Biweekly News Collection No.12

No.12 (July 31, 2019)

Market Industry Trends

Logistics set to be next sunrise sector Cambodian logistics sector is set for a robust take-off. Global transport service providers are eyeing the untapped logistics market in the Kingdom that is ideally located and can help in the movement of freight among developing economies in the region. Straddled between Thailand and Vietnam, two robust production hubs in the Greater Mekong Subregion (GMS), Cambodia can play a vital role in regional logistics networks– plugging itself into the international supply chain. Over the last five years, nearly 500 registered logistics companies have started to operate in the country and supported by 13,500 workers. According to the Japan International Cooperation Agency’s master plan, by 2023, the size of the country’s logistics sector is expected to double. (Phnom Penh Post).

Sathapana Bank drives growth through digital transformation. Sathapana Bank has taken a leap into the digital world by embarking on a transformation focused on significant infrastructure investment boosting its technology platform capabilities. “Digital transformation would provide faster and convenient banking for our new and existing customers to get access to finance. We also expect that with our ongoing significant infrastructure investments to boost our technology platform capabilities, our bank will be able to offer more innovative products and services designed to attract more customers to our bank,” Sathapana Bank CEO Lim Aun told The Post in an interview. Sathapana had teamed up with e-mobile operators Wing (Cambodia) Limited Specialised Bank, Pi Pay, TrueMoney, international money transfer agency Western Union and life insurance company Manulife. The partnerships aimed to provide convenience and compelling value proposition for the bank’s customers. (Phnom Penh Post).

Siam Cement Group generates more than $200M in Cambodia. Thailand’s Siam Cement Group Public Company Limited (SCG) generated more than $200 million in the first half of this year on its Cambodian operations, according to a company report. The company earned $226 million in sales revenues, an increase of 11% on the same period last year, with the majority of this derived from its cement business. Some $116 million was generated in the second quarter. With the Kingdom’s construction sector currently booming, Thailand-based SCG has established six subsidiaries in Cambodia all operating in the construction materials field. These include Kampot Cement plant, Concrete Roof Cambodia, CPAC Cambodia, CPAC Plank Cambodia, NAWA-CAM and SCG Trading Company (Cambodia). The firm had recently launched its Interior Solution scheme to strengthen and expand its business in the Kingdom. The scheme provides design and materials specification services, conducted by experienced designers, for both residential and commercial buildings. A total of 2,047 construction projects, worth some $3.39 billion, were approved in the first half of this year, a recent report by the Ministry of Land Management, Urban Planning and Construction showed. This represents a 57.57% increase from the same period last year, which had 1,643 projects worth $2.125 billion.

Farmers called on to up organic vegetable yields. The Ministry of Agriculture, Forestry, and Fisheries and the private sector has called on farmers to increase organic vegetable yields to meet demand from Phnom Penh’s supermarkets and restaurants. The push was made during a visit last week by Gilbert F Houngbo, International Fund for Agricultural Development (IFAD) president, to Sa’ang district’s Svay Brateal commune in Kandal province – an area in which growers practice non-chemical and organic farming through an Ifad project. On July 29, the Ministry of Agriculture, Forestry, and Fisheries launched a $100,000 Japanese-funded center. The center is a necessity to boost the production of vegetables guaranteed to be safe – from planting to harvesting, to packaging and selling on the market.  Post previously reported that last year Cambodia consumed 500 tonnes of vegetables per day, at a daily cost of between $200,000 and $300,000. The Kingdom is also estimated to import fruits and vegetables worth more than $300 million annually. (Phnom Penh Post).

Cambodia’s pork sellers suffer as African swine fever fears linger. Cambodia’s pork industry has yet to show signs of recovery since it was hit by African swine fever, pork sellers in Phnom Penh said. The ministry’s General Directorate of Animal Health and Production recently said more than 3,000 pigs were killed or culled in Cambodia due to an outbreak of African swine fever in five provinces, including Ratanakkiri, Tbong Khmum, Svay Rieng, Takeo and Kandal provinces. The Cambodian Pig Raisers Association previously estimated that the disease has caused more than $600,000 in losses to family-owned businesses. (Phnom Penh Post).

Market Deals

Bima, Pi Pay sign MoU to enhance insurance. MILVIK (Cambodia) Micro Insurance Plc, a mobile-based firm which offers health and insurance products to customers in Cambodia, has teamed up with mobile payment app Pi Pay to enhance convenience for its clients. Cambodia’s insurance premiums ratio to gross domestic product is still low. Stunted growth in the insurance sector may stem from factors such as limited awareness and low incomes, which discourage people from buying insurance. With a five-year presence in Cambodia, Bima currently has about 500,000 clients using its services. The Kingdom’s insurance industry generated more than $190 million in gross premiums last year – an increase driven by life insurance of nearly 30% over the previous year, according to the Insurance Association of Cambodia. (Phnom Penh Post).

Japanese Softbank Group unveils investment fund to drive [the] AI revolution. Japan’s SoftBank Group on Friday said it will partner with tech firms including Apple and Microsoft in a new $108-billion investment fund to accelerate the “AI [artificial intelligence] revolution”. The new fund is the long-mooted successor to its mammoth Vision Fund, which has taken stakes in leading tech start-ups from Uber to WeWork. SoftBank Group itself will plow $38 billion into the new fund, which will also include investments from Apple, Microsoft, Foxconn, a range of Japanese banks, Standard Chartered, and the National Bank of Kazakhstan. In a statement, SoftBank Group said Vision Fund 2 would “facilitate the continued acceleration of the AI revolution through investment in market-leading, tech-enabled growth companies”. The Wall Street Journal reported on Thursday that SoftBank executives brought on board Microsoft with promises to encourage the fund’s roughly 75 companies to shift to the tech firm’s cloud platform. Originally a software giant, SoftBank has increasingly become an investment firm through its first Vision Fund, which was largely backed by Saudi Arabia. The announcement of Vision Fund 2 made no mention of Saudi Arabia among the investors, though reports ahead of the announcement suggested Riyadh was in negotiations to put money into the fund. (Phnom Penh Post).

Macro-economy

PM: Gov’t spends $300M per month on infrastructure. The government spends around $300 million per month on infrastructure while earning “$500 million in revenue”, said Prime Minister Hun Sen. Included in the $300 million price tag are “constructions, repairs, and salaries”. Speaking during an inspection on July 29 of the Morodok Techo National Stadium’s construction site, located in Phnom Penh’s Chroy Changvar district, Hun Sen said the Kingdom’s economy is expected to grow 7.1% this year. The prime minister said customs revenue collection this month reached more than $250 million as of the end of last week. “The head of customs told me that [we] have three more days left [of revenue collection]. At an average of $10 million per day, we will reach $280 million this month. Adding other tax and non-tax revenue, this month we will have $500 million,” he said. Hun Sen’s financial disclosures come in response to potential sanctions which may be imposed on Cambodia, such as the US’ Cambodia Democracy Act and suspension of the Kingdom’s preferential access to the EU market under the “Everything But Arms” agreement. (Phnom Penh Post).

IFAD to give $70M agriculture loan. The UN’s International Fund for Agricultural Development (IFAD) said it will provide a $70 million loan to the government for an agricultural investment project, said its president Gilbert F Houngbo. During a field visit to a vegetable farm in Kandal province’s Sa’ang district on Saturday, Houngbo told The Post that Ifad will provide the loan for the Sustainable Asset for Agriculture Market, Business and Trade project (Saambat). The Saambat project will focus on infrastructure – including roads that connect farmers to the market, irrigation, as well as training, technology and a market for smallholder farmers in rural areas. “We have discussed [the loan] for the Saambat project, which is investing in agriculture. The loan will be approved in September this year,” said Houngbo. (Phnom Penh Post).

NBC Report: Exports jump to $6.8B, imports hit $10.5B. Cambodia’s total exports during the first half of this year jumped to $6.8 billion, from $6.2 billion during the same period last year. Imports reached $10.5 billion, said the National Bank of Cambodia’s (NBC’s) first-half report. The US market share in the exports was 28%, Europe’s was 26.6%, the UK’s was 6.6% and Japan’s was 7.7%, said the report. Some 46% of imports came from China, 15.6% from Thailand, 13.2% from Vietnam and 4.5% from Japan. Speaking during the NBC’s first-half results meeting on Saturday, director-general Chea Serey said the global economy’s favorable environment has continued to boost the Cambodian economy. However, Cambodia’s exports are far less than its imports. “The ideal scenario is that exports must be more than imports, but in reality, our [import] growth is greater due to higher domestic demand,” said Serey. She said Cambodia must strive to further boost its exports and diversify both products and their destinations. The Kingdom’s main exports include clothing, footwear, bags, electrical equipment, bicycles, and rice. The report said Cambodia’s foreign exchange reserves have also continued to grow gradually. The report shows as of the first half of this year, reserves reached $11.1 billion, which could guarantee 4.9 months’ import cover. (Phnom Penh Post).

US economic growth slows in Q2, 2018 falls below Trump Target. The US economy cooled in the second quarter of this year to a still-solid pace, government data showed, while officials also slashed an economic figure prized by President Donald Trump. Newly revised data covering the past five years now show the world’s largest economy actually slowed in the year after Trump and congressional Republicans pushed through a sweeping, $1.5 trillion tax cut. The change dealt a sharp blow to Trump’s economic message and also highlighted how momentum had deteriorated in the final months of last year when the Federal Reserve (Fed) last raised interest rates in defiance of intense pressure from Trump. The central bank next week is widely expected to cut its benchmark lending rate, reversing December’s increase. The Commerce Department reported that gross domestic product in the April-June quarter slowed to 2.1% from the first three months of the year, down sharply from 3.1% growth in the first quarter, but that was better than expected, helped by strong consumer spending.  withAnalysts had expected second-quarter growth of just 1.8%, but the economy got a boost from strong spending on autos, food, and clothing. (Phnom Penh Post).

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Biweekly News Collection No.11

No.11 (July 8, 2019)

Market Industry Trends

Cambodia’s rice exports to China exceed those to EU. Cambodia exported more rice to China than the EU for the first time during the first half of this year. The Kingdom’s rice exports during the first six months of this year amounted to 281,538 tons – up 3.7% from the same period last year. Among the 50 export destinations during the period, the Kingdom exported 118,401 tons to China or 42.06 per cent. The EU, which was the leading market for Cambodian rice exports, imported 93,503 tons (33 per cent). Cambodia exported a total of 626,255 tons of rice last year, of which 43 per cent, or 269,127 tons, was exported to the EU while some 17,000 tons (27 per cent) was exported to China. (Phnom Penh Post).

EuroCham Cambodia Launches White Book. The European Chamber of Commerce in Cambodia (EuroCham Cambodia) has launched the third version of its White Book for 2019 to advise European investors doing business in the Kingdom. The White Book is a set of recommendations on trade and investment policies compiled by EuroCham Cambodia. It will submit the book to the government for it to consider the regulatory and structural constraints faced in doing business in the Kingdom. (Phnom Penh Post).

Net Profit Margin up on all CSX listed stocks. The net profit margin of all stocks listed on CSX showed a significant increase last year, with an average of 20.89 %, led by the Phnom Penh Autonomous Port (PPAP). PPAP topped the rank with a 39.09 % increase, followed by Phnom Penh Water Supply Authority (PWSA), Phnom Penh Special Economic Zone (PPSP) and Sihanoukville Autonomous Port (PAS), whose figures stand at 27.77 %, 19.86 % and 16.54 % respectively. Grand Twins International (Cambodia) Plc (GTI), on the other hand, had the lowest net profit margin with 1.2 %. Compared to 2017, the average net profit margin of all listed stocks increased by more than 40 %. Net profit margin is equal to how much net profit generated as a percentage of revenue. All stocks have shown a positive performance during the last three years, in terms of revenue and net income, except for GTI, which saw a drop in net income in 2017. (Phnom Penh Post & CSX).

EU signed trade deal with Vietnam. The EU signed the trade deal with Vietnam on July 7, 2019. The accord was negotiated back in December 2015, but EU member states only gave their approval last week at a ministerial meeting. The deal will remove virtually all customs duties on trade between the two countries. EU-VN trade represents equivalent value of Euro50B in goods and Euro4B in services. EU investors will now have the opportunity to take advantage of a rising economy like VN and are keen to secure access to 95 million consumer. Beyond the clear economic benefits, this deal also aims to strengthen respect for human rights as well as protecting the environmental and workers’ rights in Vietnam. (Phnom Penh Post).

Global Supply Chains to be re-routed to Asean region. Chinese investment in the region’s manufacturing sector will intensify in the upcoming decade as China uses its Belt and Road Initiative (BRI) to re-orientate the global supply chain towards Asean in response to its trade battle with the US, a geopolitical expert predicts. (Phnom Penh Post).

Market Deals

CP all negotiates for 7-eleven stores in Cambodia and laos.. Thailand’s largest convenience-store operator CP All Plc released a report to the Stock Exchange of Thailand (SET) on Monday on its negotiations for a Master Franchise agreement in relation to the establishment and operation of 7-Eleven stores in Cambodia and the Lao People’s Democratic Republic. The company said the contractual parties are in the process of negotiating the terms of the Master Franchise Agreement and have agreed to an extension of the negotiation for a period yet to be agreed. This original period was due to expire by the second quarter of this year. (Phnom Penh Post).

AMRU inks $15M deal with International Finance Corp. (Phnom Penh Post). Amru Rice (Cambodia) Co Ltd, a local rice exporter and leading organic paddy producer, signed a more than $15 million loan agreement with the International Finance Corporation on June 26. The loan would be used to expand milled rice warehouses, drying silos, as well as to strengthen its packing standards, processing, quality and safety, and to increase capital to purchase paddy. The company plans to export 20,000 tonnes of organic milled rice to the EU, US, China and Hong Kong this year, and 40,000 to 50,000 tonnes next year. In the first six months of this year, the company exported more than 4,000 tonnes of organic milled rice, earning nearly $4 million. It expects to export 10,000 tonnes by the end of the year. (Phnom Penh Post).

KrisEnergy Starts 3D Seismic survey. Singapore-based firm KrisEnergy Ltd, which operates Cambodia’s Block A offshore oil development project, has started a 3D seismic survey in the area, a company press release said on Tuesday. It announced the commencement of a 1,200sqkm survey in the offshore Cambodia Block A concession, where KrisEnergy is developing the Apsara oil field. It claimed in late March that it will meet its schedule to extract its first drop of oil late this year. KrisEnergy first became a stakeholder for Block A in 2010, before buying the stake owned by Chevron for $65 million. It owns 95 per cent of the Apsara oil field in Block A, with the government owning the remainder. Minister of Economy and Finance Aun Pornmoniroth said in August 2017 that Block A is believed to hold about 30 million barrels of oil, which could be extracted over the course of nine years. (Phnom Penh Post).

SECC issues first of new license to CIC partners. Cambodian Investors Capital Partners Plc (CIC Partners) on Thursday announced that it obtained a license from the Securities and Exchange Commission of Cambodia (SECC) as the first “fund management company” in the Kingdom. CIC Partners is a subsidiary of Cambodian Investors Corporation Plc, a group of about 300 local investors, which was established in early April 2013. During the acceptance ceremony on Thursday, CIC Partners board director Kuy Vat said the firm would contribute to solving the challenges facing the Kingdom’s small and medium enterprises, particularly receiving finances from institutions. He added that CIC Partners will create a mechanism with quality, effectiveness and efficiency for investors and he expect many more to join the group. (Phnom Penh Post).

Macro-economy

CDC Approves $1.8B investment. The Cambodia Development Council (CDC) has approved more than $1.8 billion in investment projects during the first six months of this year, research by The Post has shown. According to its calculations, the CDC’s data shows that during the period from January to this week, there were 102 investment projects approved, which can create up to nearly 130,000 jobs upon their completion. The projects are mostly investments in garments, footwear, bags, hotels, commercial centers and entertainment venues. Secondary projects include plastic manufacturing plants, medical equipment, solar panel components, and rubber processing plants, fruit processing plants, toys, carton processing plants, construction material factories, agro-industry farms, husbandry, cigarette factories, and yarn and electric wires. The ongoing trade war between the US and China has made many foreign companies, especially Chinese-owned ones, search for manufacturing sites outside China to avoid tariffs imposed by the US. (Phnom Penh Post).

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Biweekly News Collection No.10

No.10 (June 19, 2019)

Market Industry Trends

China set to help Kingdom’s bike industry pedal forward. A brand new factory is emerging on a 20ha plot in Phnom Penh as part of a plan to shift production of millions of bicycles from China to Cambodia. How fast it is completed, however, will depend on the meeting between Chinese President Xi Jinping and US President Donald Trump at the Group of 20 (G20) summit in Japan later this month, if it ever happens. (Phnom Penh Post).

China mulls importing Kingdom’s agro-products. China is considering importing more Cambodian agricultural products following recent agreements to import mangoes and bananas, said Li Jianwei, the director-general of the Animal and Plant division of China’s General Administration. This week, China signed an agreement with the Ministry of Agriculture, Forestry and Fisheries to import Cambodian mangoes. (Phnom Penh Post).

NBC selects three banks for pilot Cambodia-Thailand QR code Payment system. The implementation could begin late this year. The three banks are Acleda Bank, Foreign Trade Bank (FTB) and Cambodian Commercial Bank Ltd. NBC and its Thai counterpart signed a memorandum of understanding (MoU) previously. The system would boost the use of the local currency and hedge foreign-exchange risks. Cambodians travelling to Thailand and Thais travelling to Cambodia can be able to make payments without having to use cash. (Phnom Penh Post).

Facebook takes on the world of cryptocurrency with ‘Libra.’ Facebook is leaping into the world of cryptocurrency with its own digital money, designed to let people save, send or spend money as easily as firing off text messages. “Libra” – described as “a new global currency” – was unveiled on Tuesday in a new initiative in payments for the world’s biggest social network with the potential to bring crypto-money out of the shadows and into the mainstream. An eponymous non-profit association based in Geneva will oversee the block chain-based Libra, maintaining a real-world asset reserve to keep its value stable. The initiative has the potential to allow more than a billion “unbanked” people around the world access to online commerce and financial services. (Phnom Penh Post).

Vietnam’s first homegrown car set to be delivered its first cars on 17 June 2019. VinFast said it will supply a domestic market that is rapidly expanding thanks to a mushrooming middle class with a growing appetite for cars – though it will face stiff competition from well-established players like Toyota and Ford. The carmaker is a subsidiary of Vietnam’s largest private conglomerate, Vingroup, which is owned by the country’s richest man, a press-shy billionaire who started his career selling dried noodles in Ukraine. (Phnom Penh Post).

China’s Huawei Technologies Co has applied to trademark the “Hongmeng” operating system (OS) in a number of countries including Cambodia in a bid to launch its homegrown operating system as a replacement for the Android OS. (Reuters).  

Richest Thais on track to sit on $401B, says report. Thailand’s richest people are set to get even richer, with projections that their combined wealth will top $400 billion next years, making up 71 per cent of the country’s nominal GDP. A report forecast that the country’s high-net-worth individuals (HNWI) – those with assets exceeding $1 million – are expected to make more offshore investments, focusing on equities and mutual funds in the next five years. The SCB Julius Baer Wealth Report Thailand 2019 said the combined worth of the top tier in the economy was $341 billion last year and would see a healthy gain to $401 billion next year. SCB Julius Baer aims to capture 10 per cent of the Thai HNWIs in the next five years with what it calls its holistic wealth management service. (Phnom Penh Post).

VN to be among the most dynamic market by 2030. With an emerging market economy and continued strong growth, Vietnam is set to become one of the most dynamic markets in the world by 2030, according to Euro monitor International, a global market research company. (Phnom Penh Post).

ABA reports $71.8 net profit. ABA Bank, a member of the National Bank of Canada group, recorded a net profit of $71.8 million in 2018, up 55 per cent from $46.2 million in 2017, its annual report released on Monday stated. (Phnom Penh Post).

Market Deals

Tanncam buys 65% Vibe stake. Tanncam Investment Co Ltd, an Uzbek-owned investment group registered in Cambodia with holdings in the healthcare, e-commerce, consulting, and food and beverage sectors, has acquired a 65 per cent stake in Vibe Cafe Hospitality. The company has not disclosed the value of the share in the deal which was closed on June 9. Vibe Cafe Hospitality is Cambodia’s leading vegan and health food restaurant group with two outlets in Phnom Penh and one in Siem Reap. In addition to vegan and health food restaurants, the group is a wholesale distributor of its proprietary products, a leading provider of rejuvenating cleansers and lunchboxes, and an innovator in unique health food and vegan recipes. The group recently entered into the franchising and restaurant consulting business. (Phnom Penh Post).

China Eastern set for debut in Asia’s budget air travel scene. AIRASIA Bhd and other regional budget airlines will face a new powerful competitor when China Eastern Airlines Company Ltd, one of the world’s Top 10 airline groups, expands its budget air travel to the Asian region outside China. (Phnom Penh Post).

Macro-economy

Construction stays strong. Cambodia’s construction sector remained strong during the first four months of this year following a nearly 20 per cent drop last year, according to the responsible Ministry’s figures. In the first four months of this year the construction investment capital amounted to $2.742 billion, an increase of 67.37% over the same period in 2018, thanked to the stable macro-economy, growth, and investor confidence. Most of the construction projects are office buildings and shared accommodation buildings. (Phnom Penh Post).

ASF could bankrupt VN Livestock sector. African swine fever has not only caused Vietnam’s livestock farming households to fall into debt, but has also made it difficult for animal feed dealers to collect their payments. If the epidemic continues, the domino effect could bankrupt the country’s livestock industry. A number of shops selling animal feed have been put in a bind because they have to sell animal feed to farmers on credit, while paying the manufacturers on receipt of the grains. (Phnom Penh Post).

Asian markets rise with eyes on Fed policy meeting. ASIAN markets mostly rose on Tuesday but gains were limited, with investors treading uneasily as they await the conclusion of a crucial US Federal Reserve (Fed) meeting this week. While geopolitical tensions and the Sino-US trade war continue to make waves, the key focus for now is what the US central bank plans to do with monetary policy as the tariff stand-off shows signs of impacting the world’s top economy. The latest weak data saw manufacturing activity in New York state plunge into contraction this month and hit its lowest level since late 2016, reflecting steep drop-offs in new orders, backlogs and employment. (Phnom Penh Post).

Regulations

Draft oil bill unanimously approved. At the government’s request, the National Assembly has unanimously decided to retain the full original content of a draft bill on the management and production of oil, as the development of the Kingdom’s coastal and marine oil and gas. (Phnom Penh Post).