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Business Registrations Up 29 Percent in 2014
Tuesday, 03 March 2015 00:00


Nearly 4,000 businesses registered with the Ministry of Commerce in 2014, a 29 percent gain over the year before, figures provided Monday by the ministry show.

According to the ministry, 3,850 businesses registered last year, up from 2,986 in 2013. Trademarks registered with the ministry rose from 5,866 in 2013 to 6,075 last year—4,829 of which were foreign.

Ministry spokesman Ken Ratha said Monday the uptick in new businesses was due to investors’ perception of Cambodia as a stable place to do business.

“Mostly, investors think that the politics in Cambodia is more stable, the investment and business environment is more open, and the country’s gross domestic product has a strong position,” he said.

However, Cambodia continues to be one of the most difficult countries in the world to do business, according to the World Bank’s “Doing Business 2015” report, released in October. In the report, Cambodia is ranked 184 out of 189 countries in the category of starting a business.

ASEAN Economic Community offers Cambodia a leg up
Wednesday, 11 February 2015 00:00

Author: Heidi Dahles, Griffith University

As Cambodia is coming to terms with its changed political landscape after the 2013 elections, a new era of economic development is dawning. Whether the country will be able to secure long-term economic and social development largely depends on its capability to integrate itself successfully into the ASEAN Economic Community (AEC), which may or may not meet its deadline set for the end of the year.

Economically, Cambodia has done well this decade. Its GDP grew at an average rate of 7 per cent per year in 2010–14, and a similar growth rate is expected to be accomplished again this year. But this growth rate can only be sustained in the future if the country substantially improves its competitiveness through economic diversification, inclusive development, better education and institutional capacity building.

Cambodia’s long-term growth prospects within the AEC could be hampered by the narrow base of its export industry which largely depends on garment production, milled rice and tourism. New sources of economic growth are called for. At the same time, Cambodia needs to further reduce its dependence on aid donors. A substantial proportion of Cambodia’s skilled workforce is absorbed by the ‘development industry’ financed with foreign aid money. Transformation of this sector through commercialisation is slow.

Conversely, China is now Cambodia’s largest foreign investor, a major donor of aid and an increasingly important trading partner. In return for its generous financial injections, China has exerted its influence on Cambodia to promote Chinese political interests. This may hamper Cambodia’s full integration into the AEC.

For Cambodia to benefit from trade opportunities in the AEC, the country needs to improve its hard infrastructure: in particular its transportation system, energy supplies and internet access to facilitate its integration in continental Southeast Asian production and logistics networks. The final resolution of the Cambodian–Thai dispute over the Preah Vihear temple would greatly contribute to economic cooperation across continental Southeast Asia, in particular on the Bangkok–Hanoi axis.

Infrastructural improvement and integration into regional networks may help Cambodia to successfully tackle its greatest challenge: developing a vibrant community of domestic entrepreneurs. The Cambodian government has focused on attracting FDI and has neglected incentives for domestic businesses, such as research and development schemes and credit facilities. As a consequence, Cambodian businesses lack an innovation-driven entrepreneurial spirit.

Membership of the AEC may provide access to intra-Asian FDI that could boost small and medium business growth. But institutional conditions have to be created to enable Cambodian businesses to benefit from such investments. The main barrier here may be the fact that much of the labour force lacks adequate education and training.

Cambodia’s education system is in dire need of improvement. While donor money has helped to improve primary education, secondary and particularly tertiary education both lag behind. There is a lack of qualified staff, inadequate curricula and teaching methods, lack of quality assurance, a rural–urban divide in enrolments, falling completion rates, and insufficient collaboration between industries and universities for research and development activities. Much of the higher education sector is commercially driven.

While an increasing number of foreign universities are opening branches in Cambodia, the domestic economy is unable to absorb the burgeoning number of graduates. Unemployment among Cambodian graduates is soaring. The question is whether the AEC will provide an avenue for Cambodian graduates to find employment either at home or in the other member states of the ASEAN common market.

Hidden behind the shimmering façade of Cambodia’s sustained GDP growth is a narrowing but persistent gap between the new middle classes and the urban and rural poor. To close the gap, continuing land issues have to be resolved in order to end forced evictions and dislocation of rural people into urban slums. Efforts will have to continue to further improve the regulation of economic land concessions, a process started by Prime Minister Hun Sen two years ago. Where appropriate, land should also be redistributed to the land-poor through social land concessions. But for this to happen, more radical changes are called for.

Corruption and weak institutions also hold Cambodia back from erasing poverty. Despite the adoption of the Anti-Corruption Law in 2010, corruption is still widespread. Favouritism by government officials is part and parcel of a patronage system that permeates all realms of Cambodian life. Cambodia’s ruling class and tiny business elite form an ‘elite pact’ that revolves around the exploitation of Cambodia’s most valuable economic resources. Participation in the AEC may help to restrain the power of this elite by enhancing institutional capacity-building across the ASEAN community.

While the AEC will dramatically transform the economic conditions in the region, it will pose hitherto unknown challenges to Cambodia’s economic and political future.

Source: Professor Heidi Dahles is Head of the Department of International Business and Asian Studies at Griffith Business School, Griffith University

Exchange to receive millions
Monday, 10 March 2014 00:00

Cambodia's stock exchange will receive a $2.5 million funding injection from the South Korean government in an attempt to draw more corporate interest from companies who may want to go public, according to a recent report on state media site AKP.

Smart acquisition paid off for Malaysian firm
Monday, 10 March 2014 00:00

Axiata, the Malaysia-based parent company of Cambodia’s second-largest telecommunications provider, Smart, posted a rise in total revenues for 2013 to $5.5 billion. The boost represents a 4.1 per cent increase from the fourth quarter of the previous year.

Tourism revenues increase but taxes remain flat
Monday, 10 March 2014 00:00

Overall revenue from Cambodia’s booming tourism sector reached $2.5 billion last year, according to Tourism Minister Thong Khon.

Bilateral trade with China rises
Tuesday, 20 August 2013 00:00

Trade volume between Cambodia and China was valued at $1.79 billion in the first four months this year, a 42 per cent increase compared to the same period last year, according to the Chinese embassy in Cambodia.

In 2012, bilateral trade between the countries reached about $3 billion, a 16 per cent year-on-year increase.

Speaking at the promotion conference for the 114th Guangzhou Import and Export Fair in the Sofitel Hotel yesterday, Li Zhi Gong, a representative of the Chinese Embassy in Cambodia, said: "While both countries target to reach trade volume at $5 billion in 2017, more cooperation is needed to reach the goal."

Of the 146,854 tonnes of rice Cambodia exported in the first five months of this year, 12,687 tonnes went to China.

Chen Chang Jiang, Chief Executive Officer at Bank of China in Cambodia, said that financial services in his bank have been increasing parallel to the increase in trade activity between the two countries.

Source: Phnom Penh Post

Tax revenues rise, but aren’t reflective of overall GDP growth
Friday, 19 July 2013 00:00

While the country's tax revenue grew about 20 per cent in the first half of this year compared to the same period in 2012, experts say the amount still isn't high enough to accurately reflect the country's GDP growth.

According to data from the General Department of Taxation, total tax revenue in the first six months was $470 million, compared to $388 million from January through to June last year. As for the different sources of the total, salary tax revenue went up 24.8 per cent, income tax jumped 28.6 per cent, Value Added Tax [VAT] increased by 12.2 per cent, and special tax, referring to items such as cigarettes and entertainment, went up by 17.5 per cent.

The report also listed the increase in tax collection by industry. When compared with the first six months of 2012, the largest this year, by far, was the education sector, which went up 124 per cent. Tax revenue from Cambodia's largest export industry, the garment sector, rose about 42 per cent, while consumer products added nearly 38 per cent. Hotel and questhouse revenue rose by roughly a quarter.

Keat Chhon, the Minister of Economy and Finance, repeated an explanation for previous increases in the last several months, that tax officers had stepped up efforts to make collections and had improved the quality of their work. He did, however, add that the tax department still lacked efficiency.

Stephen Higgins, former CEO of ANZ Royal bank ,said that country's nominal GDP growth was probably about 11 per cent over the same period, "which would suggest the government overall hasn’t managed to increase revenues as a proportion of GDP, which is a little disappointing after the progress they seemed to make last year".

"The International Monetary Fund has been pretty clear that what they call revenue mobilisation, or lifting the tax take, needs to improve. Corruption is a factor, but also building up capacity and capability in revenue raising areas is important," he said in an email message. "Improving and streamlining customs would make a big difference, and is something that most businesses would want to see," he added.

Hiroshi Suzuki, CEO and Chief Economist of the Business Research Institute for Cambodia (BRIC), said in an interview last month that beefing of tax collection is not a quick fix, and other countries face the same problems.

"The improvement of taxation is not an easy job. Many developing countries, not only Cambodia, have been tackling this issue. I hope both the government and donors will continue their efforts on this issue for Cambodia," he said.

Lawmakers from the Cambodia National Rescue Party consistently claim that the government loses about $500 million every year via its poor tax collection and corruption.

Last year the government collected $740 million, according to the department's official data.

Cambodia's economic growth is forecast at 7.2 per cent in 2013. The Asian Development Bank said it could pick up to 7.5 per cent next year once economic recovery in Europe and the United States takes hold.

Source: Phnom Penh Post

Robust recovery continues
Monday, 10 June 2013 00:00

Cambodia's economy is on track to maintain its robust recovery thanks to a cocktail of private sector and government efforts. In 2012, the Asian Development Bank estimated that gross domestic product grew at a rate of 7.2 per cent, an increase from a 2011 International Monetary Fund figure of 6.5 per cent. After suffering from the fallout of the global economic downturn, GDP growth is surging back.

Kang Chandararot, president of the Cambodian Institute for Development Study, attributes much of the success to agricultural production, public investment in infrastructure and recoveries in both the garment and tourist sectors.

"The government role is a leading force, while the private sector followed as business confidence was not strong after the downturn [of 2008 and 2009]," he said.

The ADB predicts 7.2 per cent growth in 2013 and 7.5 per cent in 2014, figures that are largely contingent on a steady recovery of markets in the European Union and United States.
Contributing factors for growth include Cambodia's exports, consumer spending and the diversified flow of foreign direct investment, which reached $1.5 billion in 2012. In its 2013 outlook, the ADB expects the industrial sector to expand by more than 10 per cent as EU demand for Cambodia's products increase, thanks to preferential access to the market under the Everything but Arms initiative.

The ADB report says that export volume of garment and footwear products to the US may also rise in coming years.

Valued at $2.2 billion, Cambodia’s tourism sector continues to thrive. In 2012, Cambodia welcomed more than 3.6 million tourists, a 24 per cent rise when compared with 2011.
The export of milled rice in 2012 was about 200,000 tonnes, and is expected to be greater this year. The value of construction projects approved by the Ministry of Land Management, Urban Planning and Construction last year, at a time when the sector was facing the threat of labour shortages, was $2.1 billion - double the amount the year before.

Both the government and the private sector are making collective efforts to diversify the country's exports while actively seeking new ways to market the Kingdom’s products, from its temples to its rice.

There is, however, more to be done.

Hiroshi Suzuki, Chief Economist of the Business Research Institute for Cambodia, is positive about sustaining growth through the evolution of Cambodia's manufacturing base, instead of relying on the garment sector. Suzuki says Cambodia is attracting Japanese investment in automotive parts and electronics manufacturing.

Moreover, as Cambodia looks toward integrating economically with other ASEAN member states, it has to play catch up when it comes to electricity supply, transport efficiency and infrastructure development.

Some analysts have also warned of unequal development.

Despite the shortcomings, observers believe that Cambodia’s economy will keep heading in a positive direction over the short and long term.


Source: Phnom Penh Post

Loans and deposits up 30%
Thursday, 30 May 2013 00:00

Outstanding loans and deposits made at Cambodian banks grew by 32 per cent and 28 per cent respectively at the end of March this year from a year earlier, according to data from the National Bank of Cambodia (NBC).

The data from the NBC that the Post obtained yesterday revealed that outstanding loans provided by all Cambodian banks reached about $6.14 billion at the end of March this year, and deposits made at all commercial banks reached about $6.39 billion.

Speaking to the Post yesterday, Nguon Sokha, director general of the NBC, said the banking sector is the oil to support the economic growth, so the current growth rates on loan disbursement is a reflection of the growth of Cambodia's economy.

"There is still a large demand for financing to boost investment activities in Cambodia," she said. "As our country still maintains a GDP growth rate at seven to eight per cent annually, loan disbursements and deposit amounts are still growing as we see at this time."

While all sectors are important to increase financing in the banking industry, Sokha said loans for agricultural activities contributed much to the growth, which is up about 40 per cent from the year earlier.

Major financial institutions currently show more trust in providing loans to the agricultural sector, thanks to Cambodian government policies to boost the agricultural sector.

Acleda Bank, Cambodia’s largest domestically owned bank, has been increasing its percentage share of its loan portfolio into agriculture from 15 per cent two years ago to 19 per cent at the end of March.

While the bank's total loan portfolio reached about $1.35 billion at the end of March this year, In Channy, the bank’s president and chief executive, said $254 million was given to agricultural loans, which represents about 19 per cent of total lending.

"It [agricultural loans] is growing quite well," said In Channy. "We are more confident to provide loans in the agricultural sector because the government policy has encouraged us to do so."

He added that another $16 million went to rice millers, but are considered separate from agricultural loans at Acleda.

Acleda is not alone, but the increase of loans to the agricultural sector has also happened with ANZ Royal bank, a major commercial bank in the Kingdom.

Grant Knuckey, chief executive officer of ANZ Royal, said he has seen consistent growth in loans to the agricultural sector, particularly in the past 12 months, with a growth rate of around 35 per cent.

"Agriculture is a very promising sector for banking from a growth perspective, but issues hampering the provision of increased finance also need to be acknowledged,” he said, “These include poor financial information and inadequate documentation."

Source: Phnom Penh Post

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