Prime Minister Hun Sen on Friday announced government plans for large-scale economic reforms, outlining a 17-point strategy to stimulate economic growth that he said could save the private sector up to $400 million a year.
The strategy included a number of key money-saving initiatives for private businesses, including reducing costs associated with shipping, port service fees and electricity, as well as a reform of railway operation management.
In addition, the announcement also outlined plans to reduce the number of national holidays, introduce fiscal incentives on tax and customs, and expedite the completion of amendments to the Law on Investment and the Law on Special Economic Zones.
Speaking at the 18th Government-Private Sector Forum last Friday, the prime minister said: “With these measures, we will reduce costs [for the private sector] by approximately $400 million.”
Hun Sen said the reforms will allow Cambodia to continue being competitive with its exports if the EU removes the Kingdom’s access to the Everything But Arms (EBA) scheme.
“If the EU requires us to pay duty [on exports], we will be able to pay it . . . but if we keep the [tariff] preferences, it’s also a good thing. But do not let them instruct us that ‘you have to do this, you have to do that’, and if we do not follow what they say, they will cut the EBA,” he stressed.
In February, the EU announced it had officially launched the process to withdraw the Kingdom’s access to the EBA scheme, citing “serious” human rights violations and a backsliding of democracy as the reasons.
A decision on whether access is taken away is due to come 12 months after the process officially began, according to the withdrawal procedure.
Earlier this month an EU delegation conducted an official two-day visit as part of the review and monitoring process.
EBA withdrawal is a major concern for businesses operating in Cambodia, particularly those in the textile sector, with the scheme reported to be worth $676 million annually to the Kingdom.
Among the reforms, Hun Sen also reiterated other recently enacted policies – including the removal of Camcontrol from land border check-points and Camsab from ports, as well as tax incentives for small and medium enterprises and the agriculture sector.
The prime minister said the measures will reduce logistical costs for the private sector by lifting service fees at terminals and state ports, facilitating savings worth $6.7 million a year.
With respect to customs tax reforms, the prime minister said that from April 1 onwards, all services provided by the General Department of Customs and Excises for businesses will require the issuance of computerised invoices, thereby ensuring service fees do not exceed the prices listed, as well as offering improved transparency.
Additionally, the Ministry of Economy and Finance stated it will cut scanning fees for container exports and imports by 50 per cent – from $20 to $10 for a 20-foot container and from $32 to $16 for a 40-foot container.
The prime minister also advised the Council for the Development of Cambodia to have completed amendments to the Law on Investment and the Law on Special Economic Zones by the first half of this year.
Electricity rates were also addressed, with Hun Sen stating that prices will be cut this year for several types of users. These included an electricity price cut of $0.02 per kilowatt-hour for industrial users and plans to further reduce prices for skill-based industries and high-capital industries.
National holidays were also on the agenda, as the prime minister announced seven national holidays would be scrapped starting next year. He explained that Cambodia has 28 to 30 national holidays a year, while Singapore has only 11, Laos 12, Vietnam 13 and Thailand 16.
The cut in holidays is a move designed to increase efficiency and raise Cambodia’s appeal as an investment destination for foreign companies, he said.
Lim Heng, the Cambodian Chamber of Commerce vice-president, said the private sector has long requested that the government enact these reforms to help lower production costs.
This large scale reform will help to make the private sector more robust, especially as it will increase revenues, he said.
“This response is a government surgery to help the private sector by reducing production costs,” he said.
Additional reporting from Hin Pisei