Biweekly News Collection No.30

No.30 (Apr 02, 2021)

Market Industry Trend

$200M credit guarantee scheme launched. The Ministry of Economy and Finance has recently launched a $200 million credit guarantee scheme to provide small and medium-sized enterprises (SME) to help businesses sustain the ongoing Covid-19 crisis. The Business Recovery Guarantee Scheme (BRGS), under the ministry’s Credit Guarantee Corporation of Cambodia Plc (CGCC), will widen access to formal loans from participating financial institutions (PFI) for working capital, investment, and business expansions. The primary mission of the scheme is to provide credit guarantees to PFIs to support and assist financially viable businesses that lack collateral to secure loans. Eligible applicants under BRGS must be businesses whose majority shares are owned by Cambodians. CGCC’s guarantee will act as collateral or security for 70% to 80% of the loan amount to be borrowed. The PFIs in this scheme include ACLEDA Bank, Cambodia Post Bank, Asia Pacific Development Bank, AMK MFI, Canadia Bank, Phillip Bank, and Prince Bank. (Khmer Times)

Thai bourse ‘the highest’ fundraiser for ASEAN firms. The Thai stock market has the highest fundraising value among ASEAN countries in the first quarter of this year. According to data from the Stock Exchange of Thailand (SET), Thailand’s fundraising as of February 2021 was 46.1 billion baht ($1.48 billion). In the first quarter of 2021, five companies launched initial public offerings (IPOs) with a market capitalization of 217.41 billion baht at IPO price. Of those companies, PTT Oil and Retail Business (OR) and Rojukiss International (KISS) were listed on the SET, while Jakpaisan Estate (JAK), TQR, and President Automobile Industries (PACO) were listed in the Market for Alternative Investment. It is also notable that up to 30 companies in properties funds, real estate investment trusts, and infrastructure funds are expected to be listed in the Thai stock market this year. (Phnom Penh Post)

Cambodian rice price upon the international market. The price of Cambodian milled rice on the international market has seen a slight uptick in the first quarter of 2021. According to a price list compiled by Cambodia Rice Federation (CRF), the premium “Malys Angkor” brand of fragrant rice is currently worth $825 per ton, an increase of 1.10% from 2020. The premium soft-cooking white rice costs $585 per ton, a rise of 2.99%, and premium-quality organic parboiled rice is $585 per ton, a surge of 1.74%. The new standard-fragrant rice (SKO) fetch $765 per ton. Last year, Cambodia exported 690,829 tons of milled rice. Shipments of milled rice to China weighed 289,439 tons, accounting for almost 42% of total export. (Phnom Penh Post)

Macro-economy

Duty-free access to VN for 31 tariff lines. The Ministry of Commerce has recently announced that 31 Cambodian tariff lines (mostly in agricultural products) will carry zero rates to neighboring Vietnam for 2021-2022. This comes as the Bilateral Trade Facilitation Agreement for 2021-2022 was formally ratified after the completion of internal procedures, with retroactive benefits for exports. The agreement is made to drop import tariffs on dozens of products which are to be renewed every two years. However, the goods covered in the deal are determined every year. As part of the agreement, Vietnam will provide duty-free quotas on 3,000 tons of dried tobacco leaves and 300,000 tons of milled rice this year. This agreement will strengthen trade relations between the two countries and boost economic growth. (Phnom Penh Post)

ADB GREEN PROJECTS GAIN $300 MN. The Green Climate Fund (GCF) has granted $300 million to the Asian Development Bank (ADB) to assist in creating environmentally-friendly infrastructure projects that aim to help economies in the region recover sustainably and create jobs. The ADB said the funds will be utilized by the ASEAN Catalytic Green Finance Facility’s (ACGF) Green Recovery Program to support green infrastructure projects in ASEAN member nations, specifically in Cambodia, Indonesia, Lao, and the Philippines. The ACGF provides ASEAN member governments with technical assistance and access to more than $1.4 billion in loans from the   ASEAN Infrastructure Fund and co-financing partners: ADB, Agence Francaise de Development, the ASEAN Infrastructure Fund, the European Investment Bank, the European Union, KfW and the Republic of Korea. This program is designed to support green infrastructure investment which will create climate-friendly jobs and reduce greenhouse emissions. In Cambodia, the ADB has been involved in the investment in a number of solar farms, hydropower, and biomass projects. These funds will help to stimulate green investment within the country and help to create a clean and environmentally friendly economy. (Khmer Times)

UNEMPLOYMENT RATE IN CAMBODIA, THE LOWEST IN ASEAN. All 10 ASEAN member states have faced a sudden increase in unemployment in 2020 as a consequence of the global pandemic. However, Cambodia has the lowest unemployment rate among the bloc. According to World Bank’s Unemployment Rate 2020, the unemployment rate in Cambodia was only 0.31%, while Lao PDR 0.95%, Thailand 1.02%, Myanmar 1.79%, Singapore 5.19%, Malaysia 4.55%, Indonesia 4.11%, Philippines 3.36%, and Vietnam 2.27%. Brunei has the highest unemployment in ASEAN at 8.37%. The ongoing global pandemic has left severe damage on the economic and labor market which led to an increase in the unemployment rate.

Biweekly News Collection No.29

No.29 (Mar 19, 2021)

Market Industry Trend

CMA MEMBERS RESTRUCTURE $1.4B IN LOANS. Financial institutions that are members of the Cambodia Microfinance Association (CMA) restructured some $1.397 billion in loans for 289,422 borrowers as of February 28 since the National Bank of Cambodia (NBC) issued a circular on loan restructuring during Covid-19. Based on CMA data, the total number of applicants who apply for credit restructuring during the period was 307,875 borrowers. The figures can be translated to an approval rate for loan restructuring of 94%. Small and medium-sized enterprises (SME) account for the greater part of restructured loans. NBC’s loan-restructuring directive was issued to all banks and financial institutions to restructure credit for loans in four priority sectors – tourism, garments, construction, and transport and logistics, which NBC flagged as the most severely affected by the pandemic. This directive will be implemented until mid-2021. (Phnom Penh Post)

KINGDOM JOINS ASEAN SECURITIES PLAN. The Securities and Exchange Regulator of Cambodia (SERC) and its nine capital-market-regulator counterparts in ASEAN had recently signed a new 5 years Action Plan 2021-2025 during the ASEAN Capital Market Forum (ACMF). The action plan sets out three strategic objectives, namely – fostering growth and recovery with sustainability; promoting and sustaining inclusiveness; and strengthening and maintaining orderliness and resilience. The five key priorities that support the strategic objectives are – driving higher levels of transparency and disclosure; continuing with regulatory harmonization; intensifying capacity building; amplifying communication and awareness building, and strengthening cooperation and coordination within the bloc’s financial community. Since Cambodia Securities Exchange (CSX) inception, the companies have raised a combined $253 million as of September 30. The stock index increased 58.37% in 2019 over 2018 but declined 14.93% in 2020. (Phnom Penh Post)

Macro-economy

ECONOMIC FORECAST FOR 2021 PROJECTS 3.5 PERCENT GDP GROWTH. According to the macroeconomic situation report of the Ministry of Foreign Affairs and International Cooperation, Cambodia is forecasted to register a Gross Domestic Product (GDP) growth of 3.5% and will gradually reach 6.9% by 2024. The industrial sector is poised to fuel the bulk of that growth, followed by services, real estate, and business and agriculture. The overall industrial sector is forecasted to grow by 5.9%, the garment segment is expected to grow by 4.6% and the growth for the construction sector is 2.9%. It is projected that the transportation and communications segments will grow by 4.5%, the hotel and restaurant segment will grow by 0.3% and the service sector will grow by 3.4%. The 2021 projection sees the wholesale and retail trade services segment growing by 3.2%, and the agriculture sector is projected to grow by 1.3%. Inflation is projected to rise to 3.1% this year due to an expected increase in international oil prices. The value of the riel against the $US is predicted to drop to 4,065 riels from 4,080 in 2020. (Khmer Times)

EU PLEDGES $510 MILLION TO CAMBODIA IN 2021-2027. Based on a statement by the Council of Development of Cambodia (CDC), the European Union (EU) plans another $510 million in aid for Cambodia to help the country boost its economic development in the 2021-2027 period. The aid will go toward improvements in agriculture, education, and the country’s governance. According to EU ambassador to Cambodia Carmen Moreno, the draft of EU’s Strategy on Development Cooperation for Cambodia in 2021 and the EU Multiannual Indicative Program 2021-2027 have just been finalized and will be submitted for discussion for more input in the discussion meeting between Cambodia, the EU, and the EU’s partners. Since 1992, EU partners, 10 member countries of EU, and the Swiss Confederation have supported Cambodia with $4.2 billion, which is equivalent to 19% of the country’s total cooperation financing. (Khmer Times)

CHINA RATIFIES THE WORLD’S LARGEST FREE TRADE DEAL. The Chinese government has officially ratified the Regional Comprehensive Economic Partnership (RCEP) agreement, according to Chinese media agency Xinhua. It becomes the second nation after Thailand to do so. All 10 ASEAN members and China, Japan, the Republic of Korea, Australia, and New Zealand signed the long-awaited Asia-Pacific RCEP agreement, the world’s largest free trade agreement, in mid-November 2020. Upon full ratification it will be the largest trade deal in the world, creating a market of 2.2 billion people with a gross domestic product (GDP) of close to $26.2 trillion, based on 2019 data. The ratification brings renewed hopes for comprehensive change in the flow of regional trade and investment and the promotion of intra-bloc supply chains capable of bolstering trust among members of the region’s business sector. Another 13 countries, including Cambodia, are still completing internal procedures to enable them to seek ratification. According to the spokesperson for Ministry of Commerce Seang Thay, the necessary documents for ratification are prepared and will be sent to the Council of Ministers for checking and approval before continuing the procedure to seek full ratification from the National Assembly. Cambodia is expected to receive the ratification by the second half of 2021. (Khmer Times)

CAMBODIA’S EXPORT TO VIETNAM INCREASE. Cambodia’s exports to Vietnam rose in 2020 despite both nations imposing strict cross-border movement control to fight the pandemic. Data from the Ministry of Commerce showed Cambodia’s exports to Vietnam rising by 14.8% in 2020 to $385 million. Cambodian imports from Vietnam decreased by 3.1% to $2,633 million. Bilateral trade between the countries amounted to $3,018 million, a year-on-year decrease of 1.13%. Cambodia’s main exports to Vietnam are raw agricultural products such as rice, milled rice, cashew nuts, and rubber. Imports are mainly steel, petrol, garments, and textiles, leather, and footwear. (Khmer Times)

Biweekly News Collection No.28

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)