Cambodia: Policy against economic risks turns to action

PHNOM PENH (The Phnom Penh Post/ANN) - The Ministry of Economy and Finance on Tuesday issued two separate letters to its General Department of Taxation (GDT) and its General Department of Customs and Excise (GDCE) ordering immediate action to mitigate risk to the Kingdom’s economy.

The Ministry of Economy and Finance on Tuesday issued two separate
letters to its General Department of Taxation (GDT) and its General
Department of Customs and Excise (GDCE) ordering immediate action to
mitigate risk to the Kingdom’s economy.

This comes a day after Prime Minister Hun Sen unveiled policy to
support the garment and tourism sectors, which have been hardest hit by
the EU’s partial withdrawal of its Everything But Arms (EBA) scheme and
the ongoing Covid-19 outbreak.

A ministry announcement on Tuesday said: “To support the
garment and tourism industries and economic growth in the context of
Covid-19 outbreak and the suspension of Everything But Arms, the
government outlined a number of urgent actions for the GDT and the GDCE
to follow and mitigate risk to the economy.”

The GDCE must extend its Green Lane customs clearance system to
accommodate more imports of raw materials, accessories and parts to
support production in the garment sector, the announcement said.

However, it must continue to implement post-clearance audit pursuant to the Law on Customs and relevant laws and regulations.

The department must work closely with the Garment Manufacturers
Association in Cambodia (GMAC) to discuss with freight forwarders and
customs brokers and determine fair service fees.

“To ensure efficient implementation, the GDCE must cooperate and
coordinate with relevant stakeholders such as international port
authorities and forwarders to ensure that all services are implemented
smoothly and promptly,” the announcement said.

Speaking to reporters at the Peace Palace in Phnom Penh on Monday,
Hun Sen said the government has drafted a four-point plan to navigate
the crisis.

A small number of factories, he said, are likely to lay off employees
in the coming weeks as they run out of raw materials – which come
mostly from China – and are forced to shut down temporarily.

To face these issues, he said, the government has drafted a
four-point strategy. First, it is considering a six-month to one-year
tax moratorium for the worst-hit factories. The ministry has been
charged with deciding if and how the moratorium will be granted.

The second and third points only concern factories that shut down
their operations in the upcoming weeks due to a lack of raw materials.
These factories will not be required to contribute to the National
Social Security Fund while closed.

Likewise, these factories will have to pay workers only 40 per cent
of the minimum wage, which now stands at $190. The government will pay
workers 20 per cent of the minimum wage.

“In short, each worker will receive about 60 per cent of the minimum wages, amounting to $120,” he said.

The government on Monday unveiled an emergency tax moratorium of four months for hotels and guesthouses in Siem Reap province.

It also announced the suspension of the four per cent stamp duty tax
on property worth less than $70,000 between this month and January next
year.

The prime minister said: “The property tax exemption aims to support
small and medium-sized property developers, and help low to
middle-income earners obtain their own home.

“Moreover, sales of affordable housing project units, which
originally targeted government officers, should be available to the
public as well.”

The government is allocating $50 million to support small and
medium-sized enterprises (SMEs) in the agricultural sector. The funds
can be accessed in the form of low-interest loans through the
state-owned Rural Development Bank (RDB).

GMAC on Tuesday lauded the immediate action taken by the government in response to the garment industry challenges.

“The prime minister’s official announcement has appeased our concerns
and we express our gratitude for the detailed and timely measures laid
out by the government to maximally mitigate the impact caused by the
Covid-19 outbreak and the partial withdraw of EBA.

“We will continue to participate in consultations with the ministries
and relevant institutions on the implementation of the policy, which
will solve [industry] challenges and will definitely placate investor
sentiment,” said GMAC.

The EU Commission on February 12 announced the partial withdrawal of
EBA, citing a serious and systematic violation by Cambodia of principles
in the four core human and labour rights.

The suspension affects one-fifth or €1 billion ($1.08 billion) of Cambodia’s annual exports to the EU’s 27-nation bloc.

Economic analyst Chan Sophal said Cambodia has to pay 20 per cent tax
for exports to the European Community with 80 per cent of the items
still being exempt from tax.

The primary assessment of 20 per cent tax on exports amounts to about $100 million per year.

Photos