No.18 (Oct 16, 2020)
Market Industry Trends
Rubber export is up but prices still remain elastic. Cambodia exported 179,621 tons of rubber in the first nine months of 2020, a jump of 3.78% from the same period last year. The average selling price of latex increased to $1,266 per ton in September, a decrease of $64 per ton compared to September last year. The local purchase price of rubber in the first nine months is between 4,100 riel per kilogram for latex and 1,900 to 2,350 riel per kilogram for frozen latex. The rubber plantations in Cambodia account for a total of 403,195 ha. In 2019, Cambodia exported 282,071 tons of rubber worth $377 million, an increase of 30% from 2018. According to a report by Research and Markets, latex prices are expected to fall this year until 2021. China has the highest demand for rubber in the world, accounting for 41% of the world’s total rubber production. (Phnom Penh Post).
Smart kicks in $1 million to educate SMEs. The leading mobile operator in Cambodia, Smart Axiata donated $1 million to Impact Hub Phnom Penh to launch an online education program for local entrepreneurs to overcome Covid-19 challenges. The free online course is designed to teach entrepreneurs regarding additional funding, engaging customers, and remodeling financial plans in order to improve business and build resilience in their company. The online classes are available on Impact Hub’s website and entrepreneurs can join any time at no cost. As a result of the pandemic and market changes, many small and medium enterprises (SMEs) face new challenges of digitization economy and liquidity. According to Impact Hub, business owners can access different online modules with various case studies and participate in monthly online group calls with other entrepreneurs. (Phnom Penh Post).
PPAP records positive business performance in the first three quarters. Stock listed Phnom Penh Autonomous Port (PPAP) posted positive business performance in the first nine months of this year in the face of headwinds created by the Covid 19 which lead to a global and regional economic downturn. The state-owned river port operator reported $22.26 million in revenue in the period between January-September, a 2.56% increase from the same period last year. It posted a 4.09% year-on-year rise in the volume of containers and a 0.63% year-on-year rise in the number of cargo vessels handled at the port during the period. However, there is a 2% fall in cargo and fuel oil throughput, a 52% drop in passenger boats, and a 54.65% decrease in passengers. Although the trading between countries has been reduced, the port business operation still remains strong. (Phnom Penh Post)
PPCB to issue the second round of bonds. South Korea-owned Phnom Penh Commercial Bank Plc (PPCB) officially announced its phase 2 bond offering on the Cambodia Securities Exchange (CSX) to raise another KHR 40 billion (approximately $10 million) with a maturity of 3 years and a coupon rate of 6.5% per annum payable on semi-annually basis. PPCB successfully raise $10 million from bond issuance during the first phase in late April. The second phase bonds obtained approval from the Securities and Exchange Commission and fully subscribed on September 21. The bank will list these bonds for trading on the CSX on October 9. (Phnom Penh Post).
Cambodia, China trade deal. Cambodia and China signed a free trade agreement (FTA) on 12th October at a ceremony attended by the Chinese Foreign Minister. The FTA listed around 340 more commodities in addition to what Cambodia has received from the ASEAN-China FTA. According to the Ministry of Commerce, most of the commodities are in agriculture and agro-processing including pepper, chilis, pineapples, vegetables, fruit, fish, meat (including processed), grain, crabs, seafood, and a variety of canned products. Among the additional 340 commodities in the Cambodia-China FTA, 95% of them will be tariff-free. Taxes on the remaining 5% will be dropped in at least 10 years. The trade deal between Cambodia and China is expected to boost agro-processing and investment in the agriculture sector to capitalized benefits from the agreement. (Phnom Penh Post).
Cambodia-US trade up 15% in the first 8 months. Bilateral trade between Cambodia and the US was recorded at $4,294 billion in the first 8 months of 2020, a year on year increase of 15.6%. Cambodia exported $4,096 billion worth of products to the US from January to August, a rise of 22% compared to the same period last year. The total imported goods from the US is $355 million, a decline of 44% year-on-year. Cambodia mainly exported textiles, footwear, travel goods, and agricultural products to the U.S. and imported vehicles, animal feed, and machinery. Last year, the bilateral trade between the two countries reached $5.8 billion, a year-on-year increase of 37%. (Khmer Times)
IMF sees Cambodia as ASEAN fastest growing economy in 2025. According to World Economic Outlook released by the International Monetary Fund, the economic growth forecast for ASEAN in 2021 shows Malaysia as the fastest economy recovery of 7.8% followed by the Philippines 7.4%, Cambodia 6.8%, and Vietnam 6.7%. Among the other ASEAN economies, slower growth is forecast for Indonesia 6.1%, Myanmar 5.7%, Singapore 5%, Laos 4.8%, Thailand 4%, and Brunei 3.2%. The IMF’s mid-term projections for 2025 show Cambodia outpacing its peers with a growth forecast at 6.9%, making the country the region’s fastest-growing economy. Slower growth is forecast for Vietnam 6.6%, Myanmar and the Philippines 6.5%, Laos 6.1%, Indonesia 5.1%, Malaysia, 5%, Thailand 3.7%, Singapore (2.5%), and Brunei 1.8%. (Khmer Times)
New draft law on investment mulled. The new draft law on investment is under discussion by the government and the relevant private sector. The new law will be applicable for all qualified investment projects (QIP) and their expansion that are granted. Industries to receive incentives can include high-tech industry, innovation, research and development, new manufacturing that provides added value, and industries that serve the regional and global value chain. Supportive industries such as agriculture, tourism, manufacturing, electronics, spare parts, assembling and installation, mechanical and machinery, agro-processing and food processing, tourism, special economic zone development, digital, education and vocational training, logistics, health, and green investment will all receive the incentives. The QIP project will receive an exemption from income tax for three to nine years based on the sector and investment activities after a first profit is disclosed. Those QIP projects will be encouraged to pay the tax reduced by 25% for the first two years, 50% for the next two years, and 75% for the last two years. A QIP also receives additional exemption on value-added tax for purchasing raw materials serving local production. The main aim of this new investment law is to improve the investment environment and enhance the country’s competitiveness. (Khmer Times)