Political (Cambodia-Specific)
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Opposition lawmakers attacked 26-10-15
The CNRP lawmakers were physically attacked whilst attempting to enter the National Assembly in Phnom Penh on Monday 26th October. Footage of the bloodied lawmakers was quickly dispersed on social media.Over a thousand people had descended upon the Assembly calling for CNRP deputy leader KemSokha to step down as vice president of the Assembly over allegations he is inciting unrest and hatred between supporters of the government and his political party, as well as claims he is obstructing development in the country through his ongoing criticisms of the ruling Cambodian People’s Party.
The violence was condemned by both CNRP and CPP representatives.It is not clear who organized the rally. However, Phnom Penh Post reported that prominent members of the security services in civilian clothing and Phnom Penh district officials from the CPP were seen among the crowd.
Europe, European Businesses, EuroCham Members
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PM Pitches ASEAN Access to French Investors 27-10-15
Prime Minister Hun Sen has pitched Cambodia as a gateway to ASEAN to French business leaders as part of his official visit. Speaking to the Cambodia-France Business Council Meeting, the PM commented: “From now on, please stop thinking that investment in Cambodia is just to reach Cambodia’s population of 15 million people … You have to think about the market in the Greater Mekong Sub-region, which comprises 326 million people, and the bigger market is all of ASEAN, which has 630 million people”. He argued that French companies can find opportunities to invest and produce in Cambodia in order to make duty-free exports to the entire ASEAN market, as well as benefiting from preferential tariffs for exports back to Europe.
For French companies already investing in Asia, Hun Sen sees opportunities for them to diversify their supply chains and integrate Cambodia into the earlier phases of their production process, benefiting from the Kingdom’s open attitude to foreign investment and its young and relatively inexpensive labor force.
President Francois Hollande highlight three sectors that are of interest to French businesses: aviation, water supply and city trains.
French companies invest more in Cambodia than any other European country, particularly in infrastructure, energy and hospitality. Two-way trade between the two countries was around $500m in 2014, up 34% from 2013. Mr. Hun Sen put the number of French businesses here at 50, saying another 100 micro or small businesses are owned by French investors.
During the state visit, six agreements were signed, including an extradition treaty. Five others involve French assistance in education, developing human resources for tourism, expanding the electricity grid, cultural cooperation and clean water projects.
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Acleda’s third quarter profit sits at $27.06M 27-10-15
Cambodia’s largest bank Acleda Bank yesterday announced its third quarter results for 2015, reporting $27.06 million in profit for the quarter, up almost 50 per cent as compared to the same period last year.
Profit for the first nine months of the year reached $79.5 million, registering a 46 per cent increase year-on-year.
The bank has continued to increase its deposit base, with customer deposits now reaching $2.24 billion as of September 2015, while loans and advances given out by the bank were $2.35 billion during the same period.
Infrastructure, Development and Core Industries
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A downside to economic success 24-10-15
Economists warn that Cambodia’s expected 2015 transition from a least developed economy (LDC) to a lower-middle income country (as per the UNDP’s classifications based on GNI or ‘gross national income’ per capita) could result in a scaling back of foreign aid and economic assistance. In its East Asia and Pacific Economic Update released in April the World Bank projected Cambodia’s GNI per capita – pegged at $1,020 in 2014 – would reach $1,096 in 2015, putting the country beyond the threshold of a middle-income country.
Independent economist SreyChanthy commented that “Cambodia must be prepared for this as donors would reduce developmental aid and grants, including concessional or soft loans, and give it less favourable trade deals, et cetera,”. Laos and Myanmar are expected to remain ‘least developed country’ status over the coming years.
Of particular concern is that Cambodia’s preferential access to the European single market under the ‘Everything But Arms’ policy will eventually be revoked. However, this won’t happen overnight. The European Union assesses income brackets using a United Nations measure that is a combination of a country’s GNI, the level of its human capital, and its vulnerability to economic shocks. By this measure, Cambodia could have another six or seven years until its LDC status expires. The Royal Government has been increasing its revenue generation and tax collection in preparation for the probable scaling back of foreign aid and revenue collection has improved considerably over the past two years.
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Siem Reap feels pinch of tourism downturn 26-10-15
For the first time in recent years, foreign tourist arrivals in Siem Reap have fallen. Under 1.55 million tourists visited Siem Reap province in the first nine months of the year, compared to 1.74m in the same period in 2014, representing an 11.2% decrease.
A spokesperson for Siem Reap’s tourism department attributed the decrease to external factors, such as bombings in Bangkok in August, the crash of an Air Asia flight in December 2014, and a MERS outbreak in South Korea. He added “Our tourism is reliant on neighboring countries, so any troubles in these countries impacts tourism in Siem Reap.”
Siem Reap has achieved an average of 19.2 per cent annual growth in tourist arrivals since 2009 and continued to increase by a smaller percentage even during the financial crisis. This reduction in visitors will have a significant impact on the local economy which is mostly tourism-driven.
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Minister Details Online Business Registration Plans to Parliament 27-10-15
On Monday 26th October, Commerce Minister Sun Chanthol has provided to the National Assembly his plans to bring the entire business registration process online, with registration beginning on December 7th. The initiative is designed to reduce the time required to register a business from the current five to seven days to only an hour, and to limit human interactions so as to minimize the opportunity for corruption. Mr. Chanthol commented that, if other countries were to stay the same, Cambodia’s reforms would see it move from 184th to 21st in the world for the ease of starting a business according to World Bank rankings.
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Rogue moto market raided, but no arrests 28-10-15
Customs officials and local police yesterday raided a motorbike market in Phnom Penh’s Prampi Makara district they said was illegally selling vehicles without license plates or paperwork. 46 motos were seized but no arrests were made, with the authorities instead opting to ask dealers to to sign agreements to pay relevant taxes and stop selling vehicles without paperwork. A local salesman who did not want to reveal his name said that the crackdown is a new development, as police used to drop by for routine checks in the past without seizing large numbers of vehicles.
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New fertiliser factory to target local market 28-10-15
Phnom Penh Post piece describing how Taiwan Fertiliser Company plans to build a factory within the Sihanoukville Special Economic Zone aimed at supplying the local market with fertilisers and chemical products. Total capacity for the plant would be 90,000 tonnes per year of compound fertilizer.
Cambodia’s agricultural sector has room for significant expansion as there is currently limited knowledge around the use of fertilisers. At present around 20 private firms compete in Cambodia’s fertiliser market, which is dominated by Thai and Vietnamese imports, though Taiwan Fertiliser Company hopes to gain a competitive edge by shipping only raw materials and manufacturing in-country.
Total demand for fertilizer currently sits at around 600,000 tonnes per year in Cambodia.
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CAIF heads talk safety, tax and road reform 28-10-15
Phnom Penh Post Q+A session Peter Brongers (CAIF President and Managing Director of Premium Auto Imports, the exclusive importer of BMW cars to Cambodia) and Pily Wong (CAIF VP and CEO of Hung Hiep, official distributor of Volkswagen AG), who are arguing for stricter regulation against unlicensed car imports and distributors. Cambodia has one of the least regulated automobile markets in ASEAN
CAIF, the Cambodian Automotive Industry Federation, only accepts official distributors of different brands into its membership. Grey market dealers rarely if ever pay Vehicle Industry Tax [VIT] which immediately gives them a 10% advantage over licensed dealers and deprives the Royal Government of significant amounts of revenue.
At present, car import taxes account for around a third of tax revenue from industry though the government loses a lot through the grey market. One suggestion would be to completely block the import of used cars whilst reducing import duties on official imports by 50 per cent. This would make cars more affordable for consumers whilst helping to formalize the economy and increase tax collection from the automobile sector.
Licensed distributors provide a two-year warranty though there can be a lack of understanding amongst consumers as to the benefits of this provision.
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Construction investment surges in 2015 despite poor permit ranking 29-10-15
According to a report by the Ministry of Land Management, Urban Planning and Construction (MLMUPC), in the first nine months of this year the construction sector and real estate investments in Cambodia have a combined worth of $1,752 million. That is an increased value of $1,540 million since last year and an equivalent to a 13.75 per cent growth rate. The highest investors are Korea, China, Japan, the UK and Malaysia.
Sustained growth in the construction industry comes despite Cambodia having a poor ranking (181st of 189) in the World Bank’s study of construction permit application processes. The Cambodian permission-giving process on average required 20 procedures and took 652 days until the permit was granted. Neighboring Thailand, for comparison, requires 17 procedures and 105 days until completion. The article includes a comparative graph for 9 ASEAN countries plus China and shows the waiting period in Cambodia to be significantly longer than any other of these countries. However, a ministry official doubted the accuracy of the World Bank’s findings.
In a separate Post Property article, it was reported how property developers are increasingly looking towards the northwestern areas of Phnom Penh around RusseyKeo, which still has large areas of undeveloped land.
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Business rankings edge up 29-10-15
On the critical issue of ease of starting a business, Cambodia improved only slightly from 184th to 180th position. Jean Arlet, who co-authored the annual report, commented that whilst Cambodia had significantly reduced a time and procedures required to open a business, other countries have been doing better which explains the relatively small comparative improvement. The average number of days to register a company in Cambodia is now 87 (down from 101 in 2014) compared to a world average of 20.
On the bright side, Cambodia performed well on the ease of getting credit, ranking 15, a notch lower than its 12th place finish last year. The ranking was boosted by a high score on the strength of protections for banks and customers alike.
Commerce Minister Sun Chanthol regularly refers to the Ease of Doing Business Report and expects that pending reforms, such as online business registration which is due to launch on 7th December, will see Cambodia climb up the rankings over the next few years.
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Borrowing Gap Widens as MFI Sector Grows 30-10-15
Latest figures from the Cambodia Microfinance Association (CMA) report a continued rapid expansion of the microfinance sector – The country’s 40 registered microfinance institutions (MFIs) and seven NGOs registered as lenders with the National Bank disbursed about $2.72 billion in the first nine months of 2015, an increase of 52% over the same period last year, while the seven MFIs licensed to take deposits took in $1.24 billion, an increase of 53%. Most loans went to farms and other small businesses, with the strong growth in part attributed to this year’s difficult rainy season which has pushed farmers to require loans for pumping, seeds and fertilizers.
For the sector as a whole there is some concern over the increasing gap between deposits and loans, which has increased from $0.98bn to $1.46bn in the reporting period.
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Banking on cashless transactions 30-10-15
According to the former Silicon Valley startup consultant David Wilkie, managing director of Bongloy, there is a pressing need for local online payment platforms similar to PayPal or Stripe to process their transactions as Cambodians begin to embrace online shopping and other e-commerce activities. Bongloy, a homegrown online payment gateway, has been developed to replace the prevalent cash-on-delivery system currently favoured by Cambodian e-commerce businesses, enabling them to go completely online. David Wilkie states that more and more people are getting bank accounts and see debit cards as a growing trend in the future.
