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Summary Report of the 18th Government-Private Sector Forum

On 1st March 2019 at Peace Palace, held by the Royal Government of Cambodia
Purpose of the Forum:

Government-Private Sector Forum (G-PSF) is a mechanism of the Royal Government to reduce obstacles in doing business and to improve investment environment in the country.

G-PSF is a forum to improve the business environment, builds trust, and encourages private investment through a demand driven process with the private sector identifying issues and recommending solutions. By fostering capacity and a strong relationship between the government and private sector, the G-PSF is considered a key pillar in improving the investment climate in Cambodia.

Summary of Requests stated by Private Sector:

  1. The G-PSF to be held more regularly:
    1. PM agreed to hold the GPSF each year around February
  2. New working groups to be established and existing ones to be strengthened:
    1. PM stated that three  new working groups will be established over the 10 existing working groups:
      1. Health Working Group
      2. Education Working Group
      3. Construction and Property Working Group
    2. The PM stated that all WGs to meet regularly with counterparts.
    3. The PM also mentioned about a new Committee “Economic and Policy Committee” of the Government to be created.
  3. Issue of persistent power shortages to be solved:
    1. PM said he had reached agreement with Turkey on Power Ship which will come to Cambodia for a 3 years period.
    2. Seek more power from Vietnam and Thailand.
  4. Incentives to be provided to all Sectors not specific.
    1. The PM advised that incentives would be taken out of the SEZ Law and Investment Law and covered under the National Budget.
    2. Accordingly, the PM advised that both the SEZ and Investment Laws would be revised shortly.

Summary of Reforms announced by Prime Minister Samdech Hun Sen:

Prime Minister Hun Sen on 29th March 2019, announced government plans for large-scale economic reforms, outlining a 17-point strategy to stimulate economic growth that he said could save the private sector up to $400 million a year. The strategy included a number of key money-saving initiatives for private businesses, including:

  1. A number of reductions in Export and Import Fees which some of them had already been announced to the Market including:
    1. To reduce the Terminal Handling Fee, reduce the service fee and improve the work quality of both main ports, and preparing to finish the amendment on the law on investment and law on special economic zone,
    2. Removal of the container scanning
    3. Withdrawal of the issuance of the certificate of origin (CO) for unrequired countries
    4. The removal of Camcontrol from land border check-points and Camsab from ports,
  2. Electricity rates were also addressed, with Prime Minister Hun Sen stating that prices will be cut this year for several types of users. These included an electricity price cut of $0.02 per kilowatt-hour for industrial users and plans to further reduce prices for skill-based industries and high-capital industries.
  3. E-commerce law to be enacted by 1st semester of 2019.
  4. SME Focus with incentives to SME who are in
    1. Industries:
      1. Water Products and supplies
      2. Agriculture
      3. Food Products and Processing 
      4. Manufactured goods exporting
      5. Manufactured domestic Construction goods
      6. Waste Management
      7. Tourism goods
      8. Finer Products
      9. R&D into IT
      10. Developments of SME Cluster (WorldBridge Concept!!)
    2. Incentives
      1. 3-5% Tax Exemption
      2. Some tax deductions of 200% (previously 150%)
  5. Agriculture Sector
    1. PM addressed to support the agriculture sector by VAT exemption for:
      1. Certain commodities such as seeds, fertilizer, agriculture machinery, ect.
      2. The company which support to the agriculture export
  6. Rural Development Bank (RDB)
    The RDB have done the excellent work so far throughout the years. The PM addressed in the forum that:
    1. The RDB shall focus more on the agriculture product and rename the bank itself to “Rural & Agriculture Development Bank (assume to differentiate with new SME Bank)”
    2. Implement to the dual role of Commercial Bank and Policy Bank
    3. The business model need to be revised and
    4. The government will inject further 5 million USD in fund 
  7. Small and Medium Enterprise (SMEs) Banks
    1. The SMEs Banks shall establish with 100 million USD as capital 
    2. SMEs must fully register with the government including the General Department of Tax (GDT) to get the support from the SME Bank
  8. 5 million USD will be injected into Entrepreneur Fund and it will support to:
    1. New business training centers
    2. Again any SME who wants services needs to be fully registered including with GDT.
  9. SME Law to be redrafted by Ministry of Industry and Handicrafts.
  10. Trade Facilitation shall use single-window process across all Ministries by June 2019
  11. The General Department of Tax
    1. Introduced the new VAT online system for payment and also refunds.
    2. Remove overlap audits and also issue new Audit Prakas for procedures.
    3. Interest on penalty payments reduced from 2% to 1.5% per month.
  12. National holidays were also on the agenda, as the prime minister announced seven national holidays would be scrapped starting next year.
  13. Government Inspection of Facilities
    1. Reduce to annual unless some issue.
    2. Detailed procedures to be issued to control inspections to minimize disruption to business operations
  14. Pension
    1. To be complied from 2019 
    2. This shall be contributed by the employer and employees in the rate with the rate of 4% split by 50%-50%
  15. Seniority Payments
    1. Back payments start 2021 for all non-garment and footwear
    2. Only 6 days for non-garment sector, 3day pay in June and other 3days pay in December.
    3. Companies get tax benefit of seniority payment in 2019 onward and back payment before 2019
  16. Review Labor Law as outdated.
  17. Railway
    1. Original tender process not transparent
    2. Rail has failed in time and speed of service
    3. Concession withdrawn from Royal Group
    4. Re-tender concession to be open to the public
  18. PM mentioned that Government has approx. $3 Billion in cash holdings, excluding foreign reserves.