New investments from local and foreign sources continue to pour into Cambodia despite the Covid-19 pandemic remaining a lingering threat to regional and global economies.
This comes as the Kingdom’s gross domestic product (GDP) is expected to contract between one and 2.9 per cent this year, as its main growth drivers – tourism, manufacturing exports and construction – take a massive financial hit due to Covid-19, the World Bank said in its latest economic update.
In just the first week of this month, the Council for the Development of Cambodia (CDC) approved three new investment projects worth more than $14.4 million. They are expected to generate 625 jobs.
Phoenix Artist Materials (Cambodia) Co Ltd’s $7.3 million picture frame and paint factory is expected to offer 230 jobs, while Smart Silver Star Co Ltd’s $5.1 million light bulb and lamp parts manufacturing plant will provide 180 jobs, said the CDC.
Both are located in the Manhattan (Svay Rieng) Special Economic Zone in Bavet town’s Bavet commune, in Svay Rieng province.
Chang Zhou Hua Mei Da Textiles (Cambodia) Co Ltd’s $2 million textile and facemask manufacturing plant is located in Sihanoukville Special Economic Zone (SSEZ) – the Kingdom’s largest industrial park – in Bit Traing commune’s Pou Thoeung village in the province’s Prey Nop district.
The CDC expects the facility to create 215 new jobs.
Cambodia Chamber of Commerce vice-president Lim Heng told The Post on Sunday that despite the ongoing pandemic’s grip on the economy, the government firmly adheres to its policy of investment openness, which is key to drawing foreign funds.
“Though we are actively engaged in the battle against the spread of the novel coronavirus, we have noted that the government has been working to enact internal reforms and strengthen the investment attractiveness, while our country continues to receive trade preferences granted by developed countries.
“We are on the brink of a free trade agreement with China and South Korea, which will open large markets to attract investors to our country.
“At the same time, the government has been launching some proactive and responsive measures [against Covid-19] to curb economic risk,” Heng said.
He said the reopening of the European and US markets will greatly contribute to the Kingdom’s economic recovery.
On May 25, the government introduced the fourth round of stimulus measures aimed at ensuring economic and social stability during the Covid-19 outbreak.
It will ease the practice of withholding tax for local and foreign lenders. For new loans, it has decided to reduce the withholding tax rate on banks and microfinance institutions from external and domestic sources to five per cent (borrowed from countries with agreements on Double Tax Avoidance (DTA), and the prevention of fiscal evasion and borrowing from non-DTA countries) for this year.
The government will also lower withholding tax rates on banks and microfinance institutions from both external and domestic sources to 10 per cent (both loans from DTAs and non-existing countries) for next year and adjust the withholding tax rates on banks and microfinance institutions from both external and domestic sources to normal levels in 2022.
For working capital finance sources, the Ministry of Economy and Finance will set up a “Credit Guarantee Fund” with a budget of $200 million.
The fund can secure loans using market principles to help alleviate cash flow and working capital bottlenecks of businesses in all sectors, creating at least $2 billion.
The ministry will also allocate $300 million in additional financing to act as a catalyst to boost growth in key sectors during the crisis and thereafter.
The government has decided to expand the coverage and budget volume for the “Cash for Work” programme this year to $100 million to absorb unemployed workers from factories and workers returning home from abroad.
This is expected to be achieved through local micro infrastructure and construction projects aimed at promoting agriculture and sustaining the economy.