News

Cambodian government officials are currently in negotiation with American counterparts over the terms of a new trade and investment agreement which could represent a stepping stone towards one day joining the Trans-Pacific Partnership.

The two countries formed the Joint Council on Trade and Investment in 2006 to discuss the Trade and Investment Framework Agreement (TIFA ) though the current negotiations represent only the third meeting. Discussions have centered on hastening Cambodia’s implementation of World Trade Organization commitments on customs and e-commerce regulations, as well as sanitary and phyto-sanitary measures, in order to encourage increased bilateral trade and investment.

Cambodia is currently excluded from the 12-member Trans-Pacific Partnership which could put it at a considerable disadvantage compared to Vietnam who is included. Coupled with Vietnam’s recent signature of a free trade agreement with the EU, this has increased the importance of securing a bilateral trade agreement between Cambodia and the USA. An American embassy official in Phnom Penh commented that the TPP had an open framework that would welcome new members provided they were prepared to make the necessary reforms to accede to the trade bloc.

It is hoped that a new Free Trade Agreement between Cambodia and the USA could enable the Kingdom to pay less import duties and to increase export volumes to America.

The Ministry of Labor and Vocational Training has announced a 40% drop in the number of Cambodians who went on strike last year. Whilst the number of strikes reduced by only 2% (336 in 2015), the number of workers participating dropped by 40% to 82,000 workers.

Of the 582 cases of strikes and demonstrations in 2015, the report stated that the ministry had “found successful resolutions” to all but 17. This claim was disputed by labor unions and civil society who accused the ministry and employers of colluding to crack down on union activity.

In its annual report on the application of international labour standards, released on February 5, the ILO also said it had noted reports of the routine arrest and detention of workers and various impediments to registering independent unions, though also noted that the Royal Government disputes these accusations.

The Phnom Penh Post’s review of EuroCham’s Business Confidence Survey 2015 highlighted how 81% of respondents planned to increase investments and expand their operations in the Kingdom despite challenges relating to transparency and a lack of skilled human resources.

Amongst the survey’s other findings, two thirds of respondents reported seeing little or no improvement in the ease of doing business over the past few years amidst the Royal Government’s ongoing reforms and formalization process. Ratana Phurik-Callebaut, executive director of EuroCham, commented that “communication about these efforts and reforms could be improved, while there still is a general gap of perception”.

While a large portion of EuroCham’s respondents cited low labour costs as the main competitive advantage of operating in the Kingdom, 53 per cent of firms said the lack of quality human resources was still an obstacle.

The high proportion of firms intending to expand reflects how, notwithstanding certain obstacles,  Cambodia remains a promising investment destination. “Despite existing challenges, the matter of the fact is that Cambodia has been experiencing booming growth over the past decade,” said Phurik-Callebaut. 

Telecom operator and EuroCham member Smart Axiata Co. Ltd. and the Ministry of Posts and Telecommunications on 17th February signed a memorandum of understanding that will see Smart donate $300,000 to build a facility for students at the National Institute of Post, Telecom & ICT (NIPTICT).

Minister PrakSokhon said the mission of the institute is to train a new generation of workers for Iinformation and communications technology (ICT) sector, which is playing a vital role in developing the country and ensuring integration in the ASEAN Economic Community.

He said the dormitory for students will allow those from rural areas the opportunity to study at the institute and that the donation from Smart Axiata will contribute to the development of a new generation of ICT workers.

Smart Axiata in 2014 contributed to 1.5 percent of Cambodia’s GDP and generated 66,000 direct and indirect jobs, officials said at the ceremony, adding that the company is among the biggest corporate taxpayers, paying about $117 million from 2008 to 2014.

Having already doubled over the past two years Cambodia’s commercial aircraft fleet has double to 16 planes and is expected to continue to grow over the coming year. At present, Cambodia Angkor Air and Siem Reap-based Sky Angkor Airlines operate 6 plans each and new market entrants Bayon Airlines and Bassaka Air operate two each.

Both Bayon and Cambodia Angkor Air are expected to acquire new planes soon. There is a perception that Thailand, Cambodia’s largest international market for aviation, faces too much competition from foreign airlines (4 Thai airlines currently serve routes to Cambodia) and that more can be gained by attracting group bookings for chartered or scheduled point-to-point flights to and from China. Likewise Bassaka Air is planning on cancelling its Phnom Penh – Siem Reap route to focus more on bringing in Chinese gamblers from Macau. 

Internet domain names in Khmer script could become a reality in the next year, according to SengSopheap, president of the National Institute of Posts, Telecommunications and ICT.

Over the past 10 months, the institute’s academics, along with officials from the Ministry of Posts and Telecommunications and technical experts, have been preparing a set of standard linguistic rules for Khmer domain names which have now been submitted to the Los Angeles-based Internet Corporation for Assigned Names and Numbers, which manages global domain name systems.

Khmer-script domain names would improve accessibility of content to Cambodians, particularly those who never had opportunity to learn the Latin script. 

Property and fire insurance premiums surged 35 per cent last year to reach $24.5 million, leading all other segments of the insurance sector in terms of premium growth and accounting for nearly 40 per cent of total premiums. Most of this growth was driving by companies, factories and institutions, particularly amongst foreign investors who are concerned to protect their property.

Forte Insurance said its total property and fire insurance premiums increased 28 per cent in 2015, which it attributes in part to increasing levels of home ownership and the requirement of many banks that require residential units have fire insurance policies before issuing loans.

Cambodia’s total premiums for general insurance increased from $53 million in 2014 to $61.6 million in 2015. Medical insurance had the second largest year-on-year growth at 26 per cent, followed by personal accident insurance at 18.8 per cent and vehicle insurance at 14.5 per cent.

Sok Chenda of the Council for the Development of Cambodia commented on how the 1994 Law on Investment (that provides provisions for the Qualified Investment Project incentives for large investments) does not provide incentives from SMEs and that the Council was reviewing this as part of efforts to integrate into regional production chains. 

Final figures for Cambodia’s microfinance sector for 2015 saw a 40% growth in both lending and deposits. Total issued loans by members of the Cambodian Microfinance Association reached a record $2.9 billion, a 45 per cent year-on-year increase, with loans provided to 2 million borrowers. The average loan was $1,460. These figures exclude Acleda Bank, a former MFI that upgraded to a commercial banking license in 2003, yet remains by far the nation’s largest microlender.

The eight Cambodian MFIs licensed to accept deposits also experienced rapid growth. Their total deposits at the end of 2015 topped $1.3 billion, a 45 per cent increase over the previous year, from 1.4 million depositors.

This high growth entails increased risk – Cambodia’s non-performing loans rate within microfinance remains low at 0.132% but nonetheless more than doubled in 2015. In total, Cambodian MFIs excluding Acleda wrote off $3.9 million in bad loans, compared to $1.4 million in 2014. 

Two major Indian auto manufacturers are considering setting up manufacturing facilities in Cambodia. Tata International is looking at commencing manufacturing operations for light commercial vehicles within the Sihanoukville Special Economic Zone.

Bajaj Auto intends to focus on 2- and 3-wheel vehicles and has started constructing a facility in Stung Meanchey on the outskirts of Phnom Penh. A company representative explained that, whilst they would not be producing engines in Cambodia, smaller parts and seats could be produced in-country. The company is already selling vehicles in Cambodia and expects to be able to drop prices by localizing part of the production process.

The Indian government, announced last year $100m of funding to encourage Indian businesses to set up manufacturing operations in the CLMV region.