Weekly news round-up / Week 39
Several news outlets have reported on a meeting between Prime Minister Hun Sen and Rhona Smith, the U.N.’s new special rapporteur on human rights in Cambodia, on Monday 21 September. The meeting focused on the role of the Special Rapporteur and how she could work with the Cambodian government to address human rights issues in the country.
The Phnom Penh Post focuses on the agreement between the two parties on the role of the Special Rapporteur. A spokesperson for the Prime Minister stated that “Her Excellency [Smith] informed [Hun Sen] that during her mandate she will work with the government to promote the protection of human rights without violating the sovereignty and integrity of the Cambodian government”.
The Cambodia Daily reports on how Hun Sen asked Ms. Smith to focus on racial discrimination, which potentially alludes to the alleged use of racially-charged rhetoric against people of Vietnamese origin by the opposition Cambodia National Rescue Party. Opposition leader Sam Rainsy in turn suggested that this was a tactic by the Prime Minister to distract attention from alleged preventions of freedom of expression.
In Khmer Times, it is reported that Mr. Rainsy has written to Ms. Smith asking her to intervene in the case of Senator Hong Sok Hour, arrested in August for allegedly posting doctored photos relating to the Vietnam border issue.
The special rapporteur is scheduled to report on the country’s human rights situation to the 30th session of the U.N. Human Rights Council later this month.
Garments unions held a secret ballot on 23rd September to determine their formal suggestion for the minimum wage negotiations. 9 of 15 unions voted for a $30 raise to $158, though this figure was publically rejected by at least one major union.
Ath Thorn, president of the Coalition of Cambodian Apparel Workers Democratic Union (C.CAWDU), said pro-government unions had railroaded the committee. He claimed that his union along with at least three others would propose a figure of $178 to the Labor Advisory Committee, despite warnings from a Labor Ministry spokesman that unions would forfeit their voice in the negotiations if unable to provide a single figure.
Civil servants are set to receive a 12% increase in salary and annual bonuses, which is expected to have a positive influence on the levels of non-transparent practices within the administrative system.
A 2015 study by Transparency International found 57 of 100 SMEs in Cambodia to consider corruption to be damaging their business. 48% reported having to pay unofficial fees to register at the Ministry of Commerce, and 40% relating to inspections. The Royal Government disputed these findings but did point to reforms aimed at reducing opportunities for corruption such as publicly posting fee rates and opening online systems for registering businesses and paying fees.
Europe, European Businesses, EuroCham Members
On Monday 21st September the Ministry of Tourism and the European Chamber of Commerce in Cambodia (EuroCham) signed a memorandum of understanding to strengthen cooperation in promoting and developing Cambodia’s tourism sector.
Emmanuel Menanteau, chairman of EuroCham, commented on the significant number of European entrepreneurs and companies already helping to develop the sector, particularly in Siem Reap. Of investments made by EuroCham’s more than 200 members, 30% are within the tourism sector.
EuroCham’s tourism committee will seek to share development ideas and best practices as well as propose regulations for good governance.
Last year, 700,000 European tourists visited the Kingdom, accounting for nearly 16 per cent of all tourist arrivals. Comparative year-on-year figures for European arrivals are down 5% this year, attributed to the financial situation in Europe and the effect of the Bangkok bombing.
Coverage of EuroCham’s breakfast seminar on commercial arbitration on 22nd September. Bun Youdy, a lawyer and executive member of the board of the National Commercial Arbitration Center (NCAC), has stated that the center is “ready for business” and called upon businesses to use its services.
The NCAC was created in 2013 to provide an alternative dispute resolution mechanism outside of the country’s courts. To date, Cambodian businesses engaged in contractual disputes could either take their issues to the courts or seek arbitration in Hong Kong or Singapore. The NCAC has been working on agreeing guidelines for arbitration, a code of ethics and the training of commercially-focused judges. It is now able to issue legally-binding resolutions on commercial disputes where the two parties have a prior agreement to adhere to its judgment.
So far, only one case has been brought to the council. There is a need to raise awareness of its services and also to introduce more clarity into commercial contracts.
The government passed an arbitration law in 2006 recognizing these decisions, and as a signatory to the New York Convention, Cambodia pledges to enforce arbitration cases resolved abroad. Mr. Youdy says that two foreign arbitration awards have been recognized recently in Cambodia’s courts–an indication that the judiciary is living up to its end of the deal.
EuroCham member Archetype Group has become the the first Cambodian representative for The Council of Tall Buildings and Urban Habitat (CTBUH) - a non-profit which aims to provide information on tall buildings and sustainable urban developments. Archetype, working alongside EuroCham’s Real Estate and Construction Committee, will promote CTBUH, the benefits of membership, and the sharing of technical resources through networking events and technical presentations.
Archetype’s past projects in Cambodia include TK Royal Tower, Victoria Angkor, La Residence d’ Angkor and the expansion of the international airport in Siem Reap. On the industrial side, the group has also worked on the Laurelton Diamond factory and the Crown factory.
Michel Cassagnes, architectural design director for Archetype Cambodia, commented on the market potential in Cambodia given the trend towards taller buildings within Asia: “It is worth noting that before 2000, the tallest buildings in the world were located in North America – but that has now shifted to Asia and the Middle East and in 2020, it is predicted that most new tall buildings will be located in Asia,”
Infrastructure, Development and Core Industries
Khmer Times have reported on a dramatic stand-off between employees of World City, a Korean property development company, and an excavator and bulldozer belonging to tycoon and Senator Kok An. On Thursday 17th September employees of World City physically blocked the equipment when it entered land claimed by both parties – the employees held signs saying “Adhere to Cambodian law, not illegal power”. The incident was captured on camera and has generated significant media coverage.
Khmer Times spoke to Economic analyst SreyChanthy who was concerned that the land dispute will exacerbate existing concerns amongst investors about the security of property and land rights in Cambodia - “Disputes like this have strong negative or adverse impacts. Foreign investors may be very reluctant."
Tourism Minister Thong Khon has announced plans to build two vocational training centers in Phnom Penh and Sihanoukville to improve the quality of tourism services on offer in the Kingdom. The project, which is receiving around $14m in funding from AgenceFrancaise de Developpement (AFD), should see construction begin next year.
According to t a project officer at AFD, the schools should be operational for the academic year 2018. The Phnom Penh school will have a capacity of 1,000 students whilst 300 can be trained in Sihanoukville. Skills to be taught include cooking, waiting tables, hospitality management and tour guiding. Scholarships will be available.
Minister Thong Khon projects that the tourism industry in Cambodia will need an additional 400,000 workers by 2020 (approximately double the number of jobs created by the sector in 2013).
Figures released by the Interior Ministry suggest a 4% increase in fatalities relating to road accidents compared to the same period last year. As of 21st September, 1,803 people have died in traffic accidents in Cambodia in 2015.
93% of crashes are caused by human error and fault (speeding, dangerous driving and drink driving). A new traffic law, including significantly tougher penalties for offenders, has already been passed (December 2014) and the Royal Government have previously stated plans to begin enforcement in January 2016.
Press coverage of CAMFEBA’s Annual Minimum Wage Conference held at Raffles on 22nd September. Employers and concerned by low productivity in the garments sector and warn against increasing the minimum wage too quickly and steeply which could cause factories to close down. The value added per worker declined to an estimated $303 per month in 2014. That figure is expected to drop to $295 in 2015, putting more competitive pressure on Cambodia given that its minimum wage is higher than rivals Bangladesh, Myanmar and Vietnam.
Counteracting the productivity argument, PavSina, president of the Collective Union of Movement of Workers (CUWM), said workers were not to blame for low productivity, because factory owners have not invested in new equipment, leaving workers to operate old and outdated machinery.
Mr. Van SouIeng, chairman of the Garment Manufacturers Association of Cambodia (GMAC), questioned the data collection methods of some trade unions.
Employers are expected to put forward their minimum wage suggestion on the September 25, with a final announcement scheduled for October 1.
The Asian Development Bank (ADB) has slightly lowered its forecasts for Cambodia’s GDP growth to 7% in 2015 (down from 7.3% predicted in March) and 7.2% in 2016 (down from 7.5%).
Whilst slower-than-expected growth in both China and India is having a negative effect on ASEAN as a whole, Cambodia should be somewhat insulated from too heavy an impact as most of its exports are focused towards the USA and EU. US dollar appreciation and a drought affecting the agricultural sector are the main causes of the downward revision.
The report, an update to the annual Asian Development Outlook (ADO), noted continued growth in garments, construction, tourism, finance and real estate. However, rates of growth in some sectors are declining - The Kingdom’s garment and footwear exports climbed 11 per cent in the first half of the year, decelerating from 14.5 per cent in the same period in 2014. Likewise, tourist arrivals increased just 4.6 per cent in the first half of the year, down from 5.2 per cent a year earlier.
A recent report by CBRE suggests that Phnom Penh’s retail supply will reach over 455,000 square meters by the end of 2017 – more than double the current supply. The increase is driven by the expected completion of major projects such as Parkson’s Phnom Penh Centre, Lion City, HongKong Land’s Exchange Square and Oxley’ WorldBridge’s The Bridge project.
retail centers have lowered vacancy rates in the first half of the year, from 25% to 22%. Aeon Mall has maintained a 100% occupancy rate. However, retail complexes on the city’s outskirts are said to be struggling with higher vacancy rates at present. There is nonetheless an expectation that things may improve for malls in ‘secondary locations’ - accessibility, larger parking lots and lower land prices as well as the development of large residential complexes nearby.
Following the Aeon model, it is important to focus on attracting the right mix of tenants to draw in foot traffic, not simply those who will pay the highest rents. Aeon’s success is primarily driven by attracting shoppers who spend on food, beverage and entertainment. Cambodians who shop for luxury goods still prefer to make trips abroad to do so.
In the medium-term, the overall occupancy rate for Phnom Penh is likely to decline over the as supply increases. However, the number of retail operators enter the market shows a strong level of confidence. Ross Wheble, country manager for Knight Frank Cambodia commented that “These retailers believe that the disposable income of consumers in Cambodia is increasing at a fast enough rate to sustain the demand for this new retail supply,”.