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Tourism co-financing scheme launched

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Finance minister Aun Pornmoniroth at The Dissemination Ceremony on the Implementation of the Tourism Recovery Co-Financing Scheme, on May 17. FINANCE MINISTRY

Tourism co-financing scheme launched

The government has announced the implementation of the $150 million Tourism Recovery Co-Financing Scheme (TRCS), with loans to be disbursed equally through the SME Bank, commercial banks and microfinance institutions (MFI).

The scheme was financed by a counterpart fund between the government and financial institutions, with $75 million of the national budget to be disbursed in the form of loans issued by state-run Small and Medium-sized Enterprise Bank of Cambodia Plc (SME Bank), and the other $75 million through loans made via commercial banks and MFIs.

Key offerings of the project include a maximum interest rate of 6.5 per cent per annum, a 12-month grace period, loan term of up to seven years, loan amount of up to $400,000 and the option of receiving funds in either riel or US dollars.

Although the scheme also appears to be open to businesses from all sectors, the government has particularly encouraged hotels, guesthouses, restaurants and tourism sector suppliers to apply.

The co-financing project aims to address the lack of financing of tourism-related businesses and promote the recovery of the tourism sector.

It also seeks to stabilise, improve and expand businesses’ potential by supporting them in their reopening, through means including facilities modernisation and enterprise expansion, as well as the diversification of tourism services to accommodate more international tourist needs in anticipation for when the Covid-19 crisis tapers off.

Minister of Economy and Finance Aun Pornmoniroth said that, though the country’s tourism sector has shown significant signs of recovery, enterprises continue to face challenges such as a failure to capitalise on digital business models, lack of refined hospitality skills and lack of capital, including working capital and funds to improve and expand their business operations to maintain competitiveness.

“The financing of enterprises in the tourism sector is a necessary measure to help them recover and to strengthen their competitiveness,” he said, adding that the reform of the tourism sector will turn Cambodia into a major tourist destination both regionally and globally.

The co-financing project is part of the “The Strategic Framework and Programmes for Economic Recovery in the Context of Living with Covid-19 in a New Normal 2021-2023”, a comprehensive roadmap to safely guide the economy as the novel coronavirus becomes endemic, which the government announced last year would be implemented starting December 2021.

Minister of Tourism Thong Khon noted that the number of tourism businesses that have reopened is still low. As of March 31, 1,428 tourism businesses are still closed or suspended, while more than 20,000 sector workers are still impacted and unable to return to pre-pandemic employment arrangements.

He added that nearly 97 per cent of tourism businesses reported cash flow problems and a lack of funds for repairs and reopening, and noted that businesses that have been able to reopen are largely high-end businesses financed by overseas parent companies.

“The tourism ministry believes that the implementation of the $150 million tourism co-financing programme … will not only contribute to the rehabilitation of small- and medium-sized tourism businesses that lack funding to improve their offerings, but also help new and small businesses in the sector thrive,” he said.

Pacific Asia Travel Association (PATA) Cambodia chapter chairman Thourn Sinan welcomed the co-financing scheme, saying it would lead to tourism infrastructure reform in the country, especially for resorts, hotels, restaurants and tour companies.

He added that the tourism sector is now in need of financial aid in order to be able to take advantage of the slow but steady return of the world to normalcy.

“Lower interest rates of between three and four per cent are what the private sector wants most,” he said, as it would allow businesses to make needed improvements and renovations, adding that he hoped there would be more tax breaks for the sector.

Kim Nou, owner of the Maisons Wat Kor hotel in Battambang province, said the co-financing project’s low-interest rates would boost growth in the tourism sector by allowing businesses to reopen, kickstarting the revival of the tourism sector in preparation for the return of international tourists.

He said that the Covid-19 crisis has led to a large number of hotels in the province temporarily closing, noting that they require large amounts of money for repairs to be able to reopen.

“The $150 million interest rate co-financing scheme is very beneficial for tourism-related businesses, especially in the hotel sector,” Nou said. “In the past, obtaining financing from commercial banks was difficult due to high interest rates, as well as more complicated terms and procedures.

“Although the budget of $150 million is relatively limited, at least it will help to an extent.”

According to data from the tourism ministry, Cambodia welcomed a total of 196,495 international tourists in 2021, marking a sharp 85 per cent decrease from 2020 figures. International tourist revenue was $184 million dollars, down 82 per cent from $1.023 billion in 2020.

Last year, the tourism sector represented 1.8 per cent of gross domestic product (GDP), falling from three per cent in 2020.

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