Weekly news round up 2016 / Week 2

Political (Cambodia-Specific)

A January 5th speech to soldiers by four-star General NeangPhat at a military institute in Kampong Speu province has begun to circulate on social media. In the video, the General , who is also a secretary of state for the Ministry of Defence, praises the ruling CPP  for building bridges, roads, schools and canals, whilst criticizing the CNRP for perceived agitation following the 2013 election and the party’s ongoing comments about demarcations at the Vietnamese border.
The speech concludes with a warning that the CNRP seek to incite a ‘color revolution’ and that such threats must be ‘eliminated’. A CNPR lawmaker asserted that the party supports change through peaceful means though criticized the perceived political bias of the armed forces. A CPP spokesman stated that the army is politically neutral but has a duty to protect the government which has been selected through legitimate democratic elections.

The Ministry of Interior has confirmed plans to review the Traffic Law, which has proven controversial since coming into effect on 1st January of this year. Following criticism on social media, Prime Minister Hun Sen has mandated several modifications to the law, including waiving driver’s licence exam requirements for motorbikes of less than 125cc and waiving the requirement for proof of the previous owner’s identity for registration of second-hand vehicles.

An annual congress of the CPP focused on strategy for the 2017 commune elections has put forward two initiatives aimed at supporting the poor: a commitment to raise the minimum wage in the garments sector to $160 next year, and efforts to cut electricity charges to 610 riel per kilowatt hour on households that use 50 kilowatts or less per month by April 2017.
However, an internal document obtained by the press revealed the CPP’s concern over CNRP ‘propaganda’ which is designed to ‘destroy’ its popularity.

Europe, European Business, EuroCham Members

EuroCham member Smart Axiata has been recognized by the Global Banking and Finance Review as being the Best Telecommunications Company and have the Best Corporate Social Responsibility in Cambodia in 2015.
Smart Axiata has an extensive CSR program in Cambodia with a focus on education, sport, and green environment. Projects include a collaboration with UNESCO and the Ministry of Education to counter illiteracy, the creation of mobile libraries, sponsoring of sporting events and engaging in tree-planting and cleanup programs.
Smart Axiata’s Sustainability Report 2014 – the first of its kind not only for Smart but for any company in Cambodia – is available at http://www.smart.com.kh/news/sustinability-report/sustainability-report-2014

The Ministry of Industry is cooperating with the European Patent Office to enhance their capacity so that Cambodia can better ensure protection of patents to draw more investment, Industry Minister Cham Prasidh said on 10th January. At present there are only about 10 public officials working in this area and most of them lack the qualifications to monitor and evaluate patents. The government has received about 100 patents and is checking with experts in Singapore to determine whether they duplicate patents protected in globally.
Legal protection of patents enforced by competent officials is a key consideration for investors considering entering a market. “Without a clear ability to provide such assurance, Cambodia would always be ‘passed over’ by serious investors and needless to say, any given economic growth is only driven by its own local SMEs,” commented David Van from Bower Asia.

Cambodia’s largest bank, ACLEDA Bank, recorded record after-tax profits in 2015 of $105 million – a 28% increase. Bank deposits grew 18 per cent to $2.6 billion in 2015 and outstanding loans by 23% to $2.4bn. The bank attributes growth in profit to better management of expenditure, in part driven by the increasing adoption of mobile and electronic banking. ACLEDA intends to further encourage such transactions over the coming year, as well as a program of directly issuing MasterCard ATM cards to customers.

France’s BRED Bank, one of the largest lenders in Europe, plans to open its first branch in Cambodia by the end of the year. Cambodia will be the third member of ASEAN that the bank has a presence in, after Singapore and Malaysia. BRED intends to assist SMEs in Cambodia to boost exports and imports.
Chea Serey, director-general of the National Bank of Cambodia, confirmed that BRED had in principle been given a green light to invest in the Kingdom and hoped it would contribute to the development of the financial services sector: “The presence of a European bank here will further improve Cambodia’s trade relations with the EU. And we hope to see knowledge transfer from a renowned bank like BRED to the Cambodian banking sector”.

Hungary has opened a representative trade office in Phnom Penh and hopes to see Hungarian investment in the Kingdom increase from around $1m/year to $5-10m/year. In particular, Hungarian businesses are interested in investment opportunities in agriculture, the food industry and food processing in Cambodia.
At the opening ceremony, Hungarian Minister of Foreign Affairs and Trade Pėter Szijiártó said that Hungarian businesses had expertise in medical devices, technology, food processing, food industry and health systems, and these had the potential for “spectacular success” in Cambodia. Cambodian Foreign Minister Hor Namhong hoped the deal would see Hungary importing more Cambodian agricultural products and garments. 
Hungary has similar trade offices in 40 countries. According to a report from the Ministry of Commerce, bilateral trade between Cambodia and Hungary for the first 10 months of last year was about $2.57 million. Cambodia exports rice, tobacco, garments and footwear to Hungary, while Cambodia imports electronics, medical devices, and spare parts from Hungary.

Infrastructure, Development and Core Industries

Long Q+A session by Khmer Times discussing television advertising with MounRamady, general manager of CNC (one of the Kingdom’s most popular TV channels).
Spending on commercials on the top 10 TV channels now totals close to $100m per year. TV represents around 60% of all advertising expenditure, with 15% on outdoor advertising (billboards), around 10% on print and 5% on radio.
The major industries that spend on advertising are beverages, including alcohol, which accounts for around 50% of all advertising spending, followed by cosmetics aimed at women (16%), food products (10%), pharmaceuticals (7%), telecoms and internet services (6%), construction materials (5%) and financial services (5%). Ad rates are low compared to Thailand and Vietnam and is attractive to both local and foreign-owned companies.
With low tax rates and reduced import tariffs through AEC there are lots of products coming into the market from Vietnam, Thailand and China, which makes it all the more important for local companies to implement effective branding strategies
Since 2013 the Royal Government have banned advertising alcohol and cigarettes during prime time TV and, at least for CNC, this hasn’t led to any reduction in revenues. 

The total value of the 2,305 construction projects approved by the government for the entirety of 2015 reached $3.33bn, representing a 33% increase. A spokesman from the Ministry of Land Management, Urban Planning and Construction commented that most construction projects last year were located in Phnom Penh and in Siem Reap, Preah Sihanouk and Kandal provinces, and that they were primarily backed by Chinese and Japanese investors.
Sung Bonna, chairman of real estate firm Bonna Realty Group, said property investors had found Cambodia particularly attractive last year in anticipation of the December 31 launch of the ASEAN Economic Community, and because they were seeking to redirect investment away from weaker markets in the region, with real estate considered a surer investment than the stock markets. Another major factor is that Cambodia provides more open land than countries like Singapore, Malaysia, Thailand or Vietnam.
It should be noted that the value of approved projects can be higher than eventual investment sums as some projects are cancelled if construction is perceived to be outstripping demand. 

The price of dried cassava has decline from 630 riel per kilo last year to only 490 kilo per year. This declining price is making it difficult for exports to traditional export markets of Vietnam, China, Thailand and Taiwan to be profitable for Cambodian cassava farmers are export figures are declining accordingly.
Cambodia has little domestic market for cassava due to a lack of agro-processing industries here. Those within the industry are seeking to engage with the Royal Government to see how to encourage greater exports, and also stress the need for more agro-processing factories which could enable the country to increase its value-added and export semi-processed products to other countries. 

A new sub-decree issued by the Customs and Excise Department restructures the Kingdom’s import tariff system, reducing customs duties on some items such as toys and printing equipment but raising specific taxes on certain products being imported. Significantly, automobiles will face up to 65% specific tax whilst auto spare parts will be subject to rates between 15 and 25%.
Antoine Jeanson of Automotive Asia (Cambodia), the official distributor of Audi vehicles in the Kingdom, said the tax hikes could push car prices beyond affordability for many and will encourage greater demand for low-quality and potentially dangerous used and stolen cars.
The decision is being interpreted as a move to rebalance tax revenues in light of the import tariff reductions within ASEAN Economic Community, whilst in the case of auto spare parts it may represent an effort by the government to encourage local production.

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