investment and long-term growth. In response, the Secretariat of the Coastal Master Plan has prepared the proposal for the Integrated Industrial Initiative (III), a government-backed program to advance supply chain integration and drive industrial upgrading targeting a selective of high-potential industries. For investors, it presents a timely opportunity to explore sectors that reflect broader shifts in global trade, production strategies, and the growing emphasis on resilience and diversification.
Supply Chain Positioning
While the reduced 19% tariff provides Cambodia with a relative cost advantage in certain export markets, it also brings renewed attention to structural challenges particularly for firms constrained by fragmented upstream supply linkages, logistic inefficiency and complex Rules of Origin (RoO) compliance. In response, the Cambodian government is advancing the Integrated Industrial Initiative, under the leadership of the Prime Minister, as a focused effort to build export-ready, RoO-compliant, and investment-friendly industrial ecosystems.
The Integrated Industrial Initiative (III) serves as a strategic platform to support industrial relocation and facilitate deeper integration into global value chains. It positions Cambodia as a supply chain service hub, offering institutional solutions in Rules of Origin compliance, shared logistics, and streamlined customs procedures, reinforcing the Kingdom’s competitiveness in regional manufacturing and strengthening investor confidence. The program concentrates on high-potential sectors such as electronic components, automotive parts, and light industrial goods, where Cambodia is actively developing export-ready, compliant production ecosystems aligned with shifting global trade dynamics. The Integrated
Industrial Initiative focuses on three core areas:
• Supply chain structuring: Targeting upstream and midstream investment to close key input gaps of RoO compliance within strategic sectors.
• Targeted sourcing and product mapping: Pre-identifying materials and HS codes with high RoO transformation potential.
• Institutional fast-track: Under the III Program, exporters in priority sectors can access dedicated channels for one-stop service and approval on investment, certification of origin, customs clearance, and regulatory support. These measures are being closely coordinated and calibrated with special economic zone operators under the chairmanship of Deputy Prime Minister Sun Chanthol.
The objective is not to circumvent trade rules, but to develop a compliant and integrated industrial platform that enables firms to fully leverage Cambodia’s expanding market access.
Export Outlook Over the Next Five Years
As part of Cambodia’s Integrated Industrial Initiative, several high-potential product categories have been strategically identified based on regional import demand, labor intensity, and Rules of Origin feasibility. Over the next five years, we anticipate a notably shift in Cambodia’s export composition, particularly toward electronic and automotive components such as electric motors, printed circuit board (PCB) assembly, wire harnesses, and connectors, alongside a growing emphasis on agro-processing for the Chinese market. This transformation is being shaped by targeted industrial zoning, improved infrastructure, and strong investor interest from both Chinese and ASEAN firms seeking to leverage Cambodia’s trade access and policy clarity. The shift will not happen automatically but with the III Program in place, it will be strategic, phased, and anchored by long-term investment partnerships.
Chea Kok Hong, Secretariat Director, Cambodia Coastal Master Plan, Ministry of Economy and Finance.
=FRESH NEWS
