No.26 (Feb 05, 2021)

Market Industry Trends

GOV’T ARM ISSUES NEW ROUND OF SUPPORT FOR LOCAL SMEs. Khmer Enterprise (KE) had recently announced the acceptance of applications for the third round of KE Assistance Package (KEAP) from small and medium-sized enterprises (SME) and startups that require capital to sustain business and operational needs. The program targets sectors that have been severely affected by the Covid-19 pandemic such as agriculture, aggro-processing, handicrafts, services, and information and communications technology (ICT).  Through the previous KEAP, 278 applications were received from across the capital and 18 provinces. KE provided around $400,000 to 27 SMEs and start-ups over the first two rounds, with individual funds range between $5,000 and $20,000, for exclusive use in business operations over a maximum period of one year. The new round of aid packages would help SMEs and startups to get their business back on track. (Phnom Penh Post)

NBC: $4.2B IN LOAN RESTRUCTURED SINCE MARCH. Financial institutions in Cambodia restructured approximately $4.2 billion in loans for 285,074 borrowers in 2020 after the issuance of the National Bank of Cambodia (NBC) circular on loan restructuring during COVID-19. The directive was issued to all banks and financial institutions to restructure credit for loans in four priority sectors such as tourism, garments, construction, and logistics. The circular aimed at maintaining financial stability, supporting economic activity, and easing the burden of debtors facing declining revenues during the ongoing Covid-19 outbreak. This directive will be implemented until mid-2021. (Phnom Penh Post)

GOVERNMENT PLANS NON-GARMENT INDUSTRIAL EXPORT EXPANSION. The government plans to boost non-garment manufacturing exports this year on the back of strong market demand as the availability of viable Covid-19 vaccines jump-starts a global economy hungry for recovery. The data from the Ministry of Economy and Finance reported the non-garment manufacturing products in 2020 at 26% of Cambodia’s total industrial exports by value, marked as an increase of 8.8% from 2019. It is anticipated that the bilateral Cambodia-China Free Trade Agreement (CCFTA), the upcoming free trade agreement with South Korea, the Regional Comprehensive Economic Partnership, and the UK’s Generalized System of Preferences (UK’s GSP) will help to stimulate the economy and boost exports figures this year. (Phnom Penh Post)

Regulation

SOUTH KOREA DOUBLE TAX AVOIDANCE PACT IN EFFECT. The double tax avoidance (DTA) agreement between Cambodia and South Korea has come into effect. The tax treaty will help taxpayers avoid paying double taxes on the same income and alleviate the tax burdens on enterprises doing business in the other country. According to data from Korea International Trade Association (KITA), bilateral trade volume between Cambodia and South Korea amounted to $884.88 million in 2020, a decrease of 17.77% from 2019. Cambodia’s primary exports to South Korea include garments, footwear, travel goods, beverages, rubber, pharmaceuticals, agricultural products, and components for electronic equipment. Imports from South Korea include vehicles, electronics, kitchen equipment, beverages, pharmaceuticals, and plastic products. (Phnom Penh Post)

Macro-economy

THAI-CAMBODIA 2020 BILATERAL TRADE BELOW GOAL 50%. Bilateral trade between Cambodia and Thailand for 2020 reached only half of the target of $15 billion set by the two governments in 2015. Bilateral trade between the two nations was valued at $7.236 billion in 2020, marked as a year on year decrease of 23%, according to Thailand’s Ministry of Commerce. The restriction on border crossing due to Covid-19 has adverse impacts on cross-border trade flow between the two nations. Recently, the Cambodian embassy to Thailand has announced the establishment of a representative office for the Cambodia Business Council in Bangkok which will serve as a one-stop-shop for business. It also aims to promote Cambodian products and shore up bilateral trade between Cambodia and Thailand. (Khmer Times)

SOUTH KOREA FTA TALKS CONCLUDE. Cambodia and South Korea had recently concluded talks for a bilateral free trade agreement (FTA), and the deal is expected to sign in mid-2021. According to a joint press statement, the agreement will allow zero tariffs for a broad range of goods. Cambodia is expected to lift tariffs on 93.8% of goods traded while South Korea will scrap duties on 95.6% of goods traded. The deal will boost exports of garments and textiles, footwear, travel bags, spare parts, electronic equipment, as well as agricultural products such as rubber, peppercorn, cashew nuts and cassava. Imported goods that stand to benefit from the FTA include automobiles, electronics accessories, domestic appliances, beverages, pharmaceuticals and plastic products. Cambodia and South Korea FTA will expand market liberalization beyond the provision of existing FTAs of the two nations such as the ASEAN-Korea FTA and Regional Comprehensive Economic Partnership (RCEP). (Phnom Penh Post)

BRITAIN TO APPLY TO JOIN ASIA-PACIFIC FREE TRADE BLOC. Britain has announced their decision in applying to join a massive 11-nation free-trade bloc of Asia-Pacific countries. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is a market which represents half a billion people and roughly 13.5% of global economy. Membership within the bloc will potentially offer new opportunities across UK business sectors. The CPTPP was launched in 2019 to remove trade barriers among 11 nations representing nearly 500 million consumers in Asia Pacific region in a bid to counter China’s growing economic influence. Negotiation between the UK and the partnership which represents 11 pacific rim nations is expected to start within this year. (Phnom Penh Post)