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Logo of Phnom Penh Post newspaper Phnom Penh Post - Businesses upbeat but are ready to see reforms in action

Businesses upbeat but are ready to see reforms in action

A return to political stability means business confidence in the Cambodian economy remains buoyant, but ongoing government reforms are now needed to give companies greater assurance of future growth prospects, according to the latest business confidence survey from ANZ Royal Bank.

The ANZ Royal Business Confidence Index, a quarterly benchmark that takes its data from businesses surveyed across the Industry, Agriculture and Services sectors, rated overall business confidence in Cambodia at 82 out of 100, down by just 1 point from the previous quarter.

“A basic outcome of the survey is that SMEs are more confident than the larger companies; mainly because they’re expecting a higher growth in profit – double digit growth across the board,” the latest report reads.

“Furthermore, almost everyone has high expectations for an even better sector performance in the next year; those include more investments, high technology, good quality of products, more supply and demand in the market, and a reform of the tax rate regulations,” the report continues.

Agriculture was the most upbeat of the sectors, while services and big business were more wary. Larger corporations were the only area surveyed that did not anticipate growth in new jobs.

Corruption remained the key issue for businesses, while effective taxation, a lack of infrastructure, quality of education and industrial relations were also of concern.

Almost 90 per cent of businesses surveyed said that a return to political stability last July, following a year of political deadlock, had brought with it less strike action, more government accountability and should stimulate greater investment.

“However, some still consider that as a premature triumph and point out that a stable government does not necessarily mean a performing government,” the report states.

Acknowledging the positive outlook from the survey, Hiroshi Suzuki, chief economist at the Business Research Institute for Cambodia, said the private sector still had expectations from the government relating to improved infrastructure, like roads and ports, as well as easier cross-border trade procedures.

“Also, the electricity price in Cambodia is the hot issue,” Suzuki said.

Support for SMEs amid rising competition from regional businesses was also a challenge for the government, Suzuki added.

“The assistance to the human resources development to improve the productivity and the establishment of policy lending to improve the access to finance by SMEs could be the major challenges,” he said.

According to ANZ Royal’s survey, businesses remain uncertain about the impact of ASEAN integration due at the end of the year, with concerns that neighbouring countries will be better prepared to take advantage of rising competition.

But Heng Sokkung, secretary of state of the Ministry of Industry of Handicraft, said deeper regional integration should be viewed as an opportunity for Cambodia’s SMEs.

“Investors no longer view Cambodia as a country with a small market as they did before, but rather a production base in a bigger regional market,” he said.

“Cambodia’s SME sector will be more and more apparent, a mix of supporting industry and clustering industry as the government is working actively to boost the sector,” he went on to say.

Sokkung agreed that there were still challenges for the government to overcome, as highlighted in the survey, but said the industrial policy, to be implemented before the end of the year, would work towards meeting those challenges over the next decade. “We foresee a good future of Cambodia’s SME sector,” he said.

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