Biweekly News Collection

NO.4 (FEBRUARY 20, 2019)

MARKET INDUSTRY TRENDS

IN SECOND WEEK OF FEBRUARY, VIETNAM AGREED TO EXPAND ITS [ANNUAL] IMPORT QUOTA FOR CAMBODIA’S RICE TO 300,000 TONS. The agreement was announced by the meeting of the Cambodian Minister of Commerce with Vietnam high official on Asia-Africa Market Department of Vietnamese Ministry of Industry and Trade. In 2018, official data recorded 26,712 tons of rice export to Vietnam. (Phnom Penh Post).

ON JANUARY 30, 2018 A SEMINAR ON CONNECTING FDI AND SMES WAS HELD IN PHNOM PENH by the cooperation of the CDC, International Financial Corporation (World Bank) and Japanese Embassy, attended by 160 from policy makers, research institutes, local and foreign business associations, and investors in Cambodia. The seminar agenda included existing government policies, challenges & opportunities, results of need survey, good international practices, and Q&A. (Government).

GLOBAL CONNECTEDNESS INDEX (GCI). CAMBODIA MOVED UP FOUR SPORTS TO 49 IN 2018 FROM 53 IN 2015 OUT OF 169 COUNTRIES ON ITS STATUS OF THE WORLD’S MOST CONNECTED NATIONS. The move means greater cultural diversity, more choices, more opportunities to learn and develop, greater integration and opening new market opportunities, said the report. Top ten countries of Cambodia’s international flows are China (17%), Thailand (17%), Vietnam (11%), US (9%), South Korea (4%), Japan (4%), Singapore (4%), the UK (3%), Lao PDR (3%), and France (3%). Cambodia is one among four countries – Malaysia, Mozambique, Singapore and Vietnam – where the international flows most exceeded expectations. The Southeast Asian nations Cambodia, Malaysia, Singapore and Vietnam beat expectations by the widest margin, reflecting improved supply chain networks within the region and ASEAN policy initiatives promoting economic integration. Singapore also remains the world’s second most connected country, being the only Asia Pacific country to feature in the Top 10 ranking. Myanmar experienced the biggest improvement, jumping 23 spots to 133rd position. Hong Kong retains its second place behind Singapore on the depth dimension of the Index, which measures the proportion of overall physical, intellectual and human capital that crosses national borders; while Japan and South Korea continue to rank amongst the top 5 in global breadth of the same flows. (DHL Website).

KINGDOM SEES MINIMAL CHANGE IN RICE EXPORTS BETWEEN 2016-2018. The sector appears to face new challenges requiring the government and private sector to work harder to keep the industry healthy. The challenges are centered around the EU market as the bloc imposes tariffs on Cambodia’s rice, added on the existing issues such as higher production costs and a lack of infrastructure. Nevertheless, the industry insiders said the volume of this year’s rice exports will remain steady due to a new quota from China and Vietnam. (Phnom Penh Post).

ON JANUARY 11, AN INVESTOR DELEGATE FROM CHINA’S CHONG QING MET WITH THE SECRETARY GENERAL OF THE COUNCIL FOR DEVELOPMENT OF CAMBODIA (CDC) to discuss the investment opportunities on solid waste processing into energy and the construction of the urban sky train. (Government).

MARKET DEALS

TEMI TOURISM PROJECT APPROVED BY THE CDC. The project is Qualified Investment Project (QIP) registered capital at the application and approval of $500.4 million, and promises 5,150 new direct jobs. The project locates in Koh Kong province.

LEGAL AND REGULATIONS

ON 18 FEBRUARY 2019, A CONSULTATIVE MEETING TO COLLECT INPUTS FOR DRAFTING NEW INVESTMENT LAW, from private sector, research institutes, legal consultants, and development partners was held in Phnom Penh by the Council for Development of Cambodia. The new law aims to attract more direct investments and improve Cambodian competitiveness. However, the above mentioned process indicates that the new law adoption is still at least one to two years ahead. (Government).

DECLARATION NO. 100 OF THE MINISTRY OF ECONOMY AND FINANCE, DATED JANUARY 29, 2019 – SUSPENDING THE COLLECTION OF THE MONTHLY WITHHOLDING TAX ON REVENUE FOR ENTERPRISES AND BUSINESSES PRODUCING AND SUPPLYING AGRICULTURAL PRODUCTS FOR DOMESTIC MARKETS OR EXPORTS of products namely paddy, rice, corns, beans, peppers, cashew nuts, cassava, rubber. Application period is from January 2019 for five years. (Government).

MACRO ECONOMY AND POLICIES

(NO.3, JANUARY 29, 2019)

MARKET INDUSTRY TRENDS

Lack of awareness and Investment hampering local fintech sector. Insiders of the National Bank of Cambodia said at an annual conference to fulfill its potential in the Cambodian economy, fintech must overcome a number of challenges, including lack of consumer awareness, a weak regulatory framework, and scant funding and investment. Additionally, other areas of fintech, like Artificial Intelligence and Big Data are still largely unexplored in Cambodia, while smartphone and internet-related technologies are flourishing. A lot of Cambodian are using smartphones, mostly in urban areas, but they still lack understanding on fintech. At the same time local investors do not seem interested in the sector either. (Khmertimes)

Japanese firms see opportunity in South East Asia garbage. Rapid economic development across SE Asia has created a serious garbage problem, as growing volumes of rubbish highlight a shortage of disposal sites. But in this problem lies an opportunity for Japanese companies with incineration expertise to begin the urgent task of constructing badly needed disposal facilities. Large scale incineration project in SE Asia such as one located about 150 km from Jakarta of Indonesia is support by JICA project. State-of-the-art facilities built by Japanese companies, including Hitachi Zosen Corp and JFE Engineering Corp, also generate power in the incineration process, which allows an early recovery of construction costs. (About 30% of the existing facilities in Japan- approximately 1,100 in total)- are capable of generating power. Japanese companies have increasingly received orders from Europe and other regions and SE Asia in this promising market, amid the Chinese competition. In Thailand, Chinese companies have received an increasing number of orders by offering lower prices. However, there have been complaints about failure, insufficient power-generation capacity and other problems at the incineration facilities built by Chinese companies. (Phnom Penh Post)

MARKET DEALS

Gold Tower 42 to be completed by 2020.After years of delays in construction, building Gold Tower 42 is scheduled to be completed in early 2020. Yon Woo Cambodia, the company that owns the building, reached an agreement in November 2017 with Shenzhen Hongtao Decoration and Weimin Construction & Engineering, which will be in charge of completing the project. The project began in 2008 and has already been delayed three times: first in 2009, following the global financial crisis, and again in 2012. Construction resumed in 2013 and then stopped again in 2017. Yon Woo Cambodia announced in 2018 that Gold Tower 42 construction has already cost $100 million so far and another $140 million will be spent to complete the whole project. (Khmertimes)

Hyundai joins venture with Vietnamese auto firm. A joint venture of Hyundai and Vietnamese firm Thanh Cong Group JSC was singed to boost sales in the merging market. Two parties signed an initial agreement to establish a sales joint venture with the goal of selling 100,000 vehicles in Vietnam by next year. Sales of Vietnam’s automobile sector jumped 27% to 287,949 units in 2018 from 226, 120 in 2017. In order to achieve the sales goal, Hyundai will increase production to 100,000 vehicles in the second half of the next year from 60,000. (Yonhap News Agency).

Chip Mong Group bank unveiled. President of Chip Mong Commercial Bank Plc, Yew Wan Kup said the bank obtained an in-principle license from the National Bank of Cambodia in May 2018 and has been building up its team since then. The bank will begin operations by offering banking products and then gradually move to the latest digital banking ones. (Phnom Penh Post).

LEGAL AND REGULATIONS

Ministry of Commerce to lose $60M a year in revenue. The ministry of Commerce will lose $60 million in revenue annually after the government eliminated export procedures in a campaign to boost competitiveness. (Phnom Penh Post).

Ministry of Commerce is drafting the Law on Customer Protection. The law is expected to promote the fair competition among business people and improve customers’ welfare. (Ministry’s annual report 2018).

Cambodian government reveals the team to construct the draft of the Digital Economy Policy. The team consists of 23 people mostly from the Ministry of Economy and Finance and Supreme National Economic Council. (Sub-decree).

MACROECONOMY AND POLICIES

Trade deficit grows once more. Cambodia’s trade deficit with the rest of the world continued to widen last year to $5.2 billion, as the imports outstripped the exports once again, according to a report of the National Bank of Cambodia. A total import in 2018 was at $18.8 billion of goods and a total export was at $13.6 billion. The annual growth rate of import was at 21.3% and export was 21% in 2018. Increasing demand for goods such as construction materials, vehicles, food-related goods, as well as increasing price of imported oil and more demand for raw materials for manufacturing sector are the main causes of accelerating imports. Business Research Institute for Cambodia (BRIC) chief economist Hiroshi Suzuki said it is common for developing countries like Cambodia to see a trade deficit increase during high growth stages because to maintain high growth it is necessary to improve new equipment and raw materials for production – same situation of Japan in high growth period between the 1950s and 1960s. Cambodian trade account deficit has been completely offset by the surplus of service accounts – mainly in tourism- official development assistance, and foreign direct investment. (Phnom Penh Post).