No.16 (May 10, 2020)

Market Industry Trends

[1] The state-owned Small and Medium Enterprise Bank of Cambodia (SME Bank) has expanded its capital from $100 million to nearly $150 million. The additional capital was jointly funded by 33 banks and microfinance institutions (MFIs), of which Prince Bank Plc provided $10 million and Vattanac Bank Plc $20 million. Small and medium-sized enterprises (SMEs) can borrow $200,000 for working capital and $300,000 for investment capital from the bank, at a 7 % annual interest rate and a payback period of not more than four years, said the Ministry of Economy and Finance. Although the SME Bank is currently unable to provide services to its customers, SMEs can apply for a loan from its 33 participating institutions (Phnom Penh Post)

[2] Pestech (Cambodia) Ltd (PCL), a subsidiary of Malaysia-based Pestech International Bhd, plans to list an initial public offering (IPO) on the nascent Cambodia Securities Exchange (CSX) this year to build the company’s operations and reputation in the Kingdom. PCL has clinched three electricity infrastructure contracts to date in the Kingdom – the 230kV/500kV Sihanoukville-Bek Chan (Phnom Penh) transmission line, the 115kV Siem Reap-Oddar Meanchey transmission line and the 230kV Kampong Cham-Kratie transmission line. The paperwork is being finalised and the IPO is pending final approval. The main objective of the IPO is not to raise funds but to raise PCL’s profile. CSX confirmed that PCL is set to list on the bourse soon. (Phnom Penh Post)

[3] Despite the regional and global stock market slump caused by the Covid-19 pandemic, the Kingdom’s leading microfinance institution Prasac Microfinance Institution Ltd (Prasac) on May 5, officially listed a corporate bond on the Cambodia Securities Exchange (CSX). Prasac issued 1,272,000 shares for the public offering with a total issue amount of 127.2 billion riel ($31.8 million). The coupon rate for the corporate bonds is 7.5 % per annum with a three-year maturity (semi-annual payment). The bond is fully guaranteed by the Credit Guarantee and Investment Facility, a trust fund from the Japanese-led Asian Development Bank.(Phnom Penh Post)

[4] The Cambodia Rice Federation (CRF) has asked the Ministry of Economy and Finance to disburse an additional $30 million through the state-owned Agricultural and Rural Development Bank (ARDB). This comes as it prepares to purchase about one million tonnes of paddy during the upcoming harvest season. In a meeting with Minister Aun Pornmoniroth last week, the CRF asked to increase the budget dedicated to helping the sector by $30 million from the current $50 million, which would bring its available funds to $200 million. The additional budget package from government would be ready for the harvest season, and that it would improve the efficiency of stockpiles and prevent rice prices from falling. “By our estimates, paddy output in the coming season will be between 800,000 and one million tonnes, so we need the additional $30 million through the ARDB to provide rice millers the chance to purchase farmers’ entire stocks.” ARDB director-general Kao Thach said he had not yet received an official request from the CRF. (Phnom Penh Post)

 [5] The Covid-19 pandemic sweeping the globe has ground Kampot’s pepper market to a halt as exports stall and about 40% of farmers have stopped caring for their crops. Kampot Pepper Promotion Association (KPPA) told that the demand for Kampot pepper has dwindled due to the spread of Covid-19. Farmers have been forced to store their pepper products in hopes that European and US markets, the largest markets for Kampot pepper, resume their orders once the pandemic has passed. Even the local tourism sector, which accounts for 30 per cent of the pepper market, has completely stalled. The pepper harvest, which runs from January 1 to June 30, has yielded around 100 tonnes so far this year, a slight decrease from the 120 tonnes harvested last year. The Kingdom exported 78 tonnes of Kampot pepper last year. Prices currently stand at $15 per kilogramme of black pepper, $25 per kilogramme of red pepper and $28 per kilogramme of white pepper, he said. In 2010, the World Trade Organisation granted Kampot pepper geographical indication (GI) status, which increases its market value and prevents other entities from replicating it. The crop currently covers a cultivation area of 250ha, exclusively in Kampot and Kep provinces. KPPA’s membership has grown from 387 families and 21 distributors in 2017 to 440 families and 38 distributors this year. (Phnom Penh Post)

[6] Cambodia imported more than 1.2 million tonnes of agricultural fertilisers and chemical pesticides in 2019, up more than nine per cent from 1.1 million tonnes in 2018, said a report from the Ministry of Agriculture, Forestry and Fisheries.Of that, more than 1.14 million tonnes were fertilisers and 81,097 tonnes were chemical pesticides, it said. The Kingdom imports more than 90,000 tonnes per month of about 2,600 types of fertilisers and pesticides to serve the agricultural sector. Chiv Por Hor, the chairman of Poipet-based Chiv Por Hor Import Export Co Ltd, his company asked the ministry to import 6,000 tonnes per year, but imported just more than 3,000 tonnes last year.“My company sells a lot from May to August, which is farmers’ growing season,” he said. The company imports hydrolysed protein-based organic nitrogen fertilisers from Thailand and distributes them in the Kingdom under the CPH brand with a golden gaur logo. Meanwhile, an anonymous employee at a Japanese fertiliser company, said his company imports an average of 2,000 tonnes of fertilisers a year to distribute to farmers in Cambodia. However, he said, a number of counterfeit agricultural fertiliser products have made it into circulation and have taken a heavy toll on the market. The ministry has granted pesticide/fertiliser registration certificates to 235 companies and pesticide/fertiliser import and export certificates to 226 companies nationwide. There are 107 agricultural fertiliser importers and 61 pesticide importers in the Kingdom, as well as 58 companies that import both. (Phnom Penh Post)

Market Deals

[7] Two Japanese renewable energy producers, Aura Green Energy Co and solar panel system provider WWB Corp have teamed up to build a hybrid power plant generation business in the Kingdom by next year, aiming to secure a stable power supply, Japan News Agency (NNA) reported on May 4. The joint venture will use solar panels – produced by WWB Corp in Vietnam – along with rice husks supplied from a rice mill of Angkor Kasekam Roongroeung Co Ltd, a major local rice producer in Kandal province, an Aura Green Energy spokeswoman told NNA. The project will reportedly cost 400 million yen ($3.8 million), with a total output capacity of 1.5MW. The plant will supply power to the rice mill, with any surplus power to be sold to the national grid or a local power company, she said. (Phnom Penh Post)

[8] Malaysia-listed Gunung Capital Bhd, an investment holding company involved primarily in chartering out land-based transportation assets, is looking to acquire a 20 % stake in a Cambodian financial institution. Malaysian media outlet Bernama reported on May 6, that the management of the company has been invited by promoters of a yet-to-be-issued, fully fledged commercial banking licence in Cambodia to evaluate a proposal to participate in. It said the company management is currently in advanced discussions regarding the allowable equity participation in financial institutions. The parties are also in advanced discussions on other qualitative and quantitative requirements, such as governance issues, imposed by the relevant authorities in the Kingdom on foreign equity participation. (Phnom Penh Post)

Rules and regulations

[9] The government will set up a National Commission for Consumer Protection to implement the Consumer Protection Act, which is aimed at promoting integrity in competition and trade. The Law on Consumer Protection was introduced on November 2, 2019 and contains 11 chapters and 51 articles. The purpose of the law, according to proponents, is to determine the measures and mechanisms that contribute to an improved trade environment and protects the rights and interests of consumers. The law applies to all entities doing business, whether for profit or non-profit, including sales of goods, services or real estate, unless otherwise noted exempt by other regulations. (Phnom Penh Post)

Macro-economy

[10] Cambodia exported more than $1.6 billion worth of goods to the US in the first three months of this year, a sharp 42.29 % year-on-year increase from $1.1 billion, said a US Census Bureau report. The Kingdom’s imports amounted to $85.1 million, down 30 % from $122.1 million last year, the data shows. A prolonged health emergency in the US would significant disrupt the flow of goods. The Garment Manufacturers Association in Cambodia (GMAC) has again called on global brand companies, retailers and traders to be responsible in their purchasing decisions – to accept goods that have been delivered and to not retract orders or renegotiate their terms. This comes after mounting suspensions of US and European orders forced 180 factories to shut down and 60 more to downsize, threatening the livelihoods of more than 150,000 workers, GMAC said in a letter. Cambodian exports to the US were worth about $5.362 billion last year, up 40% from 2018’s $3.818 billion, US Department of Commerce data shows. Imports rose 15% to $513.4 million last year from 2018’s $445.8 million. The US remains Cambodia’s largest trading partner and export market. Cambodia is currently the US’ 66th largest goods trading partner with $4.3 billion in total bilateral goods trade during 2018. US imports of agricultural products from Cambodia totalled $24 million in 2018. The US imported mostly rice and rubber. (Phnom Penh Post)

[11] Minister of Economy and Finance Aun Pornmoniroth has called on the private sector and government to work hand-in-hand to sustain the Kingdom’s economic growth as the Covid-19 pandemic grips the regional and world economies, and disrupts production and global demand. Speaking at a meeting with the private sector in late April, Pornmoniroth said shrinking regional and global growth, coupled with travel restrictions and limited effective measures implemented in response to the outbreak threaten the survival of businesses in the Kingdom’s key sectors. Cambodia Chamber of Commerce vice-president Lim Heng said that in response to the crisis, the government has taken a proactive approach to support affected sectors such as garments, tourism, transport and small and medium-sized enterprises (SMEs). In mid-March, a fiscal stimulus plan of $800 million to $2 billion, equivalent to seven per cent of the gross domestic product (GDP), was announced to ease the overarching effects of the coronavirus in six months to a year. On April 7, Prime Minister Hun Sen announced that all workers employed by suspended factories should receive $70 per month – $30 from the employer and $40 from the government. On April 4, the fully state-owned Small and Medium Enterprise Bank of Cambodia (SME Bank) launched with initial capital of $100 million to provide financing for SMEs. On March 16, the state-owned Agricultural and Rural Development Bank (ARDB) launched a $50 million fund to increase access to credit for SMEs in the local agricultural sector. A recent simulation done by Asian Development Bank (ADB) revealed that in a best-case scenario on the back of a months-long travel ban and the sharp decline in domestic demand due to the outbreak, Cambodia could face a 1.15 per cent impact to its total GDP amounting to $283.3 million. If the outbreak lasts for six months, up to $711.4 million could be hived off the GDP. Even grimmer, ADB said a hypothetical worse case situation shows a nearly $1 billion economic loss in the event that Cambodia experiences an outbreak of its own beyond six months. (Phnom Penh Post)