No.28 (Mar 04, 2021)

Market Industry Trend

NBC, IFC TO BOOST SME FINANCIAL ACCESS. The National Bank of Cambodia (NBC) and the International Finance Corporation (IFC) have recently signed the memorandum of understanding (MoU) of the project “Cambodia Supply Chain Finance Market Development”. The implementation of this project is aligned with the key priority of promoting innovative credit products for SMEs set in the National Financial Inclusion Strategy 2019-2025. SMEs only have limited access to obtaining finance due to high collateral requirements from banks or microfinance institutions (MFIs) which is the main barrier for SMEs’ business expansion. The result of this project will serve as a pathway for policy-setting and improving [the] SME finance ecosystem in Cambodia through strengthening regulatory support, enhancing market knowledge and practice, and developing a favorable ecosystem. The cooperation between NBC and IFC will help to expand financial access for Cambodia’s SMEs. (Phnom Penh Post)

EXTENSION OF DEVELOPMENT ASSISTANCE GRANT WILL AID SIHANOUKVILLE PORT PROJECT. The government of Japan has announced the extension of its official development assistance (ODA) grants to Cambodia. The extension amount of $10.8 million is earmarked for the project developing a Vessel Traffic System for Sihanoukville port. The project will establish a Vessel Traffic System (VTS) to improve maritime safety and the efficiency of vessel navigation around the Sihanoukville port. It is expected that safety at Sihanoukville port, the social-economic development of Cambodia, and connectivity within the Mekong region will be improved as a result of this project. (Phnom Penh Post)

Regulation

TAX OFFICIAL DEFOGS CAPITAL GAINS. General Department of Taxation (GDT) has listed some of the assets that would be exempted from capital gains tax once it comes into force on January 1, 2022. Capital gains tax will be levied on taxpayers’ gains from the sale, transfer, or establishment of property rights, or the registration of ownership or possession rights, according to Prakas No 346. Individuals will be required to pay a 20% capital gains tax rate on calculated profits from the sale of certain assets including land, buildings, stocks, bonds, licenses, patents, and currencies. According to the GDT press release, capital assets that are exempted from capital gain tax are:

– Property belonging to state institutions, foreign missions, international organizations, and government technical cooperation agencies.

– Sale or transfer of agricultural land that remains in production and whose owner or operator resides in the same commune as the farmland.

– Principal place of residence of taxpayers of at least 5 years before the sale or transfer.

– Immovable property sales and transfer among relatives as outlined in regulation on stamp duty tax.

– Assets sold or transferred for public benefit as stated in Law on Expropriation.

Besides, capital gain declared and taxed as ordinary income will not be subject to capital gain tax. This tax will also not be levied on assets sold for breakeven or at a loss. (Phnom Penh Post)

Macro-economy

EXPORTS TO CHINA GAIN MODEST 8% IN 2020. Cambodia’s total export value to China has increased despite the disruption in the supply chain due to the Covid-19 outbreak. Exports to China have surged more than 8% which is equivalent to $1.086 billion in 2020 compared to $1.004 billion posted in 2019, according to the figures from the Ministry of Commerce. By contrast, the value of imported goods from China slumped about 10% in value to just slightly over $7 billion last year.  The Cambodia-China Free Trade Agreement (CCFTA) will a key in the expansion of production capacity and foster future exports of agriculture products under zero tariff rate. According to the ministry undersecretary of state Pen Sovicheat, the working group is evaluating approximately 50 commodities to craft a strategic approach resulting from CCFTA as a model to study for future trade deals. (Phnom Penh Post)

KINGDOM-JAPAN TRADE SLIPS. Bilateral trade between Cambodia and Japan was worth $2.09957 billion last year, a decrease of 8.45% from 2019 based on the data from the Japan External Trade Organization (JETRO). Cambodia exported $1.615 billion worth of merchandise to Japan and imported $484.699 million in 2020. According to the Ministry of Commerce, notable Cambodian exports to Japan were garments, bags, footwear, furniture, cosmetics, paper, office supplies, and leather goods. Imported goods from Japan included machinery, automobiles, electronics, furniture, fabrics, and plastics. The covid-19 outbreak had obstructed bilateral trade between the two countries which lead to a slight drop in trade volume posted last year. (Phnom Penh Post)

AGRI-EXPORTS SURGE 55% IN JAN-FEB. Cambodia exported a total of 1,599,922.37 tons of major non-milled-rice agriculture products in the first two months of 2021, an increase of 569,493.88 tons or 55.27% compared to the same period in 2020, according to data from the Ministry of Agriculture, Forestry and Fisheries. The ministry listed 43 agriculture products for export to 25 countries and territories. Cassava chips, fresh cassava and paddy weighed in at 802,451.56 tons, 154,750 tons and 287,850 tons. Cashew nuts, red corn kernels, fresh bananas, fresh mangoes, fresh chilies, palm oil and rice bran reached 79,473.51 tons, 78,856.14 tons, 75,645.57 tons, 43,680 tons, 32,417.12 tons, 7,176.69 tons, and 6,250 tons respectively. The remaining 33 other products accounted for 31,371.25 tons. (Phnom Penh Post)