Kingdom’s 2011 GDP hits 6.9%

Cambodia's gross domestic product grew 6.9 per cent year-on-year in 2011, and is set to increase to 6.5 per cent this year, according to preliminary projections from the Ministry of Economy and Finance.
Agriculture, which was hit hard by floods last year, climbed 3.3 per cent, according to the ministry’s website.

At the same time, industry was up 14.3 per cent, while garment manufacturing alone soared 20.2 per cent. Services gained 5 per cent on a strengthened financial sector, according to the website.

The figure for agricultural growth was not a surprise, ministry Secretary of State Hang Chuon Naron said yesterday. A 10 per cent increase in rubber helped buoy the sector in the face of flood devastation, he said.

The government’s rice-export policy yielded positive results in 2011 that are expected to continue, World Bank senior economist Huot Chea said last week via email.

The government’s preliminary projection was near identical to its end-of-the-year estimate of 7 per cent. Projections for 2011 growth were issued a number of times by the government, often in response to World Bank and International Monetary Fund estimates.

In December, the IMF said GDP would grow at less than 6 per cent in 2011. The World Bank predicted 6 per cent growth, while the ADB estimated 6.8 per cent. The government will issue official 2011 numbers in June, Hang Chuon Naron said.

Prime Minister Hun Sen on Tuesday set Cambodia’s minimum growth target for 2012 at 6 per cent, according to Foreign Ministry spokesman Koy Kuong. Economists said the goal was conservative.

“The government is taking a rather cautious approach when it comes to economic outlook,” Cheang Vannarith, executive director of the Cambodia Institute for Cooperation and Peace, said this week via email. Emerging economies in Asia will drive the region’s growth this year, he said. A positive economic outlook in the United States, as well as Cambodia’s ASEAN chairmanship, should contribute to healthy growth, he said.

The World Bank’s 2012 GDP forecasts for the United States and the European Union in 2012 were 2.2 per cent and 0.3 per cent, respectively, “which may have some implications for Cambodia”, the World Bank’s Huot Chea said.

Large jump in number of workers to Korea

Cambodian migrant workers to South Korea increased by about 135 per cent in 2011, making Cambodian nationals the fourth-biggest migrant worker population in the East Asian country.

A recently expired ban on Vietnamese and Indonesian workers in South Korea accounted for the increased demand for labour from countries in the region, Cambodian labour officials said.

The Kingdom sent 4,957 workers to South Korea last year, a large increase on the 2,116 sent the year before. Nepalese and Bengladeshi migrant workers are the most populous.

“We had a sharp increase last year because the Korean government had temporarily stopped receiving workers from Vietnam and Indonesia after they found irregularities in the examinations there,” said Heng Sour, the chief of overseas manpower at the Ministry of Labour and Vocational Training.

Migrant workers must pass an examination to work in South Korea. Cambodia first sent workers to South Korea in 2002, however an official memorandum of understanding wasn’t signed between the two governments until 2007.

Although the ban on Vietnamese and Indonesian workers has been lifted, Heng Sour said Cambodia still hopes to improve its position in the Korean labour force.

Coordination of Action Research on Aids and Mobility Executive director Ya Navuth said South Korean employers have treated Cambodian migrant workers well. He said he supported sending more workers to the country.

Hotelier books profits in capital

Cambodia’s year-on-year tourism growth has drawn more investment in the hotel sector. The Little Garden, a boutique hotel in Phnom Penh that opened just six months ago, continues to draw a large number of foreign visitors. Phnom Penh Post reporters Sorn Sarath and Siem Bunthy interviewed The Little Garden’s owner, Pisey Pech, who opened the hotel with local partners and investment capital of US$100,000.

Why did you choose to invest in a hotel?
I first began my interest in business when I was travelling around a lot previously, and studied abroad so I could get ideas from other countries. I noticed that in Cambodia, most hotels are foreign-style and are owned by foreigners. Because of this, foreigners living in Cambodia receive all the profit.

You’ve just started, and your hotel is small compared to others. What strategies do you have to grow the business?
First, for the past six months we have invested in internet advertisements and have put strict budgets on our operating expenses. We also have a website that allows tourists to book before they come to Cambodia. Also, the hotel is well-equipped and a bit cheaper than similar hotels in the area.

You mentioned that foreign investors are interested in the hotel sector. Why don’t Cambodian investors have a larger presence in the business?
Nowadays, most of the investors in Cambodia are Thai, Malaysian and South Korean. Cambodians also have money, but the investment level is low and most of them like investing only in real estate that delivers a quick profit. These hotels also risk not being around for long. For example,  the eruption of the economic crisis two years ago stunned this business.

Is your decision to start a hotel connected with the present economic and tourism growth of Cambodia?
Although we know the growth rate of hotels in Siem Reap has increased, in Phnom Penh it remains limited and cannot accommodate a lot of visitors. I think my hotel contributes to strengthening the tourist sector in Cambodia. The government considers the tourism sector a good field in which to push for economic growth. But most good hotels are controlled by foreigners, and this money simply flows back overseas.

How do you propose to curb this problem, and what should the government do about it?
The Ministry of Tourism and  Ministry of Commerce must create an environment that offers opportunities to local investors so our economy becomes more stable and doesn’t have to depend on foreign investment. Some investors just invest for a short period of time, which is not good for our economy.

To encourage Cambodians to run businesses by themselves, it’s important for Cambodians to have better access to loans from banks and to make the laws for opening a company more relaxed.

Many tourists from China and Korea visit Cambodia on travel packages offered by foreign companies, so the profits often stay in their countries. What is your opinion on this?
It’s a free market, so it’s difficult to ban them. But Cambodians and the government should work closely to try to absorb some of those visitors. We should find a way to provide good services, and the government should give technical assistance to local companies.

Agriculture to see lending growth

Some commercial banks could increase loans to the agricultural sector this year, according to industry insiders who cited improvements in the sector and a rise in crop prices.

Cambodian farmers lack the capital needed for inputs such as seeds and fertiliser, while domestic rice millers often can’t get credit to purchase large quantities of paddy, insiders said.

Experts have long said the dearth of loan activity in Cambodian agriculture stymied the sector’s development toward an economy of scale.

ACLEDA Bank, Cambodia’s largest domestically owned bank, would increase its loan portfolio in agriculture, which now represents about 16.5 per cent of its total lending, Executive Vice President So Phonnary said.

“We see greater potential and higher product prices now in both the domestic and global markets. We always make year-on-year increases to loans in this sector,” she said.

Of the US$166 million in agricultural loans from ACLEDA, $10.5 million went to about 450 of the country’s rice millers, she said, noting the higher risk associated with lending to the sector.

ANZ Royal Bank and Korean-owned Kookmin Bank also expected to increase lending to agriculture.

Stephen Higgins, CEO at ANZ Royal, didn’t give a figure for proposed increases but said the country’s advantages in the sector would be a source of growth in the coming years.

Agricultural loans make up about 10 per cent of Kookmin’s $24 million total loan portfolio, the bank’s CEO and president, Jang Ki-Sung, said. That number is set to increase this year, he said.

Milled rice exports grew by about 22 per cent in 2011, the Post reported yesterday. The Kingdom shipped about 170,000 tonnes worth $103 million of the processed grain abroad last year.

Although some banks had made loans more accessible to local rice millers and farmers, strict requirements from banks were still a barrier, Son Koun Thor, president of the state-owned Rural Development Bank, said.

“We have money for [farmers] to borrow, but they have problems receiving loans if they don’t have clear business plans, exact cash flow or collateral.”

Lim Bun Heng, president of Loran Import-Export Co, a rice milling company, claimed that while his company was able to access more credit, the interest rate had also increased.

“Those commercial banks help us a lot, but their interest rate is still high compared to neighbouring countries, where banks charge around 3-4 per cent. Here they charge 10 per cent per year,” he said.

“If they lowered rates to around 5-6 per cent per year, we would have a better chance of getting other loans to increase our production capacity,” said Lim Bun Heng.

The ability among farmers to repay loans made agricultural lending risky, ACLEDA’s So Phonnary said.

“We’re very careful in providing loans to the sector. It is high risk because rice millers and farmers don’t have clear business plans,” she said, adding that this was why lenders charge high interest rates to the sector.

Food costs expose gap in country’s production

Despite a 67 per cent drop in food imports to Cambodia in 2011, inflation in exporting countries drove an 18 per cent rise in the total value of the imports.

Food imports fell from 769,993 tonnes in 2010 to 254,080 in 2011, while the total value of imports increased to US$158 million from $134 million, data from the Ministry of Commerce showed.

Inflation in countries such as Vietnam, Thailand, Malaysia, Australia and Singapore led to the increase in revenue, University of Cambodia economics and business lecturer Chheng Kimlong said. “Those countries had increased inflation so it pushed up the product prices. That’s also why the volume slowed down.”

Cambodia has few other options than to import food products from neighbouring countries, Chheng Kimlong said. Domestic production is still low and cannot meet consumer demand, he said.

Meng Saktheara, director general at the Ministry of Industry, Mines and Energy, said the small- and medium-sized enterprise subcommittee that he oversees received $800,000 in unconditional aid from the Asian Development Bank to increase local entrepreneurs’ technical capacity and competitiveness.

Growth in consumer demand for foreign food products could usher in new investment from abroad, Chheng Kimlong said. The increased spending could catch the eyes of foreign companies looking to set up shop in the Kingdom, he said.