Uncategorized

NO.20 (NOV 13, 2020)

MARKET INDUSTRY TRENDS

NBC LAUNCHES BAKONG INTER-BANK PLATFORM. The National Bank of Cambodia (NBC) has recently launched an inter-bank mobile payment platform known as the “Bakong System”. The primary objectives of the system are enabling payments between banks and financial institutions, improving the efficiency and safety of the payment system, boosting financial inclusion, and promoting cashless payments in the local currency. Online payments and other alternative options for banking transactions such as deposits, withdrawal, sending, and receiving by e-wallet also can be made through the system. Bakong system will modernize the payment system in Cambodia and facilitate transactions in the financial sector. The total number of Bakong partners currently stands at 18 including 16 bank and financial institution partners, and 2 payment service providers. According to NBC director-general Chea Serey, 24 additional institutions have been granted membership in principle and are preparing to review the technicalities involved in connecting to the system. (Phnom Penh Post)

US GOV’T FINANCE AGENCY OKAYS $50 MILLION LOAN TO HATTHA BANK. The US International Development Finance Corporation (DFC) has approved a $50 million to the newly transformed Hattha Bank Plc to expand micro-lending to women and micro, small and medium-sized enterprises (MSMEs) in Cambodia, especially in rural areas. The loan will create access to financing and capital funding that is not very accessible for those who are most vulnerable in the country. The given loan is one of the nine investments approved by the DFC board of directors, which worth more than $2.5 billion. These projects aim to advance the development and help stabilize communities in Africa, Latin America, and emerging markets across the globe. (Phnom Penh Post)

RICE EXPORTS HINDERED BY A NUMBER OF FACTORS. Cambodia exported 536,305 tons of milled rice in the first ten months of 2020 according to the Ministry of Agriculture. The average rice export of Cambodia is estimated at 600,000 tons per year, which is low compare to the neighboring countries. Vietnam, the third biggest global exporter is expected to export around 6.5 million tons to 6.7 million tons of rice while Thailand is expected to export 5 million tons of rice. The main challenges of rice production in Cambodia are high production and logistic cost. Poor irrigation systems and the lack of infrastructure in the rural area have contributed to the high cost of production and limit the ability to compete with the neighboring countries. The infrastructures to support the production chain, logistics, and transportation are being developed and it is anticipated that rice processing and transportation costs will be cheaper after the infrastructure is fully developed. Cambodia is ranked number 4 in ASEAN countries as a rice exporter which is behind Myanmar as the third exporter in the bloc. (Khmer Times)

GEMSTONE, JEWELRY EXPORTS ROCKET 718.6% IN THE FIRST EIGHT MONTHS. Cambodia exported $2.22 billion worth of gemstones and jewelry to international market in the first eight months of this year, a 716.8% rise from $418.29 million in the same period last year, reported by the Ministry of Economy and Finance. Singapore was Cambodia’s largest export market, Thailand and the US ranked second and third respectively. The report measured exports of natural or cultured pearls, precious or semi-precious stones, metals, precious metals, imitation jewelry and coins. (Phnom Penh Post)

MORE THAN HALF OF STOCKS NOW BELOW FLOAT PRICE. The Cambodia Securities Exchange (CSX), its regulator, licensed underwriters, and investors have shown concerns regarding the trading stock price of four out of seven listed companies, which have now fallen below their initial public offering price (IPO). Grand Twins International (Cambodia) Plc (GTI) traded at 69% below its IPO, Phnom Penh SEZ Plc (PPSP) traded at 35% below its IPO, Phnom Penh Water Supply Authority (PPWSA) traded at 8% below its IPO and Pestech (Cambodia) Plc (PEPC) also traded at 8% below its IPO. The drop in stock price does not always indicate poor business performance. Based on the published financial report, PPWSA and PEPC still managed to gain profit despite the impact of COVID-19. (Phnom Penh Post)

MARKET DEALS

RUI LI CAMBODIA ENTERS BANKING SCENE. The Chinese-owned Rui Li (Cambodia) Bank Plc has officially launched its operations in Phnom Penh to enter into the growing financial sector of Cambodia. The company received commercial banking license from National Bank of Cambodia on 20 October 2020. Under commercial banking business operation, the bank will provide services such as public deposits, credit, currency exchange, payment services, local and foreign currency transactions. (Phnom Penh Post)

MACRO-ECONOMY

BILATERAL TRADE WITH THE US STAYS STRONG. Two-way trade between Cambodia and the US has remained strong even during the COVID-19 pandemic. According to statistics from the US Census Bureau, from January to September the bilateral trade reached more than $5 billion, an increase of 16% compared with the same period last year. The total imported goods from the US during the period worth $232 million, a 40% dropped year on year. Cambodia is one of the main exporters which benefit greatly from duty-free access to the US market under the Generalized System of Preference (GSP) program. The major exported commodities to the US are textiles, footwear, travel goods, bicycles, and agricultural products. Meanwhile, imported goods are vehicles, animal feeds, and machinery. (Phnom Penh Post)

KINGDOM’S ELECTRICITY DEMAND RETREATS ON COVID-INDUCED ECONOMIC SHOCKS. Electricity demand in Cambodia stumbled between 10% and 12% this year due to Covid-19 trigger economic shocks in key sectors, especially in the manufacturing sector. The garment manufacturing sector which accounts for approximately 40% of total electricity consumption has suffered from operational suspension and business slowdown caused by customers canceling or freezing orders. The decline in electricity is a result of slow economic growth. Last year, the peak electricity demand was 2,000MW and is decreased to 1,700MW this year while household consumption remains stable. In response to the economic downturn, the government had issued a plan to reduce electricity tariffs for companies in four key sectors namely manufacturing, agriculture, commercial, and service, for five months starting from June to encourage them to continue working during the spread of Covid-19. Moreover, electricity bills will be reduced by 25% based on the previous average from January to March of this year. (Phnom Penh Post)

BILATERAL TRADE WITH JAPAN SLIGHTLY DOWN BUT OUTLOOK OPTIMISTIC. Bilateral trade between Cambodia and Japan was reported at approximately $1.54 billion in the first nine months of this year, down from $1.67 billion in the same period last year, showed by data from state-run agency Japan External Trade Organization (Jetro). Cambodia exported $1.20 billion worth of goods to Japan and imported $339 million worth of goods from Japan. Export to Japan comprise of clothing, footwear, electronic components and bicycles. Arrivals from Japan mostly consist of electronics and finished products. The diminishing in export figures is due to low demand driven by lockdown restrictions, competition with other countries, lack of production capacity and limited qualified products to meet Japanese required standards. (Phnom Penh Post)

IMF CALLS ON ASEAN TO TEAM UP ON JOINT ECONOMIC RECOVERY. International Monetary Fund (IMF) called on all ASEAN leaders to join hands in the battle against Covid-19 and ensure a quick economic recovery. The meeting was held through video link under the theme Securing Growth and resilience in the ASEAN: Policies for the Post-Covid World. Last year the ASEAN countries contributed 10% of global growth just as much as the 19 countries in the Eurozone, said IMF Managing Director Kristalina Georgieva. Going forward, it will be crucial for countries within their parameters and capacity to maintain crucial fiscal and monetary measures, and importantly, to continue to target those measures in a way that helps the most vulnerable people, the most vulnerable parts of the economy.

No.19 (Oct 28, 2020)

Market trends

Telecom operators have their licenses revoked. The Ministry of Post and Telecommunication has decided to suspend and/or revoke the licenses of 17 telecom operators after they fail to comply with the license’s obligation and submission of relevant required documents. The inspection finding shows that the operation of those 17 operators is inactive and had no employees. 17 telecom operators are CADCOMMs, Emaxx Telecoms Co Ltd, CN Xinyuan Interconnect, Xnet Co, Saturn Holding Ltd, ATA Telecoms, PPIN Internet, HT Networks, Aerospace Information (Cambodia) Technology, Lim Heng Group Co, TPLC Holdings, DG Communication, DTV Star, Kingtel Communication (only VoIP license revoked), Asia Star Resources Investment Holding (position and navigation license revoked) and DBKtel (suspension of internet services provider’s license). (Khmer Times).

Market Deals

Gov’t approves over $830m worth of electricity projects. More than $830 million worth of electricity infrastructure projects including a 150MW hydropower dam, a 265MW coal fired power station and 3 transmission lines were approved. The 150MW Stung Tatai Leu dam will be built on the upper reaches of the Tatai River in Koh Kong province by the China National Heavy Machinery Corp (CHMC) at a cost of $389.4 million under a Build-Operation-Transfer [BOT] 39-year concession scheme, including four years for construction and 35 years for business operation. A final registration certificate is granted to Oddormeanchey Power Industrial Co Ltd (OPI) for its $294.3 million 265MW coal-fired power station in O’Svay commune’s Chheuteal Chrum village in Oddar Meanchey province’s Trapaing Prasat district. Three projects of a 230kV transmission line, a 199.52km long 500kV transmission line, and a 107km long 500kV transmission line also received approval. These investment projects will contribute to the government master plan in meeting electricity supply needs. (Phnom Penh Post).

OCIC set to spend $2.5B on the capital’s satellite city. The local company Overseas Cambodian Investment Corp Ltd (OCIC) announced the plan to invest $2.5 billion to develop the Koh Norea in southeastern Phnom Penh into a new satellite city at the ground-breaking ceremony of the two monumental bridge projects – one connecting Koh Pich in Chamkarmon district’s Tonle Bassac commune to the Koh Norea Development Zone in Chbar Ampov district’s Niroth commune, and another linking Koh Norea to National Road 1. $550 million of the capital investment will be spent on infrastructure development in the satellite city and $39.6 million on constructing two bridges. OCIC has been building concrete foundations and filling the river bank with stone and sand in preparation for the main infrastructure, bringing the satellite city to 27% completion. (Phnom Penh Post)

Alibaba fintech arm gets a nod for record IPO listing in HK. The financial arm of Chinese e-commerce Alibaba received approval from China Securities Regulatory and Commission for its listing in Hong Kong which is another milestone towards the biggest initial public offering in history. Ant Group aims to raise a massive $35 billion via dual-listing initial public offering (IPO) in Hong Kong and Shanghai. The listing could be the world’s largest IPO, surpassing the record set by Saudi Aramco’s $29.4bn float last December, said Bloomberg. The targeted valuation of Ant Group is around $250 billion. This fintech company runs Alipay, the dominant online payment system in China, where cash, cheques, and credit cards have long been eclipsed by e-payment devices and applications. (Phnom Penh Post).

Regulations

E-business owners need permits. The Ministry of Commerce has called on e-business owners to apply for permits and licenses to conduct business legally in Cambodia. The e-commerce law aims to regulate electronic businesses and enable local small and medium-sized enterprises to integrate into value chains linked to domestic and international markets. It outlines the documentation and procedures required to obtain e-commerce permits and business licenses which are valid for two and three years respectively from the issuance date. The permits and licenses requirement does not apply to sales of goods or services with turnover less than the limit of the small taxpayer, sales of goods or services that is pure of one’s personal artistic work, sale of goods or services that is of a family nature or is seasonal, booking of services that do not require any deposit or payment by customers or users, commercial marketing of goods or services including advertising for sale-purchase that is not an offer for formation of a contract, private tutoring, training or education of the national religion, training by non-profit organizations and state institutions’ operations in the provision of public services. (Phnom Penh Post).

Macro-economy

Non-performing loans rise but only by a slight margin. The banking sector is still healthy with manageable non-performing loans during COVID-19 and recent flooding. According to the president of the Association of Banks in Cambodia (ABC) In Channy, banks are closely monitoring the impact on customers and non-performing loans ratio (NPLs) now are approximately 2% which were around 1.3% before Covid 19. As of October, the financial institutions have provided loan restructuring to more than 280,000 customers involving about $3 billion. On top of this, data from the Cambodia Microfinance Association (CMA) shows that CMA members have restructured loans for 265,000 clients involving $1.3 billion by mid-October. NPLs in the microfinance sector was 2.5% of the total loan in September. (Khmer Times).

NBC to sell $50M in forex intervention. The National Bank of Cambodia (NBC) called for licensed banks, microfinance institutions (MFIs), and money changers to join a $50 million foreign exchange (forex) intervention auction. “The minimum bid amount will be announced on the morning of the actual bidding date,” said NBC. Due to the economic slump caused by Covid-19, Foreign exchange rates have seen substantial currency fluctuations within the region. NBC has decided to intervene in the exchange rate with the auction in order to reinforce the purchasing power of the riel, maintain price stability, and stabilize the macroeconomy. The central bank’s intervention serves to strengthen the vitality of the local currency (Khmer riel) against the US dollar which is now trending at above 4,100 riels. (Phnom Penh Post).

Fiscal revenue growth revised down. The Cambodian government has revised its target year-on-year fiscal revenue growth from the original plan outline in the Revenue Mobilization 2019-2023 of 0.5% to 0.3% of Gross Domestic Product (GDP). Total fiscal revenue collected was recorded at $2.956 billion for the first half of 2020, representing a 0.7% decrease compared with the same period last year. The expected national GDP next year is approximately $27 billion to $30 billion while the estimated total national revenue is around $4.8 billion to $5.4 billion. According to the 2021 approved draft budget of $7.62 billion, the government plans to collect around $5.275 billion in national revenue and borrowing around $1.5 billion from development partners to cover the shortfall. Last year the government set its fiscal revenue target at around $4.56 billion, however, it was able to exceed this target and earn $6.04 billion, representing more than 22% of Cambodia’s 2019 national GDP. The new Revenue Mobilization Strategy 2019-2023 launched in June last year is a roadmap for inter-related ministries to follow in order to make revenue collection more efficient and effective, with integrity and credibility. (Khmer Times).

Bilateral trade with Thailand down 19% in the first nine months. Bilateral trade between Cambodia and Thailand was worth $5.569 billion in the first nine months of 2020. It indicates a decrease of 19% compared to the same period last year, based on data from Thailand’s Ministry of Commerce. Cambodian exports to Thailand were to the tune of $958 million while imports worth $4.611 billion. Trade between the two countries had been strained due to border restriction as a result of Covid 19.  In 2019, trade volume between the two countries was to the tune of more than $9.41 billion, increasing 12% from $8.38 billion in 2018. The majority of Cambodia’s exports to Thailand comprise gemstones, jewelry, agricultural products, and aluminum. Cambodia’s imports from Thailand mainly consist of fuel, motorcycles, cars, gemstones, and jewelry. (Phnom Penh Post).

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)

Market Deals

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).

Macro-economy

Cambodia, China trade deal. Cambodia and China signed a free trade agreement (FTA) on 12^th 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)