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2019 Business Review

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The five-star Great Duke Phnom Penh hotel closed its doors on Tuesday after 23 years. Opened in 1996 as the InterContinental, the hotel played a key role in welcoming regional leaders to Cambodia. Heng Chivoan

2019 Business Review

January

Cambodia's largest microfinance institution Prasac raised its registered capital from $110 million to $168 million, an amount five times larger than the National Bank of Cambodia’s (NBC) requirement of at least $30 million.

Construction on a $150 million 45-storey tower began thanks to a joint venture between the Royal Field Development Company Limited, a subsidiary of the local Chip Mong Group, and the US’ Marriott International Inc. The multi-purpose tower, located on Russian Boulevard next to the 7 Makara flyover, is expected to open in 2022

The Cambodian rice sector lost its duty-free export status to the EU after the European bloc decided to impose tariffs on rice from Cambodia and Myanmar to curb a surge in such imports. The decision will be in effect for three years, until the tariff rate is steadily reduced, forcing the sector to pay around $53 million in the first year.

February

Phnom Penh’s NagaWorld casino announced a 53 per cent net profit increase at $390.6 million, a sum which was almost equal to the combined net profit of all Cambodian commercial banks in 2018. Its annual financial report showed a 53 per cent increase in gross gaming revenue to $1.4 billion and net profit jumped 53 per cent to $390.6 million.

The government announced it would form a committee in preparation for the construction of a new international airport in Kandal province, a step forward in the project following the government’s approval of Cambodia Airport Investment Co Ltd’s proposal in December 2017. The committee consists of 21 members, with Kandal provincial governor Mao Phirun the sole permanent member.

March

Minister of Economy and Finance Aun Pornmoniroth said Cambodia’s digital economy was gradually taking shape and forging headway in digital payments, online entertainment and e-commerce. However, he warned that the digital economy remained at a nascent stage and would need at least 10 years to burgeon into a technology-driven economy.

Cambodia’s tobacco industry reported a decrease in cultivation, despite the Kingdom being granted duty-free and quota-free exports of tobacco to Vietnam, according to the Ministry of Agriculture, Forestry and Fisheries data.

April

The NBC announced it will be one of the first central banks to use blockchain technology in its national payment systems for use by consumers and commercial banks, according to a World Economic Forum (WEF) report. It said the Cambodian central bank hoped to implement blockchain technology in the second half of 2019 as an experiment in supporting financial inclusion and greater banking efficiency.

Cambodia was granted permission to export yellow bananas directly to China, without relying on Vietnam as an intermediary, a Ministry of Agriculture, Forestry and Fisheries announcement said. However, authorities said exporters must comply with certain requirements including – proper packaging in English and Chinese, farm registration codes, and sanitary and phytosanitary certificates.

May

Research by Moody’s Investors Service revealed Cambodia, which had a stable B2 credit rating, was among the countries with the greatest potential for reaping economic benefits from China’s Belt and Road Initiative.

The World Bank reported that Cambodian exports to the EU were expected to decline $513-$654 million per annum should the country’s tariff-free access be withdrawn. The World Bank’s assessment – made in the Cambodia Economic Update report – was based on 2018 data on the value of Cambodia’s three key EU exports – clothing, footwear and milled rice.

Microfinance firm LOLC made its second corporate bond issue after it was completely purchased by institutional investors when the subscription period ended on April 26 the previous year. LOLC issued two types of bonds – FX-indexed bonds and fixed-coupon bonds – and successfully raised 80 billion riel ($20 million) for the growth of its lending business.

June

Cambodia’s state-run electricity supplier Electricite du Cambodge signed an agreement with two Chinese firms to build a $380 million, 440MW, oil and liquefied natural gas power plant in Koh Reah commune in Kandal province’s Lvea Em district. The power stations are set to open later this year.

The NBC selected three of the Kingdom’s banks – Acleda Bank, Foreign Trade Bank of Cambodia and Cambodian Commercial Bank Ltd – to implement a Cambodian-Thai QR code-based payment system.

The arrival of a Citylink flight with 67 passengers on board heralded the beginning of direct flights between Cambodia and Indonesia, with expectations of the Kingdom attracting a greater number of tourists from the Asean nation.

July

Guide Direk, the Kingdom’s first tour guide booking app, was launched by local travel agency Matong Co Ltd to assist tour guides in finding more clients. CEO Khim Maland said during its launch that it would allow both domestic and international tourists to book guided tours.

Minister of Tourism Thong Khon blamed “zero-dollar” tour operators for the decrease in foreign tourists to Angkor Archaeological Park in the first half of 2019 and called for action against them. “Zero-dollar tour operators … give tours without taking a profit, but they bring guests to places charging exorbitant prices for souvenirs, food and accommodation, and then take commission,” said Khon.

The government announced plans to develop Bokor National Park into a futuristic tourism-based city which would also serve as a historical preservation site. A sub-decree said the Bokor Town Development would be connected to the Kingdom’s southern coastal tourism corridor to develop the area into a smart city with commercial and residential zones.

August

Telecom firm Metfone in August confirmed that it planned to introduce Huawei’s 5G network technology to the Kingdom, despite its parent firm – Viettel Group – refusing to work with the Chinese tech powerhouse in Vietnam.

The NBC ordered financial institutions across the Kingdom to increase the share of local currency in their loan portfolios to at least 10 per cent by the end of 2019.

Minister of Commerce Pan Sorasak said the Cambodian government was focused on the growth of Industry 4.0 and developing competitiveness strategies to withstand the trends of global protectionism and geopolitical polarisation. “Cambodia’s trade policy must be flexible according to time and context for it to develop and seize the best opportunities, along with efforts to open up to new markets,” he said.

An International Labour Organisation research bulletin said Cambodia’s footwear sector would provide more opportunities for investment and production than the garment sector due to significant growth over the previous five years.

September

The NBC called on financial institutions to put policies in place to promote green finance and friendly investments after the Swiss-based Bank for International Settlements on the same day launched an open-ended fund for central bank investments in green bonds.

The Securities and Exchange Commission of Cambodia (SECC) and Thailand’s Securities and Exchange Commission (SEC Thailand) signed an MoU to cooperate and exchange information on cross-border equity offerings and the issuing of depository receipts with SEC Thailand.

General Department of Taxation (GDT) director-general Kong Vibol said Chinese investment was contributing greatly to the Kingdom’s tax revenues and called on Chinese companies to properly fulfil their tax obligations.

October

Cambodia campaigned to boost its luxury fragrant rice exports to China, the world’s largest market. Cambodia Rice Federation (CRF) vice-president Chan Sokheang told The Post that the CRF planned to achieve the 400,000 tonnes per annum quota set for exports.

Cambodia was reported to be the number one bicycle exporter to the European market in the first half of 2019, despite a slight bump in the road for the exports, a bike-eu.com report said. The cycling industry specialist website said the Kingdom’s bike exports to the European market backpedalled four per cent to 835,000 units, the first decline in many years.

The NBC held a soft launch of its Retail Pay System which aimed to boost interbank market activity and inclusion in the Kingdom. The system was announced in cooperation with Acleda Bank Plc, Cambodia Post Bank Plc, Vattanac Bank, Canadia Bank Plc, Kookmin Bank Cambodia Plc, Phnom Penh Commercial Bank and Prasac Microfinance Institution Ltd.

A World Bank report said that Cambodia’s economy faced challenges including credit growth in the construction and real estate sectors, rising indebtedness and the possible withdrawal of the EU’s Everything But Arms (EBA) scheme. It further warned that total outstanding loans from banks and microfinance institutions in Cambodia exceeded 100 per cent of GDP, as the potential withdrawal of EBA and a sharp slowdown in the Chinese economy looked set to dampen growth prospects.

November

The government announced plans to increase the revenue raised from taxation and customs and excise by more than 20 per cent this year. The 2020 national budget law targets a 28.1 per cent increase in revenue collection from customs and excise, reaching around $2.87 billion, or 17.72 per cent of GDP.

Cambodia and South Korea signed a joint feasibility study agreement on a potential free trade agreement to expand bilateral investment volume between the two countries.

Longmate Agriculture Co Ltd director Hun Lak said his firm was eying Japanese, South Korean and Middle Eastern export markets after an increase in exports since authorities announced that the fruit could be exported directly to China.

KrisEnergy (Apsara) Co Ltd signed a conditional letter of award with PT Profab for the supply of a minimum facilities wellhead “mini-platform” for the Apsara oilfield – Cambodia’s maiden oil development. The move was a key step towards KrisEnergy’s plans to extract its first drop of oil from Block A by mid-2020.

December

The five-star Great Duke Phnom Penh hotel closed its doors on Tuesday after 23 years, with owner Regency Company Limited citing “economic reasons”. Opened in 1996 as the InterContinental, the hotel played a key role in welcoming regional leaders to Cambodia in 2002, when the Kingdom hosted the Asean summit. It was renamed The Great Duke in early 2018, with Regency Company Limited as owner.

The General Department of Taxation released a statement aiming to quash fears that the Kingdom’s tax reforms would adversely affect corporate taxpayers, saying the moves were meant to “strengthen tax collection transparently and equitably”. The statement came after a newspaper article headlined “Will business leave Cambodia due to reforms that raise taxes” drew attention.

Japan’s Aeon Mall Co announced it would spend more than $200 million building Aeon Mall 3 in the capital’s Meanchey district – making it the firm’s third Cambodian shopping mall. The mall is to cover 174,000sqm in Ing City, some 7km from the centre of Phnom Penh.

Two of Cambodia’s leading commercial banks – locally owned Acleda Bank Plc and South Korean-owned Phnom Penh Commercial Bank Plc– were granted listing eligibility from the Cambodia Securities Exchange. This paved the way for the banks to move forward with plans to be publicly traded.

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