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Updating investment and business environment and ......Assembly, electronics and spare parts...
Transcript of Updating investment and business environment and ......Assembly, electronics and spare parts...
CAMBODIA - UPDATING INVESTMENT AND BUSINESS ENVIRONMENT AND OPPORTUNITIES FOR
ENHANCED CONNECTIVITY OF VALUE-SUPPLY CHAINS IN THE MEKONG SUB-REGION
SOK SOKEN Deputy Director, Private Investment Strategy Analysis Department
Cambodian Investment Board (CIB)
Council for the Development of Cambodia (CDC)
KINGDOM OF CAMBODIA
The 2nd Mekong – Republic of Korea Business Forum
“Strengthening Value-Supply Chains Connectivity in the Mekong Sub-region”
Hanoi, VN, 29 March 2014
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Table of contents • Putting everything into perspective
• GVC, GSC (external forces, trends)
• Regional initiative (ASEAN, APEC)
• Sub-regional initiative (GMS, BIMP-EGA, IMT-GT)
• Current Investment and Business environment • FDI Policy regimes
• Investment data
• Investment promotion materials (including G-PSF)
• Updates on investment and Business environment • Supply chain Infrastructure and Cross border infrastructure (CBI)
– (hard [transport and energy] and soft [border administration, etc.])
• G-PSF and outcomes
• Opportunities for enhanced connectivity of value-supply chains in the Mekong sub-region
• Domestic value chain – downstream (agro processing for rice, rubber, cassava, maize)
• Domestic value chain – upstream (parts and components for domestic industry, Fabric production for garment)
• Regional value chain – (miniature motors, wire harness, ignition parts, INTERMEDIARY goods)
2 Strengthening Value-Supply Chains Connectivity in the Mekong Sub-region
I - Putting everything into perspective
GSC & GVC (80% of global trade,
WTO)
Economic trend: emerging markets, BRIC, ROK, Africa
(patterns of outsourcing and
offshoring)
Ecological trend: awareness of env.
issues (scarce resource costs and supplies)
Regulatory trend: new rules (CSR,
sustainability)
Natural disasters (disruptions to key
component supplies)
Demographic trend
(demographic structure changes
demand preferences)
New technological
trend (new business
models/platforms)
3
Source: Chang et al. (2012), APEC Policy Supporting Unit
Strengthening Value-Supply Chains Connectivity in the Mekong Sub-region
I – Putting everything into perspective – Regional and sub-regional
initiatives
• To enhance scalability and expand market through improving supply chain connectivity
across borders and improve business environment behind the border: cost, time and
uncertainties for trade
• Regional • ASEAN – CBI Development
• Physical Connectivity • Transport projects - 9 regional transport agreements (air freight, goods in transit…), ASEAN Highway networks [38,400km],
Singapore-Kunming Rail link [7,000km]
• Energy sector projects (ASEAN Power Grid – 14 interconnection projects, trans-ASEAN Gas pipeline – 8 gas interconnection projects)
• APEC • Supply Chain Connectivity Framework Action Plan
• Supply Chain Visibility Initiative (reduce logistics and warehousing costs)
• Sub-regional • GMS
• 10-year Strategic Framework – increase connectivity and competitiveness(11 programmes and 3 economic corridors)
• Cross-border Transport Agreement (CBTA) – facilitates [single stop custom inspection, movement of people, road standards and signage, transit traffic regimes]
• BIMP-East Asia Growth Area
• IMT – Growth Triangle
• Pan-Asia Infrastructure initiative: Asian Highway
• CHALLENGES to supply chain connectivity • Gaps in economic and infrastructure development (asymmetric distribution of regional infrastructure)
• Too many different regulatory requirements
4 Strengthening Value-Supply Chains Connectivity in the Mekong Sub-region
II – Investment and business environment in Cambodia
5 Strengthening Value-Supply Chains Connectivity in the Mekong Sub-region
Embracing globalization process – outward looking
economic development strategy
6
JOINING
WTO JOINING
ASEAN
Everything
But
Arms (EBA)
ASEAN
Economic
Community
Strengthening Value-Supply Chains Connectivity in the Mekong Sub-region
Assessment of FDI Policy Regimes based on legal documents - ASEAN
7
+ High score indicates open FDI policy regime
+ Singapore is very open
+ The Philippines, Thailand, Indonesia and Cambodia are relatively open
+ Myanmar, Malaysia, Brunei and Lao, PDR are relatively closed.
Source: Urata and Ando (2010)
Strengthening Value-Supply Chains Connectivity in the Mekong Sub-region
Investment environment in Cambodia
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20122013
e
GDP 9.20 6.50 5.30 5.70 5.00 12.6 9.20 7.70 6.20 8.60 10.0 13.3 10.8 10.2 6.70 0.10 5.90 7.10 7.30 7.60
Inflation 17.9 3.50 10% 9.20 13.3 4.00 -0.8 0.20 3.30 1.20 3.90 5.80 4.70 5.9% 19.7 -0.6 4.00 4.90 3.00 4.00
-5.00%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
0%
2%
4%
6%
8%
10%
12%
14%
z
Source: SNEC & MEF
8 Strengthening Value-Supply Chains Connectivity in the Mekong Sub-region
Rectangular Strategy Phase III - Growth, Employment, Equity and Efficiency
9 Strengthening Value-Supply Chains Connectivity in the Mekong Sub-region
Encouraged Investment Activities
Agriculture and agro-industry
Transport and telecommunications
Energy and electricity
Labor-intensive industries, processing and manufacturing;
Tourism
Human resource development
Oil & Gas, Mining
New high value-added and more creative industries
Heavy industries
Assembly, electronics and spare parts manufacturing
10 Strengthening Value-Supply Chains Connectivity in the Mekong Sub-region
Council for the Development of Cambodia (CDC)
Investment application
CDC issues a Conditional Registration Certificate (CRC) to the Applicant
Company Registration / Ministry of Commerce
Relevant licenses, as appropriate / Ministry of Industry and Handicraft
Review and approval of construction plan / local authorities-
Ministry of Land Management, Urban Planning and Construction.
Initial environmental impact assessment / Ministry of Environment
Tax Department Registration / Ministry of Economy and Finance
CDC issues a Final Registration Certificate (FRC) to the Applicant
3 working
days
28 working
days
11 Strengthening Value-Supply Chains Connectivity in the Mekong Sub-region
Incentives
Non-fiscal incentives
No nationalization
No requirement of local equity
participation
No discrimination between foreign
and domestic investors (except land
ownership)
No restriction on capital repatriation
Special accelerated depreciation for
reinvestment of profit
No foreign exchange control
No price control and quantitative
trade restriction
Fiscal incentives
• Low corporate tax at 20%
• Exemption on import duty and export tax
• Production equipment and Construction materials imported by Qualified Investment Project (QIP)
• Production inputs imported by Export QIP
• Profit tax exemption –
• Trigger period 0-3 years + Grace period 3 years + Priority period 0-3 years determine by Financial Management Law
• Up to 9 years (Agriculture, Heavy Industry [>5m] and infrastructure [>30m] )
12 Strengthening Value-Supply Chains Connectivity in the Mekong Sub-region
Accumulated Investments (1994-2013)
9,611
4,405
3,649
2,620
1,524 1,294
1,021 899 870 786 391
-
2,000
4,000
6,000
8,000
10,000
12,000
Ch
ina
Ko
rea
EU
Ma
laysia
Vie
tna
m
US
A
Ta
iwa
n
Th
aila
nd
Ho
ng
Ko
ng
Sin
gap
ore
Ja
pa
n
US$ Million
13
Agriculture 10%
Industry 29%
Service 17%
Tourism 44%
Strengthening Value-Supply Chains Connectivity in the Mekong Sub-region
Investment by Mekong sub-region countries and ROK
2009 2010 2011 2012 2013 Jan-Apr 2014
Korea $120,135,261 $1,063,407,238 $163,249,209 $293,288,856 $85,150,716 $44,085,480
Vietnam $352,085,036 $153,252,238 $690,973,515 $84,754,552 $279,661,413 $2,641,181
Thailand $182,899,276 $2,044,408 $8,207,022 $125,831,610 $216,653,329 $16,699,385
$0
$200,000,000
$400,000,000
$600,000,000
$800,000,000
$1,000,000,000
$1,200,000,000
Investment from Korea, Vietnam, and Thailand in Cambodia
14 Strengthening Value-Supply Chains Connectivity in the Mekong Sub-region
Rank
2008 2009 2010 2011 2012 2013
$11,420,127183 $6,309,435,594 $3,029,497,634 $7,984,908,645 $2,965,537,652 $3,314,528,763
Country % Country % Country % Country % Country % Country %
1 China 39.45 Cambodia 60.81 Korea 35.10 U.K 30.93 Cambodia 42.08 Cambodia 68.80
2 Cambodi
a
36.73 China 14.93 China 28.73 Cambodia 29.76 China 20.69 China
15.68
3 Korea 10.89 Vietnam 5.58 Cambodia 14.91 China 22.05 Korea 9.89 Vietnam 6.10
4 USA 5.59 Singapore 4.81 Malaysia 8.53 Vietnam 8.65 Japan 9.15 Thailand 4.37
5 Israel 2.63 Russia 3.84 Vietnam 5.23 Malaysia 3.03 Malaysia 6.04 Korea 1.76
6 Russia 0.92 Thailand 3.53 Portugal 1.66 Korea 2.10 Thailand 4.53 Japan 1.59
7 U.K 0.59 Korea 2.89 Australia 1.65 U.S.A 1.78 Vietnam 2.89 Malaysia 1.04
8 Austria 0.54 India 1.90 Singapore 1.02 Japan 0.83 Singapore 2.59 Singapore 1.03
9 Vietnam 0.51 Malaysia 1.19 Denmark 0.97 Australia 0.31 U.K 0.51 UK 0.43
10 France 0.50 Japan 0.20 Japan 0.86 Singapore
0.20 U.S.A 0.42 France
0.27
11 Others 1.28 Others 0.32 Others 1.35 Others 0.35 Others 1.21 Others 0.96
Investment Ranking (2008-2013)
15 Strengthening Value-Supply Chains Connectivity in the Mekong Sub-region
Reasons to invest in Cambodia
Political stability and open economy
Sound Macroeconomic Environment
Competitive Investment Incentives
Young and dynamic labor force (median age: 24 years old)
Low Labor Cost
Strategic Location
Preferential Trading Status
Market access to major world markets on duty-free quota free basis
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III – Updating investment and business
environment in Cambodia
17 Strengthening Value-Supply Chains Connectivity in the Mekong Sub-region
Infrastructure - Improvement of domestic and cross border connections
• Phnom Penh – Ho Chi Minh City
Expressway Plan ( travel time and
cost savings, bilateral trade up 40%,
border crossing up 53%, special
border economic zones creating jobs)
• Bridge (Nek Leoung Bridge,
Cambodia and China Friendship
Bridge,…) and road constructions (
National Road number 5, and 6,…) are
being built.
• New Phnom Penh Port is built and
operated with capacity 150,000 TEUs,
will be expanded to 300,000 TEUs by
2015, and 500,000 TEUs after 2017.
• Sihanokville Port has one jetty and
two wharfs:
The old Jetty have two berths for 10 000
DWT and 7 000 DWT vessels at a time.
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Infrastructure – Special Economic Zone
From 1994 to 2014: 34
SEZs have been approved
which has 92 factories are
being operated.
An informal Bilateral
Meeting on Cambodia-
Thailand Joint Special
Economic Zone Development
Cooperation for the Border
areas of Bantey Meanchey-Sa
Kaeo and Koh Kong-Trat.
A new SEZ will be
established near by New
Phnom Penh Port, and this
project is under preparatory
survey by JICA.
19 Strengthening Value-Supply Chains Connectivity in the Mekong Sub-region
Infrastructure Power Supply
By 2013, Cambodia has electricity supply about 1100MW.
Cambodia will get power supply from hydroelectricity dam 584 MW by 2015 and coal power plant 505MW by 2016.
Cross-border transportation
Royal government signed and ratified to 17
annexes and 3 protocols under Cross Border
Transportation Agreement (CBTA).
Bilateral agreement with neighboring
countries:
With Vietnam: 500 vehicles ( 98 trucks )
With Thailand: 40 vehicles ( 4 trucks )
With Laos PDR: 40 vehicles
20 Strengthening Value-Supply Chains Connectivity in the Mekong Sub-region
In the process of revising the law on investment (1994) and
the law on the Amendment to the Law on Investment (2003)
Establishing of the law on Special Economic Zone (currently
only in the form of sub-decree).
Drafting on Industrial Development Policy 2014-2020
Policy and regulatory framework
21 Strengthening Value-Supply Chains Connectivity in the Mekong Sub-region
Strengthening harmony in industrial relations between workers,
employees, and employers through adoption of the law on trade union,
updating labor law.
Mechanism for reviewing and setting minimum wages.
Adopted sub-decree on Cambodian National Qualification Framework.
Updating the education strategy plan, master plan on ICT in education
and policy on Research Development in Education.
Enhancing human resource capacity in science, technology and
vocational training, in priority sector: agriculture, industrial, energy, ICT,
infrastructure, engineering, and health care.
Labour market
22 Strengthening Value-Supply Chains Connectivity in the Mekong Sub-region
Business consultation Government-Private Sector Forum (G-PSF)
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Government Private Sector Forum (G-PSF)
(Chair by Prime Minister)
Sectoral Consultative Mechanism
(MEF/CDC)
Technical Working Groups:
1. Agriculture and Agro-Industry
2. Tourism
3. Manufacturing and Distribution
4. Legislation, Taxation and
Governance
5. Services, including Banking and
Financial Services
6. Energy, Infrastructure &
Transport
7. Export Processing & Trade
Facilitation
8. Industrial Relations
9. Paddy Rice and Milled Rice
10.Mine and Energy
Policy and Strategy Mechanism
Steering Committee for PSD
(MEF/MOC)
Sub-committee of
Investment Climate
and PPI
MEF/CDC
(World Bank)
Sub-committee of
Trade Development
and Trade-Related
Investment
MOC
(World
Bank/UNDP)
Sub-committee
of SME
MIME
(ADB)
Development Partners of PSD Coordination
Mechanism (World Bank)
Strengthening Value-Supply Chains Connectivity in the Mekong Sub-region
Outcomes from the 17th Government-Private sector forum held on March 4th, 2014
Further reduction of 20% of the scanning fee is approved. Scanning fee for 40ft
container will decline from USD 40 to USD 32 and for 20ft container will decline
from USD 25 to USD 20. The Ministry of Economy and Finance will prepare
Prakas for implementing this by 1st April 2014.
An inspection on export goods for risk management will be done to the maximum
at 2% (formerly 5%) of total containers for exporting to trade partners
Incentives on the import of raw materials for producing luggage, handbag and hat
and similar products for export as provided to the garment and footwear
industries.
Approved on the establishment of Cambodia Rice Federation (CRF)
Business consultation Government-Private Sector Forum (G-PSF)
24 Strengthening Value-Supply Chains Connectivity in the Mekong Sub-region
IV – Opportunities: 3 strategic paths
1. Upstream value-
added
• Bicycle parts
• Fibre, yarn, fabric
production for garment
manufacturing
2. Downstream
value-added
• Higher value added
for agro-industry
3. Involve in regional
production chain
• Wire harness
• Motor bike ignition
• Miniature motors
There are 12 out of 92
factories which are
focusing on spare-part,
assembly, electric, and
bicycle in Special
Economic Zones.
25
1998
2012
Source: Atlas of Economic Complexity
Type Cultivated Area (2013) Yield (2013) Cult. Area (2018)
Yield (2018)
Rubber 328,771 ha (P. estate17%,
ECL 41%, smallholder 42%)
(Mature: 78,493ha)
85,244 tons >420,000 ha 400,000 tons
Paddy 3,052,420 ha 9,389,961 tons 3,34 million ha 10,85 million tons
Cassava 377,239 ha 7,933,381 tons N/A N/A
Corn 180,327 ha
848,450 tons N/A N/A
Thank you
26 Strengthening Value-Supply Chains Connectivity in the Mekong Sub-region