Energy, the stock market, telecommunications, rice and investment stability. Looking back at the stand-out business trends of the year.
Rice exports boomed, but problems remain
In 2013, no other sector experienced the same growth rates as Cambodia’s rice industry. Exports nearly doubled from 2012. Starting from a very low base in 2009, with 12,613 tonnes, rice shipments reached 332,009 tonnes in the first 11 months of this year.
The growth was due to a number of factors, including more capital investment in the industry, improved rice milling capacity, as well as broader access to world markets through trade agreements.
The industry exported to 58 countries. Sixty per cent of them were in the European Union, thanks to the Everything but Arms (EBA) duty-free deal. Cambodia’s rice exports to Malaysia, Thailand, China and Gabon are all on an upward curve.
In November, Cambodia’s jasmine variety won the “World’s Best Rice” award for the second year in a row at a conference that took place in Hong Kong.
But with all the fanfare, problems remain. Cambodia wants to ship 1 million tonnes per year by 2015, a daunting task. It faces competition from Myanmar and persistent competition from Vietnam and Thailand.
Most crucially, the EU seems to be scrutinising the origins of Cambodian rice.
A trade magazine this month printed allegations, later denied, that 30 per cent of the product was mixed with Vietnamese rice.
Fearing Cambodia could lose its special relationship with the EU, exporters vowed to sign a Code of Conduct that will supposedly ensure the originality of the rice.
Cambodia, unlike Vietnam and Thailand, benefits from the EBA agreement, which gives developing nations trade preferences to European countries on all products excluding armaments.
Telecommunications industry rides out price rules and Mfone bankrupcty
Cambodia's telecommunications industry took a major hit early in 2013. Mfone officially filed for bankruptcy before the first fortnight was out. The telecom giant folded with reportedly more than $160 million owed to more than 1,000 creditors, including $65 million owed to Chinese telco provider Huawei Technologies, and $3.7 million owed to Norwegian company Eltek Valere.
Mfone’s demise left behind assets, of course, like the thousands of cell phone towers scattered around Phnom Penh and the Cambodian countryside. Their total value was unknown, but they eventually sold to Chinese-owned Khmer Unity Network Communicate Co Ltd for a considerably scaled-down price.
Following the sale, former Mfone employees, who had been protesting for unpaid wages, received a second payment for outstanding salaries. Of the $4.4 million owned, employees have now received 30 per cent. The corporate creditors are still waiting to be paid in full.
In April, the Cambodian government issued its warnings to two of the country’s largest mobile operators for violating the often flouted Prakas 232, which was first signed in 2009 and set minimum call rates within a network of 4.5 cents per minute and cross-network rates of 5.95 cents. The enforcement sparked a backlash in the industry and among consumers, prompting the government to pull back on the controversial restrictions two weeks later.
But the government’s easing was temporary. On November 28, it sent a letter to all mobile operators giving them just seven days to withdraw promotional deals that undercut minimum call rates.
Once again, thousands of young people took to Facebook – and a few protested at Wat Phnom – expressing their anger over the increased call cost. Cambodia’s nine mobile providers agreed to follow and implement government regulations at a meeting on December 13, and decided to form an association to discuss industry issues.
The country’s internet speeds, meanwhile, are on track to vastly improve after Cambodia’s largest service provider Ezecom announced in June plans to help build a 1,425-kilometre submarine cable to Malaysia, which will then plug into the 20,000-kilometre Asia-American Gateway.
Construction on the $80 million cable was slated to begin in October this year and is due to be operational by the end of 2014.
Election year’s troubling impact on business
By far the biggest news story of the year was the national election. But it was also one of the biggest business stories of the year. Mass protests from the newly emboldened opposition party over alleged voter fraud shook up the economy in more ways than one.
Stability has always been Cambodia’s main selling point for foreign investors. On July 28, election night, anger over disenfranchisement at the polls was met with increased security, which in turn caused panicky Phnom Penh residents to withdraw $4 million from Acleda bank ATMs.
As later figures showed, the trend continued on a larger scale. At least $600 million flooded out of Cambodia’s entire banking system during the third quarter of this year, figures the National Bank of Cambodia said were probably a record.
Confidence in the economy sank 50 per cent in the tense post-election period, according to one survey. New business registrations also fell.
While Acleda and the banking system as a whole recovered, protests may have indirectly influenced some major changes to every day business and consumer life.
Responding to promised reforms from the ruling party, the General Department of Customs and Excise stamped out unofficial duties on imports in November. The new Minister of Commerce also cut red tape to make it easier to do business in Cambodia.
Getting rid of corruption is one thing, but the official payments on imports are now higher. The buck will be passed on to the consumer. The prices of basic goods are expected to rise as a result.
The former Minister of Commerce, Cham Prasidh, said this year that protests could destroy the economy. They didn’t, but their influence on changes in policy was difficult to dismiss.
For energy sector, old problems but few fixes
Cambodia's energy sector has seen a handful of improvements in the past 12 months, but reminders of how much work is left cropped up with regularity.
Little was heard about offshore gas extraction, so the news in June that Japan Oil, Gas and Metals National Corporation (JOGMEC) unearthed promising results in a search for fuel sources on Cambodian soil was welcome. JOGMEC’s joint survey with the government on land in Siem Reap and Preah Vihear provinces led to the discovery of “onshore petroleum potential”. Exploration in both provinces is expected to take up to eight more years.
In May, the government drafted a policy on energy efficiency that calls for a 20 per cent reduction in consumption by 2035, resulting in savings of hundreds of millions. But dampening Cambodia’s energy prospects was a report released earlier this month that ranked the Kingdom fifth last out of 124 countries for its so-called Energy Architecture Performance.
Cambodia achieved the lowest scores in access to energy and its dependence on fossil fuels and imported energy.
In June, following months of rolling blackouts that crippled city residents and businesses, Electricite du Cambodge’s (EDC) announced 50 extra megawatts of supply from its newly operational coal-fired plant in Preah Sihanouk. But so far, the plant’s effectiveness in combating the city’s chronic electricity shortages is not definitive.
In October, construction lurched forward on Cambodia’s first oil refinery after a $1.67 billion loan from the Export-Import Bank of China was approved in October. The $2.3 billion project in Preah Sihanouk and Kampot provinces is supposed to produce 5-million tonnes per year. It should be finished by 2016.
The cheerful news belongs to the alternative energy sector. Solar powered tuk-tuks from Australian company Star 8 could be gracing Cambodia’s roads as early as March 2014.
After coming out swinging, Cambodia’s stock market has a difficult year
The Cambodia Securities Exchange stood out in 2013 as much for what it didn’t achieve as for what it did. After the first company went public on the exchange to widespread praise in 2012, the applause didn’t last.
That inaugural company, the state-owned Phnom Penh Water Supply Authority (PPWSA), is still the only publicly traded stock, while vows to go public from other firms have been sheepish and noncommittal.
For a young bourse, this is not unusual, but the poor performance of the sole stock underlined its lack of peers.
PPWSA was traded at record-low prices in 2013. From July 17 to the 23 – not counting the weekend in between when the bourse was closed, not a single share was bought or sold, the longest drought since the company first went live in April last year.
In 2012, PPWSA issued 13 million shares, which closed at 9,300 riel on the first day. In September of this year, prices dipped as low as 4,840 riel.
Investors may have lost confidence after seeing no public offerings. A Taiwanese-owned garment factory submitted a letter of intent in 2012. Letters from the Phnom Penh Special Economic Zone and companies that the Securities Exchange Commission of Cambodia would not disclose have also been submitted. Plans to list are plentiful.
Actual listings are nonexistent.
The exchange is moving its headquarters next year. A new location may bring new tidings. The more optimistic want to give the CSX a shot. Han Kyung Tae, the managing director of Tong Yang Securities (Cambodia), reminded everyone earlier this year that the bourse is the youngest in the world.