Biweekly News Collection No.16

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)

Biweekly News Collection No.14

No.14 (January 12, 2020)

Market Industry Trends

Firm set to launch 150MW solar power plants in Kingdom. Jinkosolar Holding Co Ltd has announced it is to supply photovoltaic panels for three solar power plants in Cambodia with a combined capacity of 150MW. Cheetah solar panels will be installed at two photovoltaic power stations in Pursat province’s Krakor district, with capacities of 60MW and 30MW. The third plant, with a capacity of 60MW, will be located in the central province of Kampong Chhnang. The three solar parks will be built in line with the government’s efforts to meet the country’s growing energy demand. Ministry of Mines and Energy spokesman Victor Jona told The Post. He estimated that the solar panels for the three projects were worth some $1million. “These projects are planned to be completed by the end of this year.”At the presentation of Cambodia’s 2020 energy vision last July, Electricite du Cambodge (EdC) director-general Keo Rattanak said Cambodia will expand solar energy investment by 12 % by the end of this year, and increase it to 20% over the next three years. He said the power generated would be used to meet increasing electricity demands in the industrial and commercial sectors. “We want to set up solar power plants in many locations. We believe solar power will provide lower prices.” Meanwhile, a $58 million 60MW solar power plant – a collaboration between JinkoSolar and SchneiTec Group – is under construction in Kampong Speu province. Electricity demand in the Kingdom is expected to increase from 1.5GW to 2.3GW this year, with it reaching 2.8GW next year. In January 2018, Cambodia issued new rules for the integration of solar power. The Kingdom’s electricity demands are currently covered by hydroelectricity and coal power, accounting for around 48% and 47% of generation, respectively. Jona said 150MW of electricity from the Don Sahong Dam in Laos was connected to Cambodia’s national grid on January 7, 2020. (Phnom Penh Post.)

Acleda Bank set to hold three-day listing event. Acleda Bank Plc (Acleda Bank) is to hold a three-day event to inform potential investors of the commercial bank’s viability ahead of its listing on the Cambodia Securities Exchange (CSX) later this year. Acleda Bank received principal approval after a Securities Exchange Commission of Cambodia (SECC) review, laying the foundations for CSX listing by late first quarter or early second quarter of this year. It became the first commercial bank to receive principle approval for its initial public offering (IPO), while Phnom Penh Commercial Bank Plc (PPCBank) was the first South Korean commercial bank to achieve the same benchmark. Acleda Bank executive vice-president Buth Bunsayha told The Post on that the bank will hold the event on January 10, 15 and 18, with it “a good opportunity to meet the public and investors”. She said it would allow Acleda Bank to begin its book-building process to determine demand. CSX total market capitalisation could triple with the Acleda Bank IPO, he added. According to the SECC, market capitalisation increased 157 per cent to $800.39 million last year. There are currently five firms listed and trading securities on the CSX, while three financial institutions are listed on the exchange’s corporate bond market. The number of investors increased to 22,338, with 17 per cent of them foreign. Average trading volume was 1,750,502 shares per month, equal to $4,221,490 per month. (Phnom Penh Post.)

PAS revenue shoots up 17.5% last year. The total revenue of Cambodia Securities Exchange (CSX)-listed Sihanoukville Autonomous Port (PAS) shot up by 17.5% last year, indicating strong growth in its year-on-year business performance. An annual report from the Ministry of Public Works and Transport released on Wednesday said the Port’s total revenue reached some $80 million last year, an increase of 17.5% compared to some $68 million in 2018. Jong Weon Ha, a marketing strategist and CSX’s chief operating officer said PAS’ growth will provide a positive impact to the port’s securities trading and will attract more investors. The ministry’s report also said the number of containers handled at the port also increased by 17 per cent, reaching a total of 633,099 twenty-foot equivalent units (TEU) by the end of last year compared to 541,228 TEUs in 2018. Total tonnage handled by the ports also increased by 22.6% and reached more than 6.5 million tons compared to some 5.8 million tons in 2018, while the total number of vessels to call at the port rose 15.5% at 1,661 units compared to 1,451 unit in 2018. (Phnom Penh Post.)

Cassava exports grow 27% last year. Cambodia exported 3.29 million tonnes of cassava in 2019, up 27% from 2018’s 2.59 million tonnes, a report of the responsible ministry said. The Minister of Agriculture, Forestry and Fisheries Veng Sakhon wrote via Facebook that the Kingdom’s export of agricultural products reached more than 6.93 million tonnes, which he estimated to be worth more than $1.9 billion. Battambang provincial Department of Agriculture, Forestry and Fisheries official Heng Seth told The Post on Thursday that cassava was grown on 112,543ha in the province last year, producing more than 2.8 million tonnes. “Farmers have currently harvested around 40 per cent of total cassava planted. The price of cassava in the province was around 270 riel [$6.6 cents] per kilogramme early this year,” Seth said. A UN Development Programme report said a public investment package of some $296 million is needed for the development of the Kingdom’s cassava sector, citing a lack of focus on domestic processing. The report said Cambodia’s main cassava export destinations are Thailand, Vietnam, China, the Netherlands, the Czech Republic, Canada, Italy, India and Pakistan. Ministry of Commerce data shows that Cambodian cassava exports were worth $17.8 million in 2017, but fell to $12.6 million in 2018. (Phnom Penh Post.)

Corn industry maintains hope for rebound amid plummeted prices. Total corn exports dropped by more than 40 per cent on 2018 due to last year’s drought and pest damage, industry insiders said. Ministry of Agriculture, Forestry and Fisheries data showed that last year the Kingdom exported 119,993 tonnes of red corn – down 41.23 per cent on 2018’s 204,184 tonnes. The exports were mostly to Thailand, Vietnam and Taiwan, according to the data. Corn grower Sok Leng told The Post from Battambang province’s Sampov Loun district that her harvests had halved from 2018 – down to slightly more than 10 tonnes last year from more than 20 tonnes. “Some farmers gave up on the crop last year due to the sharp decrease in yield and prices,” she said. However, she said she continued to grow the crop as she was hopeful of a rebound this year. Most of the Kingdom’s red corn is grown Battambang, Pailin, Kampong Cham and Tbong Khmum provinces. The crop is planted biannually, with the first harvest taking place from late June to August and the second from late October to December.

Ho Chi Minh City’s EVN to become digital business. Ho Chi Minh City, Vietnam’s electricity sector has set a target to become a digital business by adopting key technologies such as big data, Internet of Things and artificial intelligence (AI) to improve the local power system. Electricity of HCM City (EVNHCMC) deputy director-general Nguyen Duy Quoc Viet said: “Technology has drastically changed the power industry. The group is applying advanced technologies to improve production and business activities, enhance labour productivity and reduce costs.” It has adopted state-of-the-art equipment and technologies in power system management and operations, including implementation of hydrological forecasting software, remote controls, and unmanned substations in 110kV-220kV grid systems, he said. The group is also striving to ensure adequate power supply for socio-economic development and environmental protection. (Phnom Penh Post.)

Market Deals

Prince Bank offering perks to companies listed on CSX. The Cambodian Securities Exchange (CSX) and Prince Bank Plc have reached a cooperation agreement for the latter to offer loans and fixed deposit rates for companies listed on the bourse. Prince Bank becomes the third commercial bank to provide the special package for listed firms after Canadia Bank and Bank of Investment and Development of Cambodia launched the services last March. (Phnom Penh Post.)

SECC and MKE Group ink MoU to develop capital market. Securities Exchange Commission of Cambodia (SECC) and Maybank Kim Eng Group (MKE Group) will cooperate to build strong regulatory frameworks and a sound ecosystem to attract more investors and develop the capital market in Cambodia. The MoU is about Cooperation and Technical Assistance Framework between the two. MKE Group, within which is also Maybank Kim Eng Securities, is an award-winning stock and derivatives brokerage firm with over 40 years of experience in Asia. (Phnom Penh Post.)

Macro-economy

Cambodia attracts US$3.6bil FDI in 2019, 43% from China. Cambodia attracted foreign direct investment (FDI) worth nearly US$3.6bil in 2019, up 12% year-on-year, an English-language daily reported on Friday (Jan 10). 43% of last year’s FDI came from China, as 11% from South Korea, 7% from Vietnam, 6% from Singapore, 6% from Japan, and the rest from other nations. The report of NBC forecast that the inflow of FDI into the country will rise 10% in 2020, reaching US$3.9bil. (Cambodia Daily).

Cambodians seeking to invest more abroad. Cambodia’s outward direct investment declined 13.45% during the first nine months of 2019 compared to the same period in 2018, the National Bank of Cambodia’s (NBC) Balance of Payments Statistics Bulletin said on Monday. The report said the investment capital reached $81.38 million during the period – down from $94.03 million year-on-year. However, the capital was worth more than $29.89 million in the third quarter, up 11.98% from $26.69 million in 2018’s third quarter, it said. The report did not identify the countries in which Cambodia invests. In 2018, Cambodian outward direct investment was worth more than $122.9 million, up 7.73% from 2017’s $114.08 million, NBC data shows. Cambodia Chamber of Commerce vice-president Lim Heng said on Thursday that Cambodia’s outward direct investment has increased concurrently with foreign direct investment (FDI) in the Kingdom. Cambodia mainly invests abroad in sectors such as finance, real estate, and construction, and the export-import of goods said Heng. “As far as I know, besides the Lao and Myanmar financial sectors that Cambodians currently invest in, more of the Kingdom’s investors are planning to put money in China’s construction sector,” he said. With an open economy and gradual growth, Heng expressed optimism that Cambodian investments abroad will continue to grow, especially in recently booming economies. “Cambodia also encourages its investors to invest abroad,” he said. Though Cambodians mainly invest in Laos, Vietnam, Thailand, Myanmar, and China, he said, they are seeking investment opportunities in other countries such as Nepal and Bangladesh. (Phnom Penh Post.)

VN Worker shortage a boom for Kingdom’s furniture industry. A shortage of workers in Vietnam – a huge beneficiary of the US trade war with China – is getting severe that some furniture makers are now scouting Cambodia and Bangladesh for factories, said the CEO of Haverty Furniture Co, Clarence Smith. Smith told Bloomberg on Thursday that labour rates in Vietnam are rising and workers are getting increasingly scarce. Haverty Furniture uses Asian factories to make its company-branded products. Even though Asian suppliers continue to source much of the timber they use from the Appalachian region of the US, the manufacturing of wood furniture “is not coming back to the US”, Smith said. Bringing manufacturing jobs back to the US was one of the Trump administration’s stated goals in imposing tariffs on Chinese-made goods. For now, most of the disruption is behind them even if the first phase of the US-China trade deal will keep the 25% tariffs on Chinese-made furniture in place, Smith said. (Phnom Penh Post.)

Vietnam gov’t mulls slashing procedures for starting business. Vietnam is strongly considering cutting the procedures needed to start a business this year in an effort to improve the country’s business climate. This was stressed at a Government Office meeting on Jan 6 to discuss solutions to improve the country’s ranking for starting a business evaluated by the World Bank’s Ease of Doing Business report. Government Resolution No 2 issued on January 1 sets a target for Vietnam to jump up 10-15 spots in the ranking. Vietnam ranked 115th out of 190 economies in facilitating business establishment indicators in 2019, falling 11 spots from 2018, with eight procedures in total. The Government Office plans to submit a proposal to the prime minister to cut the number of procedures by half. (Phnom Penh Post).

///.

Message from 3E-Fii Group: We are sorry for your inconvenience caused by our suspension of the sharing from September to December 2019. We have started the sharing from January 2020. Thank you very much for your patience and continuous support.

Biweekly News Collection No.13

No.13 (August 15, 2019)

Market Industry Trends

ILO: Cambodia’s footwear sector ripe for investment. Cambodia’s footwear sector will provide more opportunities for investment and production than the garment sector due to significant growth over the last five years, said an International Labour Organisation (ILO) research bulletin on Cambodia’s garment, textile, and footwear (GTF) industry. The bulletin said the footwear sector has grown more rapidly than the garment sector in recent years, adding Cambodia to the list of top 10 footwear export countries in 2016 for the first time. Between 2013 and last year, it said, the footwear sector’s share in Cambodia’s total GTF export value has grown by 4.4% point, while the garment sector’s share has decreased by almost 10% point. Though the global export value of footwear declined between 2015 and 2017, it said, production in the Kingdom increased steadily at an annual average of 27% during the same period. The Kingdom remained in the top 10 footwear exporters, with its exports valued at more than $1 billion last year, a 19% increase from 2017. Cambodia’s main export markets for shoes are the EU (46%), the US (17%), Japan (12%) and Canada (5%). The UK, Germany, and France are the main importers of the Kingdom’s footwear in the EU. (Phnom Penh Post).

New Rice Federation President Says He Will Make Export Push. Cambodia’s rice exports have seemingly reached their peak, as annual exports have failed to reach government targets for the last few years. In early August, the Cambodia Rice Federation (CRF), one of the leading institutions for promoting the industry, elected Song Saran, the CEO of Amru Rice (Cambodia) Co Ltd – a major rice processing and export company – as its new president. Saran has been involved in the industry since 2011, through the establishment of Amru Rice. In an interview with The Post, Saran said one of the first things he will do as president is to train farmers, whom he called “the foundation” of the industry. “The first thing I would like to do is promote market connectivity for farmers through contract farming, and reduce production costs by encouraging the use of seeds. “We want to implement a principle [for millers] on using their cash flow to buy rice [directly] from farmers during the harvest season. “We’ll explain to millers how to manage their cash flow and expenditure, and prepare their taxes and other paperwork to develop into standard [institutions], which will simplify [the process] when they need loans for investments,” said Saran. He said issues facing the Kingdom’s warehouses and drying silos cannot be overlooked and logistics development needs to be improved for competitiveness. (Phnom Penh Post).

Taiwan curtain producer plan to move to the Kingdom from China. Leading Taiwan-based curtain manufacturer and seller Nien Made Enterprise Co Ltd has revealed plans to expand in Cambodia to avoid the fallout from the Sino-US trade war, the Taipei Times reported on Saturday. Nien Made Enterprise currently operates a window blinds factory in Cambodia. Currently, about one-third of the company’s ready-made products, such as blinds, are made in China, but it plans to gradually shift the bulk of its operations to Cambodia over the next few years. Nien Made Enterprise Co Ltd. A Nien Made Enterprise public relations officer told the Times that the firm will expand its production line in Southeast Asia and will shift orders for finished products from China to Cambodia to avoid the risk of US tariffs. (Phnom Penh Post).

Vietnam’s banks keen on green projects. Green credit is a trend in the global banking and finance industry and more Vietnamese banks are following suit. The State Bank of Vietnam (SBV)’s latest survey of credit institutions (CIs) in the field of green growth and green credit released recently showed that the awareness of CIs on green credit has improved significantly. Specifically, 19 CIs have developed strategies for environmental and social risk management while 13 CIs have integrated the content of environmental and social risk management in the process of the green credit assessment. Ten CIs have built credit products and banking services for green sectors and have shown an interest in providing credit for these sectors, mainly in the medium and long term with preferential interest rates for green projects. However, the SBV’s statistics also showed that funding for green projects remained restricted, with only 24% of green projects developed by the banks for the credit appraisal process. (Phnom Penh Post).

More cargos needed to fill Lao-Thai freight train. A newly launched Lao-Thai transit freight train service requires more cargo shipments to be successful. The train can carry 10 to 20 containers in and out of Laos, but it appears that the number of exporters is smaller than that of importers. This is a problem that the parties involved must address by working together. The president of the International Transport Association under the Lao National Chamber of Commerce and Industry, Pachit Xayavong, told Vientiane Times: “Having the freight train service is good. Transport costs will be lower because companies can export more goods at the same time, but this service must have a lot of goods for two-way shipments.” The governments of Laos and Thailand launched the freight train service across the first Lao-Thai Friendship Bridge on August 1 to facilitate the business sector and boost economic cooperation. Lao products are shipped to Laem Chabang port in Thailand for onward supply to Thai markets or export to other regions. An official responsible for the container yard belonging to the Lao Logistics State Enterprise on Monday said the imbalance in shipments entering and leaving Laos is an issue that needs to be addressed by stakeholders. A lot of goods are being brought into Laos, but little is being sent out of the country. These circumstances might impact the freight business, said the official. But he was optimistic Laos will be able to export more products by freight train in the future. (Phnom Penh Post).

Market Deals

Organic co-ops sign on for contract farming. Six rice agricultural cooperatives signed an agreement on “contract farming” with the Cambodian Agriculture Cooperative Cooperation (CACC) to help organic farmers overcome market limitations. CACC representative Kann Kunthy said he wants to see the Kingdom’s agricultural market improve by promoting organic crops, which have seen an increase in demand. “Through this contract, the community will see some key benefits, such as a market price of between 20-40% [higher than normal crops], the provision of good seeds and other marketing guarantees,” he said. The CACC is a subsidiary of Amru Rice (Cambodia) Co Ltd, a major local rice processor, and exporter. Since its launch in 2017, the CACC has signed “contract farming” agreements with eight rice cooperatives, 10 cassava communities, seven cashew communities, and two pepper communities.(Phnom Penh Post).

Ly Ly Food Industry launches $16M second cracker factory. Ly Ly Kameda Co Ltd, a joint venture between local company Ly Ly Food Industry Co Ltd and Japanese firm Kameda Seika Co Ltd, was officially launched. The $16 million factory, which can produce more than 3,000 tonnes of crackers annually for export, is 49% owned by Ly Ly Food Industry and 51% by Kameda Seika. It employs about 250 workers. Ly Ly Food Industry CEO Keo Mom said the launch of its second cracker factory was a large step for the local firm, as orders continued to grow. “We plan to expand in the coming years as the market continues to gain greater interest,” She said the newly launched factory is equipped with advanced technology and has passed safety and hygiene inspections. Its raw materials are almost exclusively local and its products will all be exported. The plant began trial production in January, exporting one container daily to Australia and New Zealand. Ly Ly Food Industry’s first factory also has a production capacity of more than 3,000 tonnes a year, about 65% of the factory’s products are sold locally while the remaining 35% is exported. The firm is currently seeking more markets in countries such as China, the US, and Canada. (Phnom Penh Post).

ABC inks Visa EMV chip deal. The Association of Banks in Cambodia (ABC) signed an agreement with Visa Inc to provide Visa EMV chips to its member banks and ensure the security of customers’ transactions. In the Kingdom, Visa EMV chips were previously used exclusively at Acleda Bank Plc. Speaking during the signing ceremony, Visa Country Manager for Cambodia Chum Monika said using EMV chip standards would offer local banks and microfinance institutions the highest security for their users. The EMV chip is embedded with microprocessor technology which creates a new transaction code every time the card is used. “As digital payments grow, we are committed to ensuring Cambodians are protected when they make transactions. “Making Visa’s EMV chip standards available to local banks and microfinance deposit-taking institutions will benefit the entire industry,” said Monika. (Phnom Penh Post).

2C2P unveils easy-to-use cross-border remittance service. 2C2P (Cash and Card Payment Processor) is launching “easy2send” – a cross-border money transfer service in collaboration with local and international partners. The Thai subsidiary of Singapore-headquartered payment service firm 2C2P is launching “easy2send” – a cross-border money transfer service in collaboration with local and international partners. Easy2send allows cross-border transactions from Thailand to any country and vice versa. This service is governed under the remittance license from the Bank of Thailand. Users can make remittance requests at more than 10,000 payment outlets, with fees starting from as low as 99 baht ($3.21), and intended recipients will receive their money in real-time. Thailand is home to more than 2.1 million foreign workers and over 90% of them are Myanmar, Lao, and Cambodian nationals. (Phnom Penh Post).

Macro-economy

Cambodia-Japan bilateral trade reaches $1B in H1. Bilateral trade between Cambodia and Japan reached more than $1 billion in the first half of this year, up 16% year-on-year, according to data from the Japan External Trade Organisation (Jetro). Cambodia’s exports to Japan in the first half of this year grew 12% year-on-year to more than $792 million, as imports grew 34% year-on-year to $256 million, the data showed. Two-way trade between the two countries in the first six months of last year reached $897 million, with the Kingdom’s exports at more than $706 million and imports at $191 million. (Phnom Penh Post).

[Cambodian] Consumer credit hits $7B in Q2. The total outstanding balance of consumer credit in Cambodia continued to steadily increase, reaching $7.16 billion by the end of June – a 6.8% increase from the first quarter – according to a Credit Bureau Cambodia (CBC) report released recently. The number of consumer loan accounts increased by 5.03% quarter-on-quarter, bringing the total number of accounts to 1.19 million, equal to 37.67% of total individual accounts in the market. As of June, non-performing loans after 30 days (NPL 30) fell to 1.19% from 1.24% at the end of March.  The $7.16 billion in outstanding consumer credit accounted for roughly 30.22% of the total outstanding balance of individual loans in the market. However, the report said, the number of customers applying for consumer credit in its three forms – personal finance, credit cards, and mortgages – all dropped 19.29%. The report said the biggest drop was in mortgage applications, which fell by 36% quarter-on-quarter, with the coastal regions seeing the sharpest drop at 49%. (Phnom Penh Post).

Laos to issue a bond to tackle fiscal deficit. The Lao government plans to sell more domestic bonds in the local currency in an attempt to address the fiscal deficit and strengthen the national capital market. Over the past five months of this year, the government has sold 1.13 trillion kips ($130 million) worth of domestic bonds, equal to 28.89% of the amount targeted in the plan for this year, according to a recent report from the Ministry of Finance. The bonds were issued through the Lao Securities Exchange and the Bank of the Lao PDR with an interest rate of 5% for the one-year bond, 5.5% for the two-year bond and 6% for the three-year bond. The government has recognized the potential to mobilize funding from domestic sources, particularly by issuing bonds through the Lao Securities Exchange targeting investors and individuals. (Phnom Penh Post).

Maybank: China’s BRI Investment Jumps in SE Aisa. While geopolitical conditions have not improved much this year, the analysts noted a jump in Chinese investments in the region. Chinese investment and construction contracts in Southeast Asia nearly doubled to $11 billion in H1 of 2019, from $5.6 billion in H2 of 2018. The new BRI contracts for the past six months are largely in Cambodia, Indonesia, Singapore and Vietnam, and primarily for transport and energy projects. “ASEAN will likely see a stronger recovery in China’s BRI flows, as other regions push back against China investments,” the analysts added. In contrast, Malaysia, which used to attract the largest BRI flows, has not seen a recovery. Still, it remains the largest recipient of cumulative BRI contracts since 2013, followed by Indonesia and Singapore. The report noted that Malaysia’s new government recently re-negotiated and revived the East Coast Rail Link and Bandar Malaysia projects, which may restart investment flows. The Sino-US trade war is also fuelling the flow of Chinese investments into Southeast Asia as firms move parts of their supply chains to the region to circumvent the higher US tariffs. Maybank analysts say the beneficiaries appear to be Vietnam, Thailand, and Malaysia. Total newly registered foreign direct investment from both China and Hong Kong into Vietnam surged by 200% in the first seven months of this year. Notably, GoerTek, one of Apple’s main contract manufacturers, has invested $260 million to set up a plant in Vietnam to make the popular AirPods wireless earbuds. Tech and the digital economy form another area that is drawing Chinese money into the region said the Maybank report. China Global Investment Tracker noted that Chinese investment in Southeast Asia’s tech sector hit $2.5 billion in the first half of this year, surpassing the amount for the whole of 2017. Maybank analysts expect more of China’s tech money will be diverted into Asean, given US moves to raise barriers and increase scrutiny of Chinese tech investment. They noted that China’s venture capital investment in ASEAN start-ups rose more than fourfold to $667 million in the first half of this year. And the biggest Chinese venture capital firms such as Qiming Ventures and CGV Capital – backed by Alibaba, Xiaomi and Meituan-Dianping – are also opening offices in Singapore. The development and roll-out of 5G mobile networks in Southeast Asia will also see Chinese investments flowing into the region, as ASEAN is generally staying neutral and open to using Chinese telecoms equipment giant Huawei’s technologies, the analysts added. (Phnom Penh Post).

///.