It’s a long way from Whitehall and Brussels, but a study has found that the developing country that will be hardest hit by Brexit is the south-east Asian nation of Cambodia.

With the deadline to reach a Brexit agreement looming in March, much attention has been given to the effects it would have on the European and British economies.

But simulations run by the German Development Institute, published this month, show that the impact could be disastrous also outside Europe, pushing millions of people in developing countries into extreme poverty.

“Brexit could increase the population living in extreme poverty in EBA countries by nearly 1.7 million,” the authors wrote. “These are conservative estimates of Brexit’s negative impacts; they do not take into account the additional implications of uncertainty, depreciation of the pound sterling, reduced aid spending, remittances and investments.”

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Under the Everything But Arms (EBA) agreement, 49 least-developed countries can export to the European Union tariff-free. With an impending Brexit, these vulnerable states will no longer have access to the UK market through EBA.

If a “hard Brexit” – the return to World Trade Organisation’s rules of trade – was to take place, the authors found Cambodia would be affected the most of all least-developed countries. It has the highest dependence on the UK market with 7.7% of its exports going to the UK.

Jayant Menon, lead economist at the Asian Development Bank, said that other markets with preferential access could potentially mitigate the loss of Cambodia’s export. This could also contribute to Cambodia diversifying its export markets. “Longer term, Cambodia also needs to look beyond garments, and indeed preferences,” he said in an email. Cambodia’s economy has long relied on garment exports.

Arup Raha, expert on the southeast Asian economy, said it was difficult to foresee the effects it could have on other economies. If they did not reach new trade agreements to waive tariffs, this “would have a negative effect” on Cambodia. “But you don’t know, it’s speculative,” he said.

Asked whether it was likely that the UK would reach trade agreements with all EBA states, he said the UK did not have much of a choice as it relied on the trade.

“They will have to,” he said. “It’s going to be very disruptive to the UK’s economy otherwise. They already might lose access to the common market. [Reaching trade agreements] will take some time, but they will have to,” he said.

But the German Development Institute study’s authors said it was unlikely agreements would be reached on time, as this required an “entirely new trade policy”.

“[The] UK may draw up new free trade agreements with individual developing countries, but that is unlikely given the short notice and it would limit the number of countries covered,” they write.

Stephen Higgins, managing partner at investment firm Mekong Strategic Partners, said it was unlikely that the UK government would take potential negative effects on other countries into account in its decision-making.

“Given the UK is showing such a blatant disregard for its own economic welfare by pushing ahead with Brexit, it is probably a big stretch to expect it to put a high weighting on the economic welfare of others,” he said in an email.







