Weekly news round up/ Week 52

Political (Cambodia-Specific)

Ith Samheng, the Minister of Labor, expects Cambodia’s Labor Court to be inaugurated in early 2017. Delegations representing unions, employers and government officials have been sent on research missions to Japan, Singapore and Australia and will soon write a report recommending a structure for a Cambodian Labor Court.
Whilst the Labor Arbitration Council is currently used to address some labor disputes, this is a mechanism that sits outside the court system.
Chea Mony, President of the Free Trade Union (FTU), has long lobbied for the creation of a labor court and believes that it will help attract foreign investment if effectively implemented and maintaining standards of transparency and independence.

The Royal Government is considering making an amendment to the Law on Political Parties which would prevent Cambodian citizens with dual nationality from holding party leadership positions. If such an amendment were made this could exclude exiled CNRP leader Sam Rainsy from his position as he holds a French passport.

Europe, European Businesses, EuroCham Members

Estimates from the Ministry of Commerce suggest that the EU remained the largest export market by value for Cambodia in 2015, receiving shipments worth $2.32bn. The United States was a close second with $2.07bn, whilst the Asia-Pacific region received $1.1bn and a far smaller figure of $15m being sold to Africa.
Compared to 2014, the total value of exports to the EU is largely unchanged. Exports to the USA increased from around $1.7bn (figure provided by Phnom Penh Post, real figure may be larger).

Infrastructure, Development and Core Industries

Total tax collection for 2015 was around $1.3bn, representing a 25% increase on 2014 as the Royal Government seek to ensure better awareness of and compliance with taxation laws. Improved collection will partly finance a projected 12% increase in government expenditure in 2016 ($4.3bn).
The General Department of Taxation expects to collect $1.5bn in 2016, in part through the abolition of the estimated regime which saw some companies paying significantly less taxes than they would have in the real regime.
The department has also started implemented a ‘name and shame’ strategy of publishing the names of non-compliant companies in local media. 

The $540m Stung Tatai hydropower plant in Koh Kong, built by China National Heavy Machinery Corporation, was officially opened on 23rd December. At the opening ceremony, Prime Minister Hun Sen stressed the importance of the state being able to produce and distribute affordable electricity to meet domestic consumption demands. The dam contributes to ongoing efforts to reduce Cambodia’s reliance on imported fuels, which in 2014 represented almost 40% of the Kingdom’s total energy supply.

Domestic tourism in Cambodia increased significantly in 2015. The traditional tourist hotspot of Siem Reap received 10% less foreign visitors due to external factors but saw a 9% increase in visits by Cambodians to 2.7 million. Likewise, the coastal province of Kep saw a 30% increase in all visitors, many of whom were Cambodian.
Luu Meng, president of the Cambodia Hotel Association, commented that the total number of hotel rooms in the country will continue to increase to match rising demand from tourists, and tourism-related construction activity could increase three-fold by 2018.

A report by the National Bank of Cambodia suggests that Cambodia’s GDP grew 6.9% in 2015 and can be expected to grow by 7% in 2016. The report cites garments exports, low oil prices and growing domestic demand as major growth factors, whilst US dollar appreciation, increasing labor costs and slowdowns in China and the EU were the major challenges. There is also concern that the Kingdom could see capital outflows to Myanmar and to Vietnam, the latter of which has recently signed a trade agreement with the EU and is part of the proposed Trans Pacific Partnership (TPP).

Upon inauguration of the ASEAN Economic Community on 1st January, Phnom Penh Post published a Q+A session with Thomas Hugger, CEO of regional investment firm Asian Frontier Capital.
Mr. Hugger suggested that Cambodia will not see a huge increase in foreign investment due to relatively poor infrastructure making the Kingdom less competitive than competing destinations such as Indonesia and Vietnam. However, visa-free travel within ASEAN plus China, Japan and South Korea will benefit the Cambodian tourism sector. Reduction in intra-regional tariffs could see increased demand for Cambodian agricultural products within ASEAN, whilst participation in regional production value chains is a realistic possibility for the future.

On 1st January the Kingdom’s new Traffic Law came into effect, with almost 3,000 fines issued for minor offences such as not wearing a helmet or lacking registration documents. Whilst ticketing officers can now officially keep 70% of fines, they are not permitted to collect cash on the spot. Instead, tickets are issued and fines must be paid at designated offices. In Phnom Penh a noticeably higher proportion of motorcycle drivers were wearing helmets so as to avoid being stopped by traffic police.

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