No.27 (Feb 19, 2021)

Market Industry Trends

SKYROCKETING SHIPPING COSTS THREATEN EXPORTS. Cambodia’s exporters have expressed deepening concerns about the increase in shipping costs, which could diminish this year’s trade figures. The shipping cost from Cambodian ports to those in other countries has increased twice or thrice comparing to the previous year. The average cost of shipping a 20-foot container from Cambodia to Europe has leaped from $1,250 last year to $3,000 now. In addition to rising cost, there is also a shortage of shipping vessels containers which lead to longer transit time. The sudden surge of international shipping cost and time has become a major obstacle that restricts the number of exports good from Cambodia’s market. (Phnom Penh Post)

Market Deals

FIRMS INK $1.4M IN BUY-SELL DEALS WITH 16 AGRI-CLUSTERS. Ten local companies have recently signed buy-sell agreements and memorandums of understanding (MoUs) with representatives of 16 agri-business clusters to supply 3,400 tons of produce and chicken meat worth approximately $1.4 million. Commodities outlined in the deal include mangoes, cassava, watermelon, and “safe vegetables”, or those with reduced dependence on chemicals that are free of microbiological hazards. The agreement aims to introduce modern agriculture techniques and mechanisms in quality control of agricultural produces to shore up the consumption of safe agricultural products. As of 2020, there were 259 farming communities and 432 farming groups that implement safe vegetable production. The demand for organic local vegetables in agricultural value chains has been rising during the health crisis. This will create market opportunities for local vegetable production. (Phnom Penh Post)

Regulation

LAW ON NON-BANKING FINANCIAL SERVICES. The law for non-banking financial services has come into effect in early 2021. The Non-Banking Financial Service Authority is an independent unit combining all non-banking regulators, which perform duties by integrating management and governance on non-banking financial sectors such as insurance, pension funds, securities, social security, public administration, accounting, and auditing, real estate, mortgages, and guarantees. This law aims to strengthen and ensure the effectiveness of management, govern and development of the non-banking financial sector as well as promote financial technology of non-banking financial institutes in Cambodia.

Macro-economy

TRADE WITH EAEU SURGES 18%. Bilateral trade between Cambodia and the Eurasian Economic Union (EAEU) was worth $67.37 million in 2020, marking an increase of 18.22% compared to 2019’s $56.98 million, according to data from the Ministry of Commerce. The figures comprise exports of $52.19 million, marked as a 0.73% year-on-year increase, and imports of $15.18 million, a rise of 193.57% from 2019 figures. EAEU (Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Russia) is home to 184.6 million people and represents a combined gross domestic product (GDP) of $4.778 trillion. The exports to the bloc include agriculture products and textiles while imports consist of machinery, tractors, and spare parts for agriculture machinery. This bloc is expected to provide Cambodia a valuable alternative to the EU as a trade destination and countervail some of the disruptive effects of the withdrawal of the ‘Everything But Arms’ (EBA) trade scheme. (Phnom Penh Post)

TRADE WITH ASEAN UP 22% IN 2020, HITS $11.3 BILLION. The value of trade exchange between Cambodia and other ASEAN member states dramatically skyrocketed in 2020, hitting $11.33 billion even with flight and border restrictions in full force amid the Covid-19 pandemic. According to the Ministry of Commerce, 2020’s total trade value figures increase by 22.42% from 2019’s figures. The neighboring countries, Thailand and Vietnam accounting for the largest share of the trade pie. Cambodia exported $3.723 billion worth of merchandise, representing a sharp 186% increase, and imported $7.607 billion, a slight drop of 4.33% as compared to 2019. The export commodities comprise mostly agriculture products such as paddy, cassava, corn, and rubber and imports generally consist of foods and beverages, diverse consumer goods, and construction materials. Currently, Cambodian importers and exporters can apply for ASEAN Customs Declaration Documents (ACDD) electronically through the ASEAN Single Window (ASW). This paperless process will facilitate trade and customs clearance as well as reducing custom barriers within the region. (Phnom Penh Post)

KINGDOM-US TRADE NEARLY $7 BILLION IN 2020. Bilateral trade between Cambodia and the US amounted to $6.9213 billion in 2020, up 17.89% from 2019, based on the data from the US Census Bureau. The export value of Cambodian goods was $6.5777 billion, a year-on-year increase of 22.79%, while goods imported from the US were worth $343.6 million, a drop of 33.15% from 2019 value. Cambodian mainly exported garments, footwear, bags, and electronic components to the US, while imports made up of automobiles, electronics, and other finished products. Cambodia’s exports to the US market remained positive despite being submerged in the Covid-19 crisis. (Phnom Penh Post)

CASH-CROP EXPORTS 200K IN JANUARY. According to a report from the Ministry of Agriculture, Forestry, and Fisheries, Cambodia exported 203,485 tons of major cash crops such as milled rice, natural rubber, corn, cashew nuts, peppercorn, fresh banana, chilies, and mangoes in January. Milled rice of 34,273 tons was shipped out to 28 international markets and rubber product exports reached 52,711 tons. Cambodia also sold 44,471 tons of corn, 40,956 tons of fresh bananas, 16,252 tons of fresh chilies, 11,637 tons of fresh mangoes, 3,183 tons of cashews nuts, and 2 tons of peppercorn. (Phnom Penh Post)

NBC TO KEEP LOWER RRR UNTIL JUNE 30. National Bank of Cambodia (NBC) has recently announced the decision in maintaining the current reserve requirement ratio (RRR) at 7% until June 30 to ensure liquidity in the banking sector to fund more loans and to crank up economic activity. RRR is central bank regulations that set a minimum amount of cash that financial institutions must hold in reserve. The Cambodian RRR in foreign and domestic currency was set at 12.5% and 8%, respectively. In March last year, NBC had reduced the rate of RRR for both currencies to 7%. The revised RRR allows banks and other financial institutions to have stronger liquidity and increase funds available for lending in response to the market needs. According to NBC’s 2020 annual report, total assets in Cambodia’s banks and microfinance institutions (MFIs) grew to $59.4 billion at the end of 2020, a year-on-year increase of 15.7%. Outstanding loans in banks and MFIs grew by 14.8% to $37.3 billion, while deposits increased by 15.4% to $33.8 billion. (Phnom Penh Post)