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$50M ADB loan aims to boost economic diversity

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A general view shows building and property developments in Phnom Penh. Hong Menea

$50M ADB loan aims to boost economic diversity

The Asian Development Bank (ADB) on December 6 announced that it has greenlit a $50 million policy-based loan under Subprogram 1 of its Trade and Competitiveness Program to support government efforts to diversify the economy, better enable local businesses to compete globally, and boost Covid-19 recovery.

“The programme will support Cambodia’s post-Covid-19 economic recovery by supporting government reforms to enhance the investment and business environment; foster the growth of micro-, small- and medium-sized enterprises [MSME]; and improve trade policy and trade facilitation,” the Metro Manila-based multilateral lender said in a statement.

“Trade facilitation” is the general term for the overall framework of measures aimed at removing legal and technical obstacles across the full spectrum of border procedures to help make the international movement of imports and exports cheaper, easier, faster and more efficient and predictable, while safeguarding safety, security, health and other legitimate regulatory goals.

The statement said ADB’s Trade and Competitiveness Program “will help improve the overall business climate for both domestic and foreign firms.

“Under the first subprogramme, the government has enacted a new investment law to codify legal protections for investors, including those investing in special economic zones [SEZ], and upgraded an online business portal to enable the timely issuance of specialised digital business licences,” it added.

An SEZ is a specially-defined region within a jurisdiction’s borders that is subject to different – typically more liberal – legal, administrative and economic regulations than elsewhere in the same jurisdiction, including unique tax, logistical or one-stop service arrangements designed to attract business and investment.

ADB senior economist Sion L Morton said Covid “severely impacted key sectors of the Cambodian economy like garment, footwear and textile manufacturing, as well as tourism and construction.

“The reforms under the programme will help Cambodia’s post-pandemic recovery prospects by paving the way for businesses to grow and migrate to higher value-added segments and adapt to the changing trade landscape,” he said.

Lim Aun, CEO of a state-owned Small and Medium Enterprise Bank of Cambodia Plc (SME Bank) told The Post on December 6 that numerous development partners and government institutions are supporting the Kingdom’s smaller businesses through regulatory and financial means.

Highlighting the important roles of MSMEs in the economy, Aun sees ADB’s $50 million loan as “another boost for the competitiveness of Cambodia’s MSMEs that will allow them to capture greater market share locally and abroad.

“It is paramount that all relevant stakeholders increase financing for [MSMEs] so they can produce quality products to meet the demands,” he said.

In Cambodia, MSMEs represent 99.8 per cent of businesses, 70 per cent of employment, and contribute 58 per cent to gross domestic product (GDP), according to government-managed website KhmerSME.

Aun earlier reported that, as of October 31, SME Bank had disbursed “some $418 million” in loans to “at least 3,185” small- and medium-sized enterprises (SME), to keep them from going under during the height of the Covid-19 crisis, and subsequently to help them reopen and expand post-pandemic.

The statement said ADB’s Trade and Competitiveness Program “supports the development and diversification of MSMEs, improving their access to finance, and creating new markets for them.

“This includes simplifying the legal definition of MSMEs and rolling out a government-funded assistance package to provide grants and technical support to MSMEs in priority industries with high female participation.

“The programme will also help Cambodia improve the implementation of regional trade agreements and strengthen coordination on trade facilitation to provide more opportunities for Cambodian businesses to export their goods.

“As part of these reforms under Subprogram 1, the government has set up the National Committee on Trade Facilitation and approved the National Road Map on Trade Facilitation,” ADB added.

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