MACRO-ECONOMIC SITUATION IN CAMBODIA · The Ministry of Economy and Finance Date: February 08, 2018...

The Ministry of Economy and Finance Date: February 08, 2018

MACRO-ECONOMIC SITUATION

IN CAMBODIA

1

Summary Contents

1 - Cambodia Economic Development (Present by General Department of Policy)

0 � - � The Progress of PPP ��Implementation in Cambodia � (Present by Central PPP Unit)

3 - The 4 Key Principles in Borrowing (Present by General Department of International Cooperation and Debt Management)

2

Presentation by

General Department of Policy

3

Cambodia Economic Development

4

February 08, 2018

Contents Current economic development and Cambodia-Japan economic relation

Challenges and risks

Key policy direction and new growth policy

5

6

Robust economic growth….

Nominal GDP: $3.649 Billion (2000) Nominal GDP: $24.44 Billion (2018p)

Real GDP Growth and Contribution of Each Sector

9.1%

6.4%

5.4% 5.6% 5.0%

11.9%

8.8% 8.1%

6.6%

8.5%

10.3%

13.3%

10.8% 10.2%

6.7%

0.1%

6.0%

7.1% 7.3% 7.4% 7.1% 7.0% 7.0% 7.0% 7.0%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017e 2018p

Agriculture Industry Services GDP Growth

Source: 1994-2016 National Institution of Statistic 2017e-2018f Ministry of Economy and Finance

7

Industry sector has maintained strong growth supported by solid growth of construction sector

12.7%

18.3%

8.4%

4.0%

-9.5%

13.6% 14.5%

9.3% 10.7% 10.1% 11.7%

10.5% 9.9%

9.6%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

-30.00%

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016e 2017e 2018f

Growth of Industry Sector

Textile,Wearing Apparel & Footwear Construction Other industry Industry (RHS)


2011 2012 2013 2014 2015 2016 2017Construction Equipment -17% 27% 17% 66% 40% 54% 29%Cement 18% 51% 19% 31% -12% -26% 10%Steel -10% 33% 12% 21% 38% 9% -5%

-50%

0%

50%

100%

150%

200%

250%Growth of Construction Material Import Value

32.1%

7.3%

17.8%

10.7%

14.5%

9.1% 7.7%

17.4%

8.7%

14.5%

15.5%

13.1%

13.8%

10.7%

0.0%5.0%

10.0%15.0%20.0%25.0%30.0%35.0%

2011 2012 2013 2014 2015 2016 2017

Growth of Garment Export (Quantity and Value)

Garment Garment export quantity

And the emergence of non-garment industry

8

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

94.8% 93.3% 95.3% 96.2% 95.8% 96.4% 96.3% 96.4% 88.4% 88.8% 86.4% 82.0% 77.1% 73.5% 73.7% 73.1% 72.0%

3.2% 6.1% 3.6% 1.9% 2.6% 2.0% 2.3% 2.4% 9.4% 7.8% 7.4%

12.6% 16.6% 21.5% 21.1% 22.3% 22.8%

Export by Products

Garment Rice(Husked) Rubber Others (Electronic components, bicycles, etc.)

Source: Ministry of Economy and Finance, 2017

38,195

38,459

38,856

39,141

39,338

309

386

443

500

588

0

100

200

300

400

500

600

700

37,600

37,800

38,000

38,200

38,400

38,600

38,800

39,000

39,200

39,400

39,600

2013 2014 2015 2016 10M- 2017

Number of SME Number of non-gament factory

Source: Ministry of Industry and Handicraft

Service sector growth remain sturdy, thanks to higher-than-expected growth in tourism sector …

9

12.5

%

13.8

%

6.1%

2.4%

2.6%

4.8%

4.5%

6.2%

8.0%

8.7%

7.7%

6.4%

6.9%

7.2%

6.1%

8.9%

7.7%

8.0%

7.7%

7.9%

7.3%

12.9

%

8.0%

13.8

%

11.9

%

9.9%

9.2%

8.4%

6.6%

7.3%

8.0%

5.6%

6.6%

6.6%

6.9%

8.1% 8.7% 8.7%

7.1% 6.8% 7.1% 7.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

2012 2013 2014 2015 2016e 2017e 2018p

Tourism Wholesale and retails

Transport & Communications Real Estate & Business

Other Services Services

Source: 1994-2016 National Institution of Statistic 2017e-2018p Ministry of Economy and Finance

0.0

1.0

2.0

3.0

4.0

5.0

6.0

2010 2011 2012 2013 2014 2015 2016 2017

2.5

2.9

3.6

4.2 4.5

4.8 5.0

5.6

Mill

ion

Peop

le

International tourist arrivals

Source: Ministry of Tourism

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Agriculture experienced declining growth over the last three years due to bad weather condition and drop of commodity price and prospected to gradually pick up…..

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

18.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017e 2018p

Growth of Agriculture Sector (2005-2018p)

Crops Livestock and Poultry Fishery Forestry Agriculture (RHS)


Cambodia-Japan economic relation

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30.0%

9.2%

8.3% 7.1%

6.7%

6.0%

5.3%

4.1% 4.4%

2.9%

ChinaVietnamKoreaMalaysiaTaiwanSingaporeHong KongJapanThailandUKOthers

Top 10 Investors in 2016 (share of FDI stock

3.2% 5.4% 3.6% 2.6% 3.0% 2.9% 3.0% 3.2% 7.8% 4.5% 6.2% 7.2% 9.3% 11.7% 11.1% 10.3% 9.6%

25.6% 24.6% 24.5% 28.2% 21.5% 21.5% 21.7% 22.4%

23.8% 25.0%

30.0% 32.1%

33.4% 34.1% 37.9% 38.8% 38.6%

66.5% 65.2% 64.5% 60.8%

66.1% 66.1% 64.3% 61.8% 52.5% 52.3% 42.6% 36.7% 31.4% 26.7% 23.9% 20.9% 21.6%

0.8% 1.1% 1.1% 1.1% 1.1% 1.1% 1.0% 0.9%

2.6% 2.4%

3.1% 3.5% 4.8% 5.7% 6.8%

8.2% 8.0%

4.0% 3.6% 6.3% 7.4% 8.3% 8.4% 10.1% 11.8% 13.2% 15.7% 18.1% 20.5% 21.1% 21.8% 20.2% 21.9% 22.1%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

20012002200320042005200620072008200920102011201220132014201520162017

Share of Export Value by Countries

ASEAN EU USA JAPAN Others

14.9%

21.6%

9.0% 6.2%

3.6%

7.0% 4.6%

33.1%

Top tourist market in 2017 VietnamChinaLaoKoreaJapanThailandUSAOthers

Source: Ministry of Economy and Finance Source: Ministry of Tourism

Source: National Bank of Cambodia

2. Challenges and Risks

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Along with the good condition of the global economy, Cambodia is also facing some major risks ...

Tightened US monetary policy Brexit and uncertain future of EU China’s slowdown with mounting vulnerabilities in China’s financial system associated with rapid credit growth Uncertainty of economic and trade policies in the US especially protectionism policy Geopolitical tensions, terrorism and security concerns

14

Challenges High cost of electricity,

logistics and transport

Increasing minimum wage

High business cost and non-

smoothly doing business

procedure

Low skill and

productivity

3. Key Policy Directions & New Growth Policy

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Prioritized Agenda

Prepare the Logistics Master Plan and reduce electricity price, aiming to promote Cambodia’s competitiveness in the regional and global market

Continue expanding and strengthening education, both soft and hard skills, technology in order to promote skill development and know-how.

In the context of the challenges and risks mentioned above, in order to continue to drive economic growth around 7%, the Royal Government of Cambodia should:

Prepare long-term, comprehensive planning to develop the agricultural sector, involving all stakeholders from the public, private sector and development partners.

Continue implementing IDP 2015-2025 efficiently, particularly increase value addition to productions of various industries along with the strengthening of SMEs

Accelerate institutional structural reforms.

Thank You!

17

Presentation by

Central PPP Unit

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The Progress of PPP Implementation in Cambodia

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Central PPP Unit, Ministry of Economy and Finance

Le Palais du Gouvernement February 8, 2018

Contents

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1) PPP Policy Paper 2016-2020

i. Vision ii. Objective and Goal iii. Strategies and Measures iv. Priority Sectors

2) Progress of Implementing PPP Policy in Cambodia i. Progress on PPP Legal and Regulatory framework ii. Progress on PPP Project Implementation

• Pilot PPP Project • Other projects

3) Targeted Plan

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“By the end of 2020: a comprehensive and interlinked system of PPP in accordance with the international standards”

“To promote and encourage investments by private sector and financial institutions to contribute to restoring, building, operating and maintaining public infrastructure and other economic productivity enhancement sectors”

i. Vision

1. PPP Policy Paper 2016-2020 (1/6)

ii. Objective

23

iii. Strategies and Measures

• Strategies

(i) Legal framework, operational management procedures, financial support mechanism, institutional mechanism, and Inter-Ministerial Committee

(ii) “Learning by Doing” approach

(iii) Institutional capacity and human resource development


Policy Measures Activities

2016 – 2018 2019 – 2020 1. Review and development

of legal framework and operational management procedures

- During the interim period, establish an Inter- Ministerial Committee led by the Ministry of Economy and Finance;

- Review provisions stipulated in the Law on Concession and other related laws and make amendments as necessary;

- Prepare legal documents, operational management procedures, procurement management procedures, and financial support mechanism etc.;

- Review and approve priority project list and the findings from feasibility studies of those priority projects.

- These functions and duties shall be transferred to the permanent mechanism which will be reviewed and decided by RGC latterly.

- Review and revise as needed in order to establish a permanent institutional mechanism;

- Review and revise as needed the relevant legal framework, institutional mechanism, and operational management procedures.

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• Measures (1/2)

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Policy Measures Activities

2016 – 2018 2019 – 2020 2. Development of financial

support mechanism

- Establish and operationalize Project Development Facility (PDF) - Develop and put into effect operational procedures for PDF.

- Review possibilities to establish and operationalize Viability Gap Fund (VGF)

- Develop and put into effect the operational procedures for VGF.

3. Development and identification of institutional mechanism

- Integrate functions of the Central PPP Unit and Risk Management Unit for the MEF. (The function of CPU and RMU has reviewed and integrated under the single roof of CPU.)

- Establish or integrate functions of PPP units in different

sectorial ministries/institutions

- Review and revise functions of PPP units in different sectorial ministries/institutions.

4. Institutional capacity and human resource development

- Prepare and put into effect the institutional capacity and human resource development plan.

- Update the institutional capacity and human resource development plan.

• Measures (2/2)


iv. Priority sectors

• Initial Stage - Revenue-Based Payment • These sectors include the following:

– Transportation system such as roads, bridges, railroads, ports, and airports; – Production, transmission and distribution of electricity; – Production, supply and distribution of clean water; – Development, modernization of markets and public car parks or public commercial centres; – Development of public infrastructure in industrial zones – Waste collection and management services; – Waste water treatment and sewage systems; – Vocational skill development; – Social housing infrastructure; – Tourist infrastructure such as tourist attraction sites, museums, etc. – Economic productivity enhancement sector and other priority sectors

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• Medium and Long-term sectors – Infrastructure for gas and petroleum sector such as petroleum and

gas distribution system; – Telecommunications sector and information and communications

technology; – Irrigation system and agriculture infrastructure; – Public health services infrastructure; – Education and sports infrastructure, etc.

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2. Progress of Implementing PPP Policy (1/6)

28

Approved by Parliament • Law on Concession (2007) • Law on Investment • Law on Public Finance System

Approved by Prime Minister • Policy Paper on PPPs for Public Investment Project Management 2016-2020

(June 22, 2016) • PDM Strategy 2015-2018 (August 17, 2015) • Sub-decree on PDM (23 June, 2011)

Approved by Minister of Economy and Finance • Ministerial Decision on Establishment of the Inter-ministerial Committee for steering the

Implementation of Policy on PPPs (September 12, 2016) • Prakas on Established of Central PPP Unit (December 22, 2017)

i. Progress on PPP Legal and Regulatory framework a) Existing Legal Framework

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b) Reviewing and Amending the Law Review: • Law on Concession Not International best practice • Law on Public Procurement Article 3 (Allowing other forms of

procurement) Action: • Require new law • New draft law on PPP (8th draft) • Public consultation workshop


Inter-ministerial Committee for Steering the Implementation of Policy on PPPs

• Chaired by Secretary of State, Ministry of Economy and Finance

• Main Responsibility:

i) Review provisions stipulated in the Law on Concession and other related laws and make amendments as necessary or propose a new law on Public-Private Partnership mechanism if necessary.

ii) Prepare sub-decrees, Prakas, related legal instruments, operational management procedures for public investment projects using PPPs.

iii) Review and approve priority project list and the findings from feasibility studies of those priority projects while piloting PPP projects.

• Members: 9 from the MEF (including the Chairman), and 16 from line ministries/institutions.

• Secretariat: Central PPP Unit, MEF

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c) Institutional Framework


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IMC for Steering the Implementation of Policy on PPPs


Central PPP Unit

Policy and Knowledge Management Project Development Project Delivery and

Monitoring General Affair

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d) Operational Management Procedures 1. Standard Operating Procedures 2. Definitions and Abbreviations 3. Project Selection Guidelines 4. Project Development Fund Guidelines 5. Feasibility Study Guidelines 6. Financial Analysis Guidelines 7. Value-for-Money Analysis Guidelines 8. PPP Procurement Manual 9. PPP Contract Template 10. Government Support Measures (GSM) Guidelines 11. Risk Management Framework Guidelines 12. Contract Management Guidelines


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Standard Operating Procedures (SOP)

Project Identification and Selection Stage Contract Management Stage Feasibility Study Stage Procurement Stage

Project Selection Guidelines

Project Development Fund Guidelines

PPP Procurement Manual “Selection of Transaction

Advisor”

Feasibility Study Guidelines

Financial Analysis Guidelines

Value-for-Money Analysis Guidelines

PPP Procurement Manual “Selection of Private Partner”

PPP Contract Template

Contract Management Guidelines

PPP Procurement Manual “Selection of Independent Engineer/Consultant and

Owner’s Engineer”

Risk Management Framework Guidelines

Government Support Measures (GSM) Guidelines

2. Progress of Implementing PPP in Cambodia (6/6)

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• Pilot Project: 4 potential candidate PPP projects:

1. Bavet Bulk Water Supply; 2. Phnom Penh Logistic Complex; 3. Sihanoukville Cruise Terminal Port Development Project; 4. Rice Handling Pontoon Platform Logistic.

• Project selected as Pilot PPP Project: Sihanoukville Cruise Terminal Port Development Project.

• This project is being studied at Feasibility Stage.

2. Progress of Implementing PPP Projects

35

• Other projects: • PNH-SHV Expressway Project • Public Affordable Housing Project

2. Progress of Implementing PPP Projects

3. Targeted Plan

• Establish Project Development Fund (PDF) by 2018

• Finalize all SOPs on PPP project cycle by early 2018

• Finalize FS on Sihanoukville Cruise Terminal Port Development Project by March 2018

• Impose new PPP Law by 2019

• Continue to find other financial source for FS on other Pilot PPP projects

• Continue to build capacity for Central PPP Unit and PPP Unit of line ministries

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37

Thank you!

For further information: ppp.mef.gov.kh

Presentation by General Department of International Cooperation and Debt Management

(GDICDM)

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40

Policy of Borrowing

Cambodia - Japan ODA Policy Dialogue 08 February 2018, CDC

1. The 4 key Principles in Borrowing 2. Policy Measures for PDM 2015-2018 3. Debt Sustainability Analysis

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Content

42

The 4 key principles

Borrowing Ceiling

Only Concessional

Loan

only for priority sectors

Effectiveness Efficiency

Accountability Transparency

1. The 4 Key Principles in Borrowing

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1. Set annual borrowing limit of SDR 600M for 2015, and SDR 700M - 800M from 2016 to 2018;

2. Continue to borrow highly concessional loans

3. Continue to borrow for priority sectors which support sustainable growth and increasing economic productivity;

4. Continue to strengthen the efficiency of public investment projects through the preparation of the overall guiding principles of PIM which covers public investment funded projects (funded by RGC’s budget), ODA funded projects, and PPP projects.

5. Continue to implement key reform programs in the priority sectors;

2. Policy Measures for PDM 2015-2018 (1/2)

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6. Continue to implement the centralized principles of PDM;

7. Continue to mobilize grants and other sources of financing to fill the need of total public investment;

8. Continue to monitor and manage debt-related risks, especially contingent liabilities (resulting from government guarantees/ PPP projects, and banking and financial sectors);

Set the ceiling of the government guarantees for PPP projects (4 % of GDP);

Set up Contingency Fund (5% of Total Annual Debt Service)

9. Continue to strengthen institutional and human capacity.

2. Policy Measures for PDM 2015-2018 (2/2)

a. PV of debt-to-GDP

05

1015202530354045

2015 2020 2025 2030 2035

b. PV of debt-to-exports

0

20

40

60

80

100

120

140

160

2015 2020 2025 2030 2035

c. PV of debt-to-revenue

0

50

100

150

200

250

300

2015 2020 2025 2030 2035

d. Debt service-to-exports

0

5

10

15

20

25

2015 2020 2025 2030 2035

Most extreme shock

Baseline

Historical scenario

Threshold

Customized Scenario

e. Debt service-to-revenue

0

5

10

15

20

25

2015 2020 2025 2030 2035

Conclusion: Cambodia’s public debt is “sustainable” and remains at “low risk” of debt distress.

3. Debt Sustainability Analysis

20

Thank You!

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MACRO-ECONOMIC SITUATION IN CAMBODIA · The Ministry of Economy and Finance Date: February 08, 2018...

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