Weekly news round-up / week 35

Europe, European Businesses, EuroCham Members

A survey by the EU-ASEAN Business Council has reported a positive outlook for European businesses in Cambodia upon the inauguration of the ASEAN Economic Community. About 63% of companies in Cambodia expected to see profit increases this year and in future years.
Andre de Jong, managing director for German firm Bosch in Cambodia, Laos and Myanmar, commented that countries like Cambodia will benefit from AEC as import-export hurdles will be removed, making them more cost-effective.
Blaise Kilian, advocacy manager for European Chamber of Commerce in Cambodia, said that while there was positive business sentiment in the Kingdom, a lack of clarity on the AEC’s implementation made it hard for firms to plan for the future.
“The limited connectivity of the Kingdom to the regional economy as compared with the other countries would explain the fact that only 55 per cent of Cambodian respondents plan to expand their operations in ASEAN,” he said.

Infrastructure, Development and Core Industries

Speaking at Textile and Garment Industry Exhibition, a senior official from the Ministry of Industry and Handicraft has called on garments manufacturers to invest in modern technology in order to increase productivity. Claims that such factories have seen their existing technologies become worse and worse, and need to make investments in order to save time and reduce costs. With minimum wage negotiations ongoing, increased levels of automation can increase productivity and alleviate the burden of higher wages. Investment in machinery would not necessarily result in job losses, just make each employee more productive.

Commentary on the possible effects of China’s market crashes on the Cambodian economy. Depreciation of the Chinese yuan and GDP slowdown in China may result in reduced Chinese FDI inflow into Cambodia and decreasing levels of Chinese tourism. Also indirect effects through the negative impact that events in China are likely to have on regional neighbors and the USA (important export market).
As a highly dollarized economy, the Cambodian currency is appreciating vis-à-vis the yuan and regional neighbor’s currencies, which could have an impact on investment decisions.
Cambodia is exposed to large Chinese infrastructure investments, like hydropower dams and roadways, while at the same time private sector investments from China are in several key sectors, including agriculture, real estate and garments. This could limit the effect of the downturn – large, long-term infrastructure investments are less vulnerable to short-term fluctuations. 

Grade 12 national exams were completed on Tuesday 25th August amidst sweeping reforms to combat cheating by Ministry of Education and the Anti-Corruption Unit. Minister of Education Hang Chuon Naron commented that the reforms had brought about positive results – only a small number of cheat sheets discovered, no mobile phones in test rooms, only one or two calculators.
Whilst cheating was down, the number of students skipping the test increased, as were reports of fainting. Early indicators suggest significant improvement on the awful results of last year (74% failed). 

Border police in Tbong Khmum’s Memot district near the Cambodian-Vietnamese border seized more than 900 cases of top-shelf booze on Sunday after a truck tried to smuggle in a large chunk without paying tax, police confirmed yesterday.  Included high-end brands such as Macallan Scotch. Drivers were handed over to officials at the customs office. 
Such incidents are an important indicator of the Royal Government’s ongoing efforts to ensure greater levels of enforcement of existing laws.

On Wednesday 26th August the government introduced the Cambodia Industrial Development Policy 2015-2025, which aims to expand the Kingdom’s narrow industrial base beyond garments and rice. 
Policy aims to increase industrial sector’s contribution to GDP to 30% by 2025, up from 24.1% in 2013. It will increase agricultural processing in Cambodia and aims to formally register the small and medium enterprises sector, while addressing high electricity costs and logistical and skilled labor shortages.
Under the policy, Council for the Development of Cambodia (CDC) is being restructured and will be the chief instrument in implementing the policy. Will work as a coordinator amongst the other relevant ministries. Specific tasks given to the CDC for completion by 2018: reducing electricity tariffs, developing a plan for transportation and logistics, strengthening labor and skills training, and developing Sihanoukville to become a multi-purpose special economic zone.
There are upcoming laws to be submitted by end of the year, including Law on Special Economic Zones and a new Law on Investment.
David Van of Bower Group commented on the importance not just of having a policy but of implementation, pointing to the failed 2010 Rice Policy.

At a tax seminar organized by tax advisory firm VDB Loi, Cambodia’s small and medium enterprises were urged to formalize their accounts and register with the Tax Department in order to avoid the risk of unpredictable tax collection in the future.
Up to 80% of businesses in Cambodia are not currently registered with the General Department of Taxation. Companies that aren’t registered are at risk of taxes being imposed by GDT at any time, potentially including retrospective taxes with interest and penalties.
Transparency International urged such businesses to understand the risks associated with corruption and to comply with the formal taxation process rather than make facilitation payments. Tax enforcement in the Kingdom is believed to be improving.

Thematic Pieces

A feature piece in the Guardian looking at a wave of ‘restrictive laws’ being passed against NGOs across various countries, featuring an image of Cambodian protesters against LANGO.
Over the past three years, more than 60 countries have passed or drafted laws that curtail the activity of non-governmental and civil society organizations. Ninety-six countries have taken steps to inhibit NGOs from operating at full capacity. 
Introduction includes descriptions of laws recently passed by India, China, Russia, Egypt and Uganda alongside Cambodia. For the Kingdom, article describes “A new law requires registration and annual reports to be filed with the government. NGOs can be disbanded if their activities “jeopardize peace, stability and public order or harm the national security, national unity, culture and traditions of Cambodia

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