No.21 (Nov 27, 2020)
Market Industry Trends
Banks and Fi loan restructuring extended until mid-2021. National Bank of Cambodia (NBC) has decided to extend loan restructuring to all sectors impacted by pandemic and floods until mid-2021. The loan restructuring is conducted based on the actual evaluation of the client’s situation from the bank’s financial institution. It will also be dependent on a mutual understanding between banks and financial institutions and their clients and will include provisions for the reduction of interest rates and the waiving of other additional fees. The central bank will permit restructuring up to three times without any impact to the loan classification during the referred period and specified that all financial institutions must follow the implementation of the extension and monitor the restructuring loans regularly as directed by NBC. (Khmer Times)
Mortgage loans reach $4.6 billion in the first nine months. Demand for residential units and real estate in Cambodia continues to grow in 2020, despite the spread of the COVID-19 pandemic, which has negatively affected economic growth. According to the quarterly report of the Credit Bureau of Cambodia (CBC), loans in the real estate sector reached $4.6 billion by the end of September 2020, a significant increase from $3.9 billion at the end of 2019. According to Cambodia’s Economic Trends report of the Ministry of Economy and Finance, there were 2,819 residential projects, accounting for 84% of the total 3,350 construction projects, in the first eight months of this year. The report underlined that residential demand in Cambodia continues to grow even though the COVID-19 crisis has weakened other economic bases. (Khmer Times)
Gov’t credit guarantee unit set for 2021. The Credit Guarantee Corporation of Cambodia (CGCC) is expected to launch in the first half of 2021. It was established with $200 million in registered capital funded by the government. The corporation sets out to increase access to financing for small and medium-sized enterprises (SMEs) in priority sectors such as agricultural, industrial, and service sectors with a capped lending size at $500,000. CGCC will be tasked with providing credit services, evaluating and managing risks, cooperating with banks and financial institutions, and developing partners that also provide credit services. It aims to provide a source of capital for SMEs who struggle to raise additional funds due to limited collateral and provide them with collateral protection insurance. According to the Ministry of Economy and Finance, the government is seeking more fund injection from international finance partners and the World Bank plans to provide about $100 million in loan to the government for additional capital. (Khmer Times)
Market Deals
PPCB bonds trade on the secondary market. The Cambodia Securities Exchange (CSX) data shows that the corporate bonds of Phnom Penh Commercial Bank Plc’s (PPCB) are now traded in the secondary market. The secondary bond market is where investors can buy and sell the bond and transaction proceeds will go directly to the counterparty. The volume of bonds traded is 40,000 units selling at a premium of KHR105,309 per unit with 867 days left to maturity. It represents a yield-to-maturity (YTM) of 4.49%, which is substantially lower than the initial coupon rate on the bond’s issue date. PPCB has successfully raised $20 million from two separate listings this year with an annual coupon rate of 6.50% and a maturity date of three years. (Phnom Penh Post)
KE offers assistance to SMEs. The state-run Khmer Enterprise (KE) has recently signed grant agreements with 27 start-ups and small and medium-sized enterprises (SMEs) for the first and second round of financial assistance packages to sustain their business during the Covid-19 crisis. KE is an implementation unit of the Entrepreneurship Development Fund (EDF) established by the Ministry of Economy and Finance which purpose to promote entrepreneurial activities and ecosystem. The key prioritized sectors for the program include ICT, services, agro-processing, and agriculture for export and manufacturing aimed at curbing imports in its aspiration to enhance economic diversification, innovation, productivity, and job creation. The financial assistance packages awarded amount to approximately $400,000 and a single fund ranges from $5,000 to $20,000 with a maximum period of one year. The third round of Khmer Enterprise assistance packages (KEAP) is expected to roll out next year. (Phnom Penh Post)
Top US venture capital firm moves into the Kingdom. The US-based global venture capital firm 500 Startups is now collaborating with Khmer Enterprise to launch Angkor 500, which aims to drive the formation of technology-driven startups and prepare relevant entrepreneurs for regional expansion. Within the initial partnership period of 2 years, 500 Startups will conduct a range of programs and international showcase to accelerate the investors. This program will create an opportunity for investment in new generation startups by connecting them to key industry stakeholders and corporate partners. Since its inception in Silicon Valley, 500 Startups has invested in more than 2,300 companies via its five global funds and 15 thematic funds dedicated to either specific geographic or vertical markets. It has contributed to the development of innovation ecosystems by supporting startups and investors through educational programs, events, conferences, and partnerships with corporations and governments around the world. (Khmer Times)
Macro-economy
UK to make trade preference available to lease developed countries Cambodia will be able to get trade preference from the United Kingdom (UK) after the new Generalized Scheme of Preferences (GSP) takes effect on January 1, 2021. The UK has left the European Union (EU), and the post-Brexit transition phase period is expected to end by this year. The new scheme will consist of three frameworks that replicate the market access provided under the UK’s GSP such as least developed, general, and enhanced countries. Cambodia, which falls under the least developed countries framework, will therefore be entitled to duty-free and quota-free access on exports to the UK of all goods, except arms and ammunition. (Khmer Times)
Cambodia signs the world’s largest free trade pact. The negotiation for Asia-Pacific Regional Comprehensive Economic Partnership (RCEP) has been concluded and the leaders of 15 Asia-Pacific nations have officially signed the blockbuster trade pact. Leaders of the 10 ASEAN states, Australia, China, Japan, New Zealand, and South Korea witnessed the signing of the RCEP agreement via video link following the conclusion of the 4th RCEP Summit. Marking as the largest free trade pact, the RCEP has a combined gross domestic product (GDP) to the tune of $26.2 trillion, or 30% of global GDP, and engages 2.2 billion people, according to the ASEAN secretariat. This trade deal will help to promote trade flow and facilitate market access for countries through eliminating tariffs and quotas on over 65% of traded commodities. Moreover, common and transparent rules and regulations will be introduced within the region upon the agreement came into force. It noted that the agreement comprises 20 chapters, 17 annexes and 54 schedules of commitments that cover market access, rules and disciplines, and economic and technical cooperation. The Jakarta-based Economic Research Institute for ASEAN and East Asia (ERIA) found that the deal would boost Cambodia’s GDP an additional 2%, increase exports by an extra 7.3% and raise investment by an added 23.4%. The signed trade pact is very crucial for rapid economic recovery after the Covid-19 crisis and the promotion of intra-bloc supply chains to bolster trust among the member of the region. (Phnom Penh Post)
The signing of the Japanese ODA loan agreement with Cambodia: contributing to Covid-19 crisis response in Cambodia through the provision of budget support. The Japan International Cooperation Agency (JICA) signed a loan agreement with the Royal Government of Cambodia in Phnom Penh to provide a Japanese Official Development Assistance (ODA) loan of up to 25 billion yen for the COVID-19 Crisis Response Emergency Support Loan. The objective of the program loan is to subsidize the country’s recovery from the social and economic downturn caused by COVID-19 through budget support for the implementation of the COVID-19 Master Plan and related policies. (JICA)