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Good Monday morning! Before we get to The Memo proper, please take a moment and have a read of this important environmental story about the Mekong River by Laura Bicker by way of the BBC. It’s well written (and well presented!) and touches on the impact this river has had on generations of residents and how economic demands are now pushing them to the brink of despair.
⭐️ BBC: Last Chance to Save a Mighty River
Drop in GFT Exports Signals Trouble
Cambodia's garment, footwear, and travel goods (GFT) exports have declined by nearly 17% in the January-October period of 2023, falling to $8.96 billion from $10.78 billion in the same period last year. This sector, crucial to Cambodia's economy, has been hit hard by the deteriorating global economic climate and reduced demand from key markets like the US and EU. Despite other sectors showing growth, the GFT sector's downturn poses a risk of job losses and reflects the impact of international conflicts and changes in trade preferences, such as the non-renewal of the Generalized System of Preferences (GSP) by the US and reduction in Everything But Arms (EBA) benefits by the EU.
Read more: Khmer Times
DFDL: 2024 Compliance Deadlines and Incentives
Cambodia has set deadlines and announced several tax incentives for 2024, impacting enterprises and their operations. The deadline for foreign employee quota applications is November 30, 2023, with a cap of 10% of local workforce and options to apply for excess hiring under special conditions.
In tax incentives, the government extended the Capital Gains Tax delay until the end of 2024 and continued Stamp Duty exemptions for certain property transfers. Agricultural sector incentives, including VAT and Minimum Tax exemptions, have been extended to 2025. The Qualified Investment Project incentives include tax exemptions and suspension of Pre-payment of Tax on Income for certain industries until 2025. Voluntary Disclosure Incentives will expire by June 2024, and new Tax Administration Reforms aim for greater transparency and standards. The government also introduced customs processing fee exemptions and an electronic system for cargo declaration, effective January 1, 2024. Notably, the "Visit Siem Reap 2024" tourism promotion initiative provides tax exemptions and audit relaxations to boost the sector's recovery.
Dollar Dominance Impedes Fiscal Policy Freedom
Cambodia's high dollarization level has been a double-edged sword, supporting economic stability yet limiting the effectiveness of monetary policy, according to Chea Serey, Governor of the National Bank. While promoting economic growth and stability over the past two decades, the prevalence of the dollar has made the economy more vulnerable and overly reliant on fiscal policy. Efforts to enhance use of the Cambodian riel show progress, but the challenge of reversing high dollar usage persists, demanding both incentive and supportive policies in order to allow the bank more leeway in setting fiscal policy.
Read more: Kiripost
Leases and Loopholes for Foreign RE Investors
Cambodia's stance on real estate ownership by foreigners is clear: while direct ownership remains off-limits, the government feels that it offers extensive lease options. Prime Minister Hun Manet reaffirmed the constitutional prohibition against foreign land ownership but highlighted alternatives like long-term leases ranging from 15 to 50 years, extendable by another 50. These leases provide rights akin to ownership, including use and transfer. Foreigners can also buy land through Cambodian representatives or trusts, albeit with specific legal arrangements to safeguard investors' interests.
China Funds Infrastructure, Boosts Trade
Over $3.3 billion in Chinese funds have been invested in Cambodia's construction projects, significantly developing the country's infrastructure and has led to the construction of over 3,000 km of roads and numerous bridges. Deputy PM Sun Chanthol emphasized the importance of these projects in connecting Cambodia with China and ASEAN countries, and requested expedited Chinese support for further development.
Bilateral trade between the two nations has risen nearly 5% over last year’s figure, topping US$10 billion YTD. Nearly 90% of the trade value is export from China to Cambodia because apparently many of the imported goods are raw materials which are finished in Cambodia and then re-exported to other international markets.
Anti-Counterfeit Unit’s Revamp and Relaunch
The Interior Ministry has been directed to expedite the restructuring of the suspended Cambodian Counter Counterfeit Committee (CCCC). This move follows the unit's nationwide halt in September due to corruption allegations, revealed by a leaked phone call. The CCCC, seen by the business community as being crucial in combating poor-quality goods, is expected to restart operations shortly. The restructuring is intended to refine procedures and target the ongoing issue of counterfeit products, which include food, cosmetics, medical supplies, and alcohol which are a bane to legitimate manufacturers and importers
Read more: Khmer Times
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