Cambodia's Policy against economic risks turns to action

PHNOM PENH (The Phnom Penh Post/ANN) - The Ministry of Economy and Finance issued two separate letters to its GDT and its 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.

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