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Q3 business and finance news snapshot

Traffic passes in front of National Bank of Cambodia headquarters in Phnom Penh.
Traffic passes in front of National Bank of Cambodia headquarters in Phnom Penh. Pha Lina

Q3 business and finance news snapshot

The Kingdom’s banking and finance sector has been a flurry of activity of late, with inflows of foreign capital into the Kingdom’s banking sector nearly doubling during the first half of 2017.

Meanwhile, the prime ministers of Cambodia and Thailand signed an agreement that protects each country’s nationals from dual taxation.

Other leading stories in the finance sector include a decision by Cambodia’s tax authority to temporarily halt a controversial VAT decree in the wake of a private sector backlash.

June 28
Cambodian tax officials met with their counterparts in Hong Kong as part of the first round of discussions for drafting a double taxation agreement (DTA) aimed at preventing dual taxation and fiscal evasion, the General Department of Taxation (GDT) said in a press release.

The discussions between GDT and Hong Kong Inland Revenue Department officials were held over five days from June 19 to 23, according to the release.

June 29
The strong inflow of Japanese investment is expected to continue on the back of both large-scale commercial projects and the consumer habits of Japanese expatriates residing and working in Cambodia, according to investment officials.

Japanese investment into the Kingdom over the last 25 years through May 2017 totaled $1.5 billion, the Council for Development of Cambodia (CDC) said after the closing of the 15th Cambodia-Japan Public Private Sector Meeting, which drew nearly 70 Japanese investors to Phnom Penh. The investment has covered some 125 registered projects to date, as well as 200 Japanese restaurants, the CDC said in a press release.

July 7
Just one day after the Kingdom’s microfinance organizations mutinied and said they would not implement a government directive requiring all financial institutions to implement a 10 percent VAT on fees for financial services, the tax department announced it would back down and temporarily suspend the controversial decree until it could conduct a study and address private sector concerns.

The General Department of Taxation (GDT) said in a releasethat it was suspending the implementation of a May 25 prakas(financial regulation) “until further notice”. The prakas was intended to define more clearly the government’s laws on non-taxable supplies concerning primary financial services.

“[The] GDT will cooperate with the private sector to examine and clearly study the definition of the phrase ‘primary financial services’ and the implementation of [the] VAT,” the announcement said, adding that the government was doing this to provide more consistency with regard to the law.

The General Department of Taxation office in Phnom Penh.
The General Department of Taxation office in Phnom Penh. Pha Lina

July 10
The regulatory body for Cambodia’s insurance industry signed a memorandum of understanding with its Thai counterpart to boost the sector’s operations, exchange technical assistance and encourage cross-border information-sharing to strengthen each other’s regulatory capabilities, according to a release by the Ministry of Economy and Finance (MEF).

The head of the Financial Industry Department at MEF signed the memorandum with representatives of Thailand’s Office of Insurance Commission. It is the first time Cambodia has signed an insurance industry protocol with a foreign regulatory body and brings the country closer to ASEAN standards for promoting a regional insurance industry framework, the release added.

July 19
The dearth of investment options in the local capital market has forced insurers in Cambodia to rely on underwriting for profits instead of investment returns, but industry leaders say if the government can provide more options to invest in securities it could attract substantial sums of as-yet-untapped insurance investment.

“The government has to support the development of a diverse and significant securities market in Cambodia to provide investment options that are suitable for insurance companies seeking to diversify the investment of their capital and reserves,” said Huy Vatharo, chairman of the Insurance Association of Cambodia (IAC).

Cambodia’s insurance sector has grown quickly since the establishment of the first state-run insurance company in 1990. Seven local and international insurers now provide general insurance coverage, while life insurance first arrived in 2012 and is offered by four insurers.

In developed countries, insurers are a dominant institutional player in the financial market, investing huge sums of capital in stocks and bonds. In Cambodia, however, they face limited opportunities for investment given the country’s diminutive capital market, with just five listed companies and no bond issues.

August 2
Inflows of foreign capital into the Kingdom’s banking sector almost doubled during the first and second quarters of 2017 as two heavyweight players entered the local market and lending institutions responded to revised minimum capital requirements, a central bank official said.

Chea Serey, director general of the National Bank of Cambodia (NBC), said that foreign direct investment (FDI) into the banking sector amounted to $439 million during the first six months of the year, an 89 percent increase on the same period of 2016.

“The establishment of the two new banks during this first semester contributed to this jump,” she said, referring to the launch of local operations by France’s BRED Bank and Japan’s Mizuho Bank.

In addition, she said, international banks and investors injected more capital into Cambodia-based lending institutions to bring them into line with the central bank’s revised minimum capital requirements.

August 8
Cambodia’s banking sector enjoyed another strong performance last year as the Kingdom’s economy continued to expand, with banking credit moderating, deposits increasing and financial institutions remaining healthy as they further integrate into the global economy, the central bank said in its annual report.

The National Bank of Cambodia report said that banking sector assets grew by 17.8 percent to $27.8 billion in 2016. Private sector financial institutions had an outstanding loan portfolio of $17.6 billion, an 18.3 percent credit growth increase compared to 2015, while deposits grew by 20.7 percent to reach $15.1 billion.

August 16
Consumer credit in Cambodia continued to grow during the second quarter of this year, although at a more moderate pace with loan applications decreasing, according to the latest report from the Credit Bureau Cambodia (CBC).

According to the report, the total number of consumer loan applications in the second quarter of this year was around 300,000, a 15 percent decrease compared to the first quarter. Meanwhile, consumer credit, comprising personal finance, credit cards, and mortgage loans, increased by 6.6 percent compared to the first quarter.

Total outstanding loans reached $3.87 billion across 785,000 current account holders.

August 25
In a move to urge small-and medium-sized businesses to list on the Cambodian Stock Exchange’s Growth Board, more than 70 companies have joined a new initiative offered by the market regulator that will provide professional guidance on how to meet listing criteria, paving the way to having a first listing sometime next year.

The Securities and Exchange Commission of Cambodia (SECC) launched its “Excellence Program” with the aim of helping companies develop the capacity to prepare adequate financial reports, establish proper accounting protocols, and learn about how the growth board can provide additional funding sources.

The Cambodia Securities Exchange (CSX) has struggled to attract a single SME since the launch of its Growth Board in late 2015. According to SECC regulations, companies are required to have a minimum of $500,000 in operating capital to list, compared to $7.5 million on the main board. Companies that list on the platform are also required to release one year of audited accounts, compared to the two years required for bigger companies.

A man points to figures displayed by the CSX at a listing ceremony for the Phnom Penh Special Economic Zone last year.
A man points to figures displayed by the CSX at a listing ceremony for the Phnom Penh Special Economic Zone last year. Athena Zelandonii

August 31
Cambodia’s insurance industry continued to experience strong growth during the first half of this year, with the total gross premium reaching $68 million, an increase of 21 percent compared with the same period in 2016, according to a report released by the Insurance Association of Cambodia (IAC).

While the report did not break down premium growth by insurance type, IAC Chairman Huy Vatharo said life insurance was the biggest percentage growth area. General insurance, including fire, health, and vehicle coverage, saw modest gains.

“I’m very excited to see the prosperity of the insurance sector in Cambodia alongside the country’s economic rise,” he said. “This reflects a greater understanding among the population and business institutions towards the concept of insurance.”

September 7
Malaysian power infrastructure provider Pestech International plans to list its wholly owned Cambodian subsidiary next year in a bid to raise $18 million to expand its presence in the Indochina region, according to Japanese media reports.

Pestech CEO Paul Lim Pay Chuan announced the company’s intention to list Pestech (Cambodia) Ltd (PCL) by the second quarter of 2018 during a press conference, according to Japan’s Nikkei Asian Review. He said the firm has already appointed the Cambodian branch of Malaysia’s RHB Bank to advise on the proposed initial public offering (IPO), with a prospectus potentially coming before the end of this year.

September 8
Cambodia and Thailand officially signed a double taxation agreement (DTA) that protects each country’s nationals from dual taxation and aims to encourage bilateral investment and strengthen economic ties.

Finance Minister Aun Porn Moniroth and Thai Foreign Minister Don Pramudwinai signed the agreement in the capital, in the presence of Prime Minister Hun Sen and Thai Prime Minister Prayut Chan-o-cha, who is conducting a state visit.

While full details of the DTA between the two countries have yet to be released, the agreement follows Cambodia’s aggressive push to shield investors from being taxed twice on multinational operations, and to improve compliance with ASEAN standards.

June 28
Cambodian tax officials met with their counterparts in Hong Kong as part of the first round of discussions for drafting a double taxation agreement (DTA) aimed at preventing dual taxation and fiscal evasion, the General Department of Taxation (GDT) said in a press release.

The discussions between GDT and Hong Kong Inland Revenue Department officials were held over five days from June 19 to 23, according to the release.

June 29
The strong inflow of Japanese investment is expected to continue on the back of both large-scale commercial projects and the consumer habits of Japanese expatriates residing and working in Cambodia, according to investment officials.

Japanese investment into the Kingdom over the last 25 years through May 2017 totaled $1.5 billion, the Council for Development of Cambodia (CDC) said after the closing of the 15th Cambodia-Japan Public Private Sector Meeting, which drew nearly 70 Japanese investors to Phnom Penh. The investment has covered some 125 registered projects to date, as well as 200 Japanese restaurants, the CDC said in a press release.

July 7
Just one day after the Kingdom’s microfinance organizations mutinied and said they would not implement a government directive requiring all financial institutions to implement a 10 percent VAT on fees for financial services, the tax department announced it would back down and temporarily suspend the controversial decree until it could conduct a study and address private sector concerns.

The General Department of Taxation (GDT) said in a releasethat it was suspending the implementation of a May 25 prakas (financial regulation) “until further notice”. The prakas was intended to define more clearly the government’s laws on non-taxable supplies concerning primary financial services.

“[The] GDT will cooperate with the private sector to examine and clearly study the definition of the phrase ‘primary financial services’ and the implementation of [the] VAT,” the announcement said, adding that the government was doing this to provide more consistency with regard to the law.

July 10
The regulatory body for Cambodia’s insurance industry signed a memorandum of understanding with its Thai counterpart to boost the sector’s operations, exchange technical assistance and encourage cross-border information-sharing to strengthen each other’s regulatory capabilities, according to a release by the Ministry of Economy and Finance (MEF).

The head of the Financial Industry Department at MEF signed the memorandum with representatives of Thailand’s Office of Insurance Commission. It is the first time Cambodia has signed an insurance industry protocol with a foreign regulatory body and brings the country closer to ASEAN standards for promoting a regional insurance industry framework, the release added.

July 19
The dearth of investment options in the local capital market has forced insurers in Cambodia to rely on underwriting for profits instead of investment returns, but industry leaders say if the government can provide more options to invest in securities it could attract substantial sums of as-yet-untapped insurance investment.

“The government has to support the development of a diverse and significant securities market in Cambodia to provide investment options that are suitable for insurance companies seeking to diversify the investment of their capital and reserves,” said Huy Vatharo, chairman of the Insurance Association of Cambodia (IAC).

Cambodia’s insurance sector has grown quickly since the establishment of the first state-run insurance company in 1990. Seven local and international insurers now provide general insurance coverage, while life insurance first arrived in 2012 and is offered by four insurers.

In developed countries, insurers are a dominant institutional player in the financial market, investing huge sums of capital in stocks and bonds. In Cambodia, however, they face limited opportunities for investment given the country’s diminutive capital market, with just five listed companies and no bond issues.

An insurance agent assists a customer at a Manulife branch in Phnom Penh.
An insurance agent assists a customer at a Manulife branch in Phnom Penh. Pha Lina

August 2
Inflows of foreign capital into the Kingdom’s banking sector almost doubled during the first and second quarters of 2017 as two heavyweight players entered the local market and lending institutions responded to revised minimum capital requirements, a central bank official said.

Chea Serey, director general of the National Bank of Cambodia (NBC), said that foreign direct investment (FDI) into the banking sector amounted to $439 million during the first six months of the year, an 89 percent increase on the same period of 2016.

“The establishment of the two new banks during this first semester contributed to this jump,” she said, referring to the launch of local operations by France’s BRED Bank and Japan’s Mizuho Bank.

In addition, she said, international banks and investors injected more capital into Cambodia-based lending institutions to bring them into line with the central bank’s revised minimum capital requirements.

August 8
Cambodia’s banking sector enjoyed another strong performance last year as the Kingdom’s economy continued to expand, with banking credit moderating, deposits increasing and financial institutions remaining healthy as they further integrate into the global economy, the central bank said in its annual report.

The National Bank of Cambodia report said that banking sector assets grew by 17.8 percent to $27.8 billion in 2016. Private sector financial institutions had an outstanding loan portfolio of $17.6 billion, an 18.3 percent credit growth increase compared to 2015, while deposits grew by 20.7 percent to reach $15.1 billion.

August 16
Consumer credit in Cambodia continued to grow during the second quarter of this year, although at a more moderate pace with loan applications decreasing, according to the latest report from the Credit Bureau Cambodia (CBC).

According to the report, the total number of consumer loan applications in the second quarter of this year was around 300,000, a 15 percent decrease compared to the first quarter. Meanwhile, consumer credit, comprising personal finance, credit cards, and mortgage loans, increased by 6.6 percent compared to the first quarter.

Total outstanding loans reached $3.87 billion across 785,000 current account holders.

August 25
In a move to urge small-and medium-sized businesses to list on the Cambodian Stock Exchange’s Growth Board, more than 70 companies have joined a new initiative offered by the market regulator that will provide professional guidance on how to meet listing criteria, paving the way to having a first listing sometime next year.

The Securities and Exchange Commission of Cambodia (SECC) launched its “Excellence Program” with the aim of helping companies develop the capacity to prepare adequate financial reports, establish proper accounting protocols, and learn about how the growth board can provide additional funding sources.

The Cambodia Securities Exchange (CSX) has struggled to attract a single SME since the launch of its Growth Board in late 2015. According to SECC regulations, companies are required to have a minimum of $500,000 in operating capital to list, compared to $7.5 million on the main board. Companies that list on the platform are also required to release one year of audited accounts, compared to the two years required for bigger companies.

August 31
Cambodia’s insurance industry continued to experience strong growth during the first half of this year, with the total gross premium reaching $68 million, an increase of 21 percent compared with the same period in 2016, according to a report released by the Insurance Association of Cambodia (IAC).

While the report did not break down premium growth by insurance type, IAC Chairman Huy Vatharo said life insurance was the biggest percentage growth area. General insurance, including fire, health, and vehicle coverage, saw modest gains.

“I’m very excited to see the prosperity of the insurance sector in Cambodia alongside the country’s economic rise,” he said. “This reflects a greater understanding among the population and business institutions towards the concept of insurance.”

September 7
Malaysian power infrastructure provider Pestech International plans to list its wholly owned Cambodian subsidiary next year in a bid to raise $18 million to expand its presence in the Indochina region, according to Japanese media reports.

Pestech CEO Paul Lim Pay Chuan announced the company’s intention to list Pestech (Cambodia) Ltd (PCL) by the second quarter of 2018 during a press conference, according to Japan’s Nikkei Asian Review. He said the firm has already appointed the Cambodian branch of Malaysia’s RHB Bank to advise on the proposed initial public offering (IPO), with a prospectus potentially coming before the end of this year.

September 8
Cambodia and Thailand officially signed a double taxation agreement (DTA) that protects each country’s nationals from dual taxation and aims to encourage bilateral investment and strengthen economic ties.

Finance Minister Aun Porn Moniroth and Thai Foreign Minister Don Pramudwinai signed the agreement in the capital, in the presence of Prime Minister Hun Sen and Thai Prime Minister Prayut Chan-o-cha, who is conducting a state visit.

While full details of the DTA between the two countries have yet to be released, the agreement follows Cambodia’s aggressive push to shield investors from being taxed twice on multinational operations, and to improve compliance with ASEAN standards.

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