Enterprise Policy Responses to COVID-19 in ASEAN: Measures to boost MSME resilience

OECD, Enterprise Policy Responses to COVID-19 in ASEAN: Measures to boost MSME resilience (p.35-27)

Policy Insight

 A.2 Cambodia

As of 23 June 2020, there were 129 reported cases of COVID-19 in Cambodia, and zero
virus-related deaths (WHO, 2020). The government has announced foreigners wishing to
travel to Cambodia need to obtain a visa at a Cambodian diplomatic mission abroad, a
health certificate before departure, and sufficient travel insurance. Migrant workers
returning from Thailand are to self-isolate for 14 days. Schools and casinos are closed and
the government has banned public events with more than 50 participants. The government
has approved a draft law for state of emergency, which is being forwarded to the National
Assembly.

The garment sector is affected more than other sectors accounting for 80% of the country’s
exports. Hence the facilitation of the import of raw materials and mid-finished components
for production and assembly in the country, ready for export has been carried out (ASEAN
Briefing, 2020). Despite slowing a little in 2019, growth remained strong as garment
manufacturing, construction, and tourism continued to expand. The current account deficit widened significantly. Growth is expected to slow sharply in 2020 as export growth eases
following partial suspension by the European Union of trade preferences for Cambodia and
as the external environment worsens under COVID-19. Issuing government bonds in local
currency would promote the development of local capital markets and domestic investment
(ADB, 2020).

Cambodia’s SME policy has principally focused on improving the legal and regulatory
environment to support SME development. The country is at a relatively early phase in the
development of targeted SME policies, but it has undergone a wave of long-term economic
planning over recent years with the aim of accelerating diversification and maintaining
robust economic growth. Cambodia counted 513 759 enterprises in 2014, according to the
last economic census, of which 99.8% were MSMEs, mainly micro enterprises (97.6%).
SMEs provide a similar structural contribution to the economy as in OECD countries,
accounting for around 71.7% of employment, with micro enterprises accounting for 58.3%
of employment. Information is not collected on their contribution to GDP or value added
(OECD, 2018).

Socio-economic stimulus packages
New measures of the National Bank of Cambodia (NBC) allows banks and other financial
institutions to have stronger liquidity and to continue lending to the private sector amid the
COVID-19 pandemic. Some of the important measures include:
● Delaying additional increases in the Capital Conservation Buffer.
● Cutting the interest rate on Negotiable Certificates of Deposit, hence encourage to
disburse loans.
● Cutting the interest rate in its Liquidity Providing Collateralized Operations,
decreasing banks funding costs in domestic currency.
● Lowering required reserves that banking and financial institutions must maintain at the
National Bank of Cambodia both for local (riel) and foreign currencies; the NBC has
also issues guidelines to financial institutions on loan restructuring for borrowers
experiencing difficulties in priority sectors like tourism, garments, construction,
transportation and logistics (IMF, 2020). 

Fiscal measures
The government has put aside between USD 800 million to USD 2 billion to help the
economy weather this crisis. A package of tax concessions, expenditure support (including
wage subsidies), and credit support has been announced. Savings on current spending of
about USD 30 million are also planned with capital spending to be streamlined by around
USD 370 million. The government will disburse special low-interest loans to specialized
banks, in addition to packages issued to SMEs and rice producers. On 25 February,
Cambodia issued regulations to support businesses recently impacted by the outbreak that
provides tax breaks and holidays for the country’s manufacturing, tourism, agriculture, and
property industries.

Deferral measures
• Tax holidays of six months to one year for textile and garment factories; extending the
number of products that qualify for the ‘green lane’ custom clearance (which would be
immediately assessed and issued custom clearance documents).
• To support the tourism sector, hotels and guesthouses located in the Siem Reap
province exempted from paying tax up to May 2020.
• 4% stamp duty tax exemption on the transfer of residential properties from February
2020 to January 2021 with a hope to support SME sized property developers to
purchase houses (ASEAN Briefing, 2020).

Direct assistance to companies
• USD 50 million in low-interest loans have been allocated to help SMEs in the
agriculture sector.
• Stimulus package given to those businesses that are legally registered and verified, also
to incentivize informal SME owners to formally register for both the benefit of their
businesses and employees.
• Relief package for garment workers who are made to take enforced leave if factories
close because of the outbreak.
• To support the agriculture sector, the government is allocating USD 50 million in the
form of low-interest loans to help SMEs (ASEAN Briefing, 2020).

Other measures
• The ADB and the ILO have been helping the National Social Protection Council
(NSPC) and the Ministry of Economy and Finance (MEF) to develop a financing model
for a social protection system that could also cover informal workers.