No.12 (July 31, 2019)

Market Industry Trends

Logistics set to be next sunrise sector Cambodian logistics sector is set for a robust take-off. Global transport service providers are eyeing the untapped logistics market in the Kingdom that is ideally located and can help in the movement of freight among developing economies in the region. Straddled between Thailand and Vietnam, two robust production hubs in the Greater Mekong Subregion (GMS), Cambodia can play a vital role in regional logistics networks– plugging itself into the international supply chain. Over the last five years, nearly 500 registered logistics companies have started to operate in the country and supported by 13,500 workers. According to the Japan International Cooperation Agency’s master plan, by 2023, the size of the country’s logistics sector is expected to double. (Phnom Penh Post).

Sathapana Bank drives growth through digital transformation. Sathapana Bank has taken a leap into the digital world by embarking on a transformation focused on significant infrastructure investment boosting its technology platform capabilities. “Digital transformation would provide faster and convenient banking for our new and existing customers to get access to finance. We also expect that with our ongoing significant infrastructure investments to boost our technology platform capabilities, our bank will be able to offer more innovative products and services designed to attract more customers to our bank,” Sathapana Bank CEO Lim Aun told The Post in an interview. Sathapana had teamed up with e-mobile operators Wing (Cambodia) Limited Specialised Bank, Pi Pay, TrueMoney, international money transfer agency Western Union and life insurance company Manulife. The partnerships aimed to provide convenience and compelling value proposition for the bank’s customers. (Phnom Penh Post).

Siam Cement Group generates more than $200M in Cambodia. Thailand’s Siam Cement Group Public Company Limited (SCG) generated more than $200 million in the first half of this year on its Cambodian operations, according to a company report. The company earned $226 million in sales revenues, an increase of 11% on the same period last year, with the majority of this derived from its cement business. Some $116 million was generated in the second quarter. With the Kingdom’s construction sector currently booming, Thailand-based SCG has established six subsidiaries in Cambodia all operating in the construction materials field. These include Kampot Cement plant, Concrete Roof Cambodia, CPAC Cambodia, CPAC Plank Cambodia, NAWA-CAM and SCG Trading Company (Cambodia). The firm had recently launched its Interior Solution scheme to strengthen and expand its business in the Kingdom. The scheme provides design and materials specification services, conducted by experienced designers, for both residential and commercial buildings. A total of 2,047 construction projects, worth some $3.39 billion, were approved in the first half of this year, a recent report by the Ministry of Land Management, Urban Planning and Construction showed. This represents a 57.57% increase from the same period last year, which had 1,643 projects worth $2.125 billion.

Farmers called on to up organic vegetable yields. The Ministry of Agriculture, Forestry, and Fisheries and the private sector has called on farmers to increase organic vegetable yields to meet demand from Phnom Penh’s supermarkets and restaurants. The push was made during a visit last week by Gilbert F Houngbo, International Fund for Agricultural Development (IFAD) president, to Sa’ang district’s Svay Brateal commune in Kandal province – an area in which growers practice non-chemical and organic farming through an Ifad project. On July 29, the Ministry of Agriculture, Forestry, and Fisheries launched a $100,000 Japanese-funded center. The center is a necessity to boost the production of vegetables guaranteed to be safe – from planting to harvesting, to packaging and selling on the market.  Post previously reported that last year Cambodia consumed 500 tonnes of vegetables per day, at a daily cost of between $200,000 and $300,000. The Kingdom is also estimated to import fruits and vegetables worth more than $300 million annually. (Phnom Penh Post).

Cambodia’s pork sellers suffer as African swine fever fears linger. Cambodia’s pork industry has yet to show signs of recovery since it was hit by African swine fever, pork sellers in Phnom Penh said. The ministry’s General Directorate of Animal Health and Production recently said more than 3,000 pigs were killed or culled in Cambodia due to an outbreak of African swine fever in five provinces, including Ratanakkiri, Tbong Khmum, Svay Rieng, Takeo and Kandal provinces. The Cambodian Pig Raisers Association previously estimated that the disease has caused more than $600,000 in losses to family-owned businesses. (Phnom Penh Post).

Market Deals

Bima, Pi Pay sign MoU to enhance insurance. MILVIK (Cambodia) Micro Insurance Plc, a mobile-based firm which offers health and insurance products to customers in Cambodia, has teamed up with mobile payment app Pi Pay to enhance convenience for its clients. Cambodia’s insurance premiums ratio to gross domestic product is still low. Stunted growth in the insurance sector may stem from factors such as limited awareness and low incomes, which discourage people from buying insurance. With a five-year presence in Cambodia, Bima currently has about 500,000 clients using its services. The Kingdom’s insurance industry generated more than $190 million in gross premiums last year – an increase driven by life insurance of nearly 30% over the previous year, according to the Insurance Association of Cambodia. (Phnom Penh Post).

Japanese Softbank Group unveils investment fund to drive [the] AI revolution. Japan’s SoftBank Group on Friday said it will partner with tech firms including Apple and Microsoft in a new $108-billion investment fund to accelerate the “AI [artificial intelligence] revolution”. The new fund is the long-mooted successor to its mammoth Vision Fund, which has taken stakes in leading tech start-ups from Uber to WeWork. SoftBank Group itself will plow $38 billion into the new fund, which will also include investments from Apple, Microsoft, Foxconn, a range of Japanese banks, Standard Chartered, and the National Bank of Kazakhstan. In a statement, SoftBank Group said Vision Fund 2 would “facilitate the continued acceleration of the AI revolution through investment in market-leading, tech-enabled growth companies”. The Wall Street Journal reported on Thursday that SoftBank executives brought on board Microsoft with promises to encourage the fund’s roughly 75 companies to shift to the tech firm’s cloud platform. Originally a software giant, SoftBank has increasingly become an investment firm through its first Vision Fund, which was largely backed by Saudi Arabia. The announcement of Vision Fund 2 made no mention of Saudi Arabia among the investors, though reports ahead of the announcement suggested Riyadh was in negotiations to put money into the fund. (Phnom Penh Post).

Macro-economy

PM: Gov’t spends $300M per month on infrastructure. The government spends around $300 million per month on infrastructure while earning “$500 million in revenue”, said Prime Minister Hun Sen. Included in the $300 million price tag are “constructions, repairs, and salaries”. Speaking during an inspection on July 29 of the Morodok Techo National Stadium’s construction site, located in Phnom Penh’s Chroy Changvar district, Hun Sen said the Kingdom’s economy is expected to grow 7.1% this year. The prime minister said customs revenue collection this month reached more than $250 million as of the end of last week. “The head of customs told me that [we] have three more days left [of revenue collection]. At an average of $10 million per day, we will reach $280 million this month. Adding other tax and non-tax revenue, this month we will have $500 million,” he said. Hun Sen’s financial disclosures come in response to potential sanctions which may be imposed on Cambodia, such as the US’ Cambodia Democracy Act and suspension of the Kingdom’s preferential access to the EU market under the “Everything But Arms” agreement. (Phnom Penh Post).

IFAD to give $70M agriculture loan. The UN’s International Fund for Agricultural Development (IFAD) said it will provide a $70 million loan to the government for an agricultural investment project, said its president Gilbert F Houngbo. During a field visit to a vegetable farm in Kandal province’s Sa’ang district on Saturday, Houngbo told The Post that Ifad will provide the loan for the Sustainable Asset for Agriculture Market, Business and Trade project (Saambat). The Saambat project will focus on infrastructure – including roads that connect farmers to the market, irrigation, as well as training, technology and a market for smallholder farmers in rural areas. “We have discussed [the loan] for the Saambat project, which is investing in agriculture. The loan will be approved in September this year,” said Houngbo. (Phnom Penh Post).

NBC Report: Exports jump to $6.8B, imports hit $10.5B. Cambodia’s total exports during the first half of this year jumped to $6.8 billion, from $6.2 billion during the same period last year. Imports reached $10.5 billion, said the National Bank of Cambodia’s (NBC’s) first-half report. The US market share in the exports was 28%, Europe’s was 26.6%, the UK’s was 6.6% and Japan’s was 7.7%, said the report. Some 46% of imports came from China, 15.6% from Thailand, 13.2% from Vietnam and 4.5% from Japan. Speaking during the NBC’s first-half results meeting on Saturday, director-general Chea Serey said the global economy’s favorable environment has continued to boost the Cambodian economy. However, Cambodia’s exports are far less than its imports. “The ideal scenario is that exports must be more than imports, but in reality, our [import] growth is greater due to higher domestic demand,” said Serey. She said Cambodia must strive to further boost its exports and diversify both products and their destinations. The Kingdom’s main exports include clothing, footwear, bags, electrical equipment, bicycles, and rice. The report said Cambodia’s foreign exchange reserves have also continued to grow gradually. The report shows as of the first half of this year, reserves reached $11.1 billion, which could guarantee 4.9 months’ import cover. (Phnom Penh Post).

US economic growth slows in Q2, 2018 falls below Trump Target. The US economy cooled in the second quarter of this year to a still-solid pace, government data showed, while officials also slashed an economic figure prized by President Donald Trump. Newly revised data covering the past five years now show the world’s largest economy actually slowed in the year after Trump and congressional Republicans pushed through a sweeping, $1.5 trillion tax cut. The change dealt a sharp blow to Trump’s economic message and also highlighted how momentum had deteriorated in the final months of last year when the Federal Reserve (Fed) last raised interest rates in defiance of intense pressure from Trump. The central bank next week is widely expected to cut its benchmark lending rate, reversing December’s increase. The Commerce Department reported that gross domestic product in the April-June quarter slowed to 2.1% from the first three months of the year, down sharply from 3.1% growth in the first quarter, but that was better than expected, helped by strong consumer spending.  withAnalysts had expected second-quarter growth of just 1.8%, but the economy got a boost from strong spending on autos, food, and clothing. (Phnom Penh Post).

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