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Gov’t outlines strategy to strengthen economy

Gov’t outlines strategy to strengthen economy

Minister of Economy and Finance Aun Pornmoniroth said the positive collaboration between the government ministries and institutions with the private sector has contributed to good progress in the implementation of the Industrial Development Policy (IDP).

Pornmoniroth, who chaired a meeting of the Committee on Economic and Financial Policy concerning the Progress of IDP 2017-2018 on Tuesday at the ministry, said IDP 2015-2025 is now being implemented to serve as a strategy for growth.

He said that its main focus was on reform via economic diversification, enhanced competitiveness, improved productivity and an increase in skilled labour.

The IDP 2015-2025 says the government aims to increase the GDP share of the industrial sector to 30 per cent by 2025 from 24.1 per cent.

It also aims to diversify the export of goods by raising garment and textile exports to 20 per cent and that of non-textiles to 15 per cent, while promoting the export of processed agricultural products to 12 per cent of all exports by 2025.

“We highly value the efforts from the Council for the Development of Cambodia (CDC), ministries and relevant institutions for implementing the IDP.

“We encourage all the ministries and relevant stakeholders to continue cooperating with each other,” said Pornmoniroth.

Garment Manufacturers Association in Cambodia (GMAC) deputy secretary-general Kaing Monika said the overall progress was positive, but warned that although physical infrastructure for transportation and logistics had been upgraded and certain processes have been simplified or modernised, the cost has not really come down.

“This is due to the non-transparent fees like clearance related charges and terminal handling charges (THC) from shipping companies.

“Last year the Prime Minister announced a reduction in THC, but the benefit has not been passed down to the end customers, especially our garment manufacturers and exporters.

“Ironically, some shipping lines have recently announced an increase in their THC,” he said.

In logistics, he said there are a number of middlemen and brokers. “When there are non-transparent fees, it provides an opportunity for unethical middleman and brokers to play around with them and pass the blame.

“The inflated amount of fees is far above the private service charge, and leaves people out of pocket,” he said.

Monika also said that charges were not consistent. “For example on overtime work, Customs officials do not charge double, but some forwarders or logistics companies can charge the importer/exporter double.

“The clearance charge is supposed to be calculated based on the number of containers, but some forwarders or logistics companies charge all importers/exporter the same amount.

“This is usually the clearance cost multiplied by the number of importers/exporters.

“It’s a serious issue for small value exports because the clearance cost could represent a very high percentage of the products’ selling cost.”

The Ministry’s press statement said the government continues to reduce the cost of electricity, implement transport and logistics planning, enhance the labour force, train more skilled labour and develop and transform Sihanoukville province into a multi-purpose industrial zone.

On the electricity cost, Monika expressed appreciation for the government’s gradual reductions but said it is not substantial enough to boost competitiveness. “With solar energy, there is no incentive for individual companies to install rooftop panels.

“We have issues in high capacity charge for both solar and non-solar energy users. There is a rationale behind the capacity charge, but it’s just too high,” he said.

Monika also said the minimum wage has gone up too fast in the last few years, further eroding Cambodia’s competitiveness. The rate of the wage increase, he said, has moved faster than that of productivity growth.

“How can we compete against Vietnam at the same level of wage, when their other costs are lower and they have more working days?

“With the serious impact of Covid-19 and the EU’s partial withdrawal of its Everything But Arms (EBA) scheme, the government should consider skipping the minimum wage negotiation this year. Minimum wage negotiations should only resume in 2021,” Monika said.

Cambodia exported more than $7.97 billion worth of garments, textiles and footwear products in the first nine months of last year – up 13.18 per cent year-on-year from $7.044 billion, according to a General Department of Customs and Excise report.

The US accounted for $2.5 billion worth of the exports and the EU $2.4 billion – with $670 million going to the UK alone – Japan ($711 million), and Asean member states $121 million.

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