Weekly news round-up / Week 37

Political (Cambodia-Specific)

The Interior Ministry have announced plans to create a new ‘anti-cybercrime’ department that will address hacking crimes but will also work with other government departments and private service providers to “gather and analyse” telecommunications data to discover online crime and national security threats. 
Human rights group and the opposition have expressed concern that this new department could be used to stifle dissent online. Comes after recent high-profile arrests relating to Facebook postings, such as that of opposition senator Hong Sok Hour who was accused of posting a fake version of a border treaty between Cambodia and Vietnam, and a university student who had called for a “colour revolution”. A ‘Cyber War Team’ already exists to monitor online activity, though the new department would have full authority to investigate and compel cooperation.

All English-language newspapers in Cambodia have been covering the visit of Australian Immigration Minister Peter Dutton following last week’s media reports that the ‘refugee deal’ between Cambodia and Australia was collapsing. Mr. Dutton held a private meeting with Hun Sen and spokesmen for both parties stressed that the deal was still on despite ongoing challenges. An adviser to Hun Sen stated that the process had been stalled by challenges in integrating the initial four refugees. 
Under the deal signed last year, refugees are not supposed to leave their temporary accommodations in Phnom Penh until they have been trained to speak Khmer to a functional level. There are no specifications on whether the first group needs to be integrated before more can arrive. Refugee rights groups with contacts on Nauru say few refugees have arrived in Cambodia because none of them wants to come.

Europe, European Businesses, EuroCham Members

Phnom Penh Post reporting on the year’s first Public-Private Sector Working Group on Tourism, for which EuroCham serves as Secretariat.
The issue of unlicensed tourism businesses featured on the agenda, with co-chair of the PPSWG Luu Meng stating that the group was seeking to work with the government on finding ways to formalize the industry. Tourism Minister Thong Khon reported that only 40% of tourism-related businesses in the Kingdom are currently registered. Is a concern as without licenses these businesses cannot be regulated, and leave no recourse for tourists who encounter problems with them. The Government is introducing an online registration process.
Dedicated taskforces will also be set up to tackled other key issues including waste management, fire safety, noise pollution, physical security, and better communicating the schedule for upcoming fairs and events.

Infrastructure, Development and Core Industries

Khmer Times Q+A with Sim Sisavuthara of Yuanta Securities, who served as underwriter for Phnom Penh Water Supply Authority’s public offering and currently working on the IPO for Phnom Penh Autonomous Port.
Expects Phnom Penh Special Economic Zone, Phnom Penh Autonomous Port, and Taiwanese garments manufacturer Ty Fashion to list by end of the year. Recognizes the impact of tax incentives for those who list, including a reduction in corporate tax (from 20% to 10% for three years and delayed payment of prepayment of tax on profit).
Believes that access to the stock market is important for long-term growth of Cambodian companies, who will reach a point where they have little collateral left to offer to banks and need to seek alternative source of funding. Sees potential for food and beverage companies and those within the banking industry to list in future.

The International Business Chamber of Cambodia (IBC) on Friday 4th September signed a MoU with the UK’s Royal Institute of Chartered Surveyors (RICS), which will work with the IBS to train developers and builders to adhere to international standards on quality and safety within the property market.
Multiple companies have criticized Cambodia's property sector for having no local safety standards to adhere to – some developers voluntarily adhere to standards from other countries, whilst others construct without reference to any such standards. Whilst large construction projects tend to be well-developed, on smaller projects developers have been known to cut corners on safety in pursuit of greater margins.
The government has been asked by some from the private sector to quickly introduce a building and fire safety code so as not to scare away international investors. Existing law does require buildings to adhere to basic water and sanitation requirements but other areas such as fire safety and disabled access are not mentioned.
In July, the Ministry of Land Management, Urban Planning and Construction signed a deal with the European Chamber of Commerce to help draft development standards to increase investment in the Kingdom. The ministry intends to have a national code of standards in place by 2018.

Khmer Times piece reporting on the difficulties SMEs face in accessing financing. The country’s 36 commercial banks tend to compete for upper-echelon clients, few focus on SMEs.  Lending by MFIs is surging ($2.4bn in first half of 2015) but they charge higher interest rates (18-30% compared to 12.6% on average from the banks).
An ADB report states that SMEs make up 96% of all companies in Cambodia, employing 62% of the population but producing only 42% of economic output. Need for greater access to financing in order to innovate and integrate into global supply chains.
Borrowers’ lack of collateral and their informal business planning contributes to the lack of access. Banks are wary of relying upon the courts in case of default so undertake strict vetting processes before lending. Grant Knuckey, CEO of ANZ Royal Bank, commented that “SME borrowers will have to stop relying on finite property security to underpin access to finance, and move to reliance on sound business plans and robust financial reporting.”

It has been revealed that a fire at a Phnom Penh nightclub on the night of Monday 7th that killed five people was actually the second fatal fire the club had experienced in as many years. Electrical malfunction is believed to be to blame and has been identified by one fire safety expert as the leading cause of blazes in the Kingdom.
Faulty wiring is a significant problem – two weeks prior there were two separate fires at a Phnom Penh garment factory and local bank branch attributed to the issue. Many clubs and businesses operating in the Kingdom do not adhere to any set standards. Whilst fire legislation was passed two years ago, an expert commented that it is not particularly effective without more detailed regulations and, furthermore, that implementation is limited.

Minister of Health Mam Bunheng has met with officials from health departments throughout the country to urge a crackdown on illegal health services and counterfeit medicines, citing almost 4,000 unlicensed health care providers within the Kingdom.
Bunheng called on officials to commit themselves to a February strategy, put forth by the ministries of Health and Interior, to curb such illegal practices and the use of fake medicines after the surprise HIV outbreak in Battambang province’s Roka commune.

Post Property profile of the office market in Phnom Penh, where occupancy rates sat at 81.3% at the midpoint of 2015 according to Knight Frank.
Occupancy rates in prime office space are lower - prime vacancy rates from the first half of this year and the last six months of 2014 declined only slightly from 47.2 per cent to 44.2 per cent. Vattanac Tower, the country’s only existing Grade A office building, is 25% full. There are less international companies entering the market than in the previous five years and most companies are opting for Grade B or Grade C office space (average 85% occupancy).
Office space will surge by 64 per cent by 2018 when several other projects come online—Exchange Square, Olympia City, GT Tower, City Tower Asia, Maybank’s group headquarters and the expansion of ACLEDA’s headquarters. Grade A will account for 60 per cent of future supply.
At present, the rental rate for Grade A office space is around $28 or more per square meter per month, whilst Grade B sits at $20-25 and Grade C at $9-18. The coming increase in supply is expected to increase rental competition and push prices down.

A program run by Agence Francaise de Developpement to provide credit to help consumers purchase home solar panels has secured the participation of  three microfinance organizations (LOLC Micro Credit, Vision Fund and Credit Mutuel Kampuchea) and four solar companies (Kamworks, Lincoln Electric System, NRG Home Solar and Entrepreneurs du Monde).
Aimed at off-grid homes, the program will enable customers to obtain loans with 2% monthly interest to buy certified systems.A typical 100-watt solar system can cost anywhere between $250 and $650, with quality devices occupying the top end of that range. This includes the panels, wiring, battery and controller. Though panels last for over two decades, batteries must be replaced every several years, costing between $130 and $200.

Suy Sem, the Minister of Mines and Energy, whilst speaking at the Cambuild exhibition on Koh Pich, has urged construction firms to explore renewable energy options like solar power. Sem particularly encouraged the use of green energy in rural areas where the electricity grid has not yet reached.
Arjen Luxwolda, managing director of Kamworks, a leading solar technology company in Cambodia, commented: “The rural market for solar has really exploded in the recent years because people who are off grid and do not have an alternative to use are switching to solar,” he said.
“I think the amount of people who buy solar powered products just to be green is very small, so it has to make economical sense in order for people to switch to solar.”


Annual Platinum Partners

Annual Gold Partners

Founding Chambers & National Chapters