IMF says Cambodia should strengthen banks

Wednesday, December 09, 2009
ABC Radio Australia

The International Monetary Fund has called on Cambodia to strengthen its banking system as the country struggles to pull out of a deep recession.

An IMF report - issued after talks with Cambodian authorities - says the recession and a sharp decline in property prices have further weakened the banks.

Now as the economy recovers, the IMF says Cambodia should safeguard its macroeconomic stability and reinforce the banking system.

The IMF projects Cambodia's economy will contract by 2.7 per cent this year before recovering to a growth of 4.3 per cent in 2010.

Cambodia had enjoyed strong growth in the years leading up the global financial crisis.

"Following a decade of high economic growth - 8.0 per cent per year on average -- and significant poverty reduction, Cambodia's economy has been hard hit by the global crisis," the IMF said.

Plunges in the export and tourism sectors also caused a slowdown in construction, which along with falling agriculture prices, depressed rural incomes in one of the world's poorest countries.

A shrinking economy and declining property prices have exacerbated strains caused by weak risk management, earlier supervisory lapses, and excessive credit growth.

The IMF encouraged Cambodia to continue strengthening its banking supervision.

"Immediate priorities should include strict enforcement of the new asset classification regime, prompt implementation of corrective action plans, development of a comprehensive bank restructuring framework, and increased supervision capacity," it said.

Auto importers feel the pain as global crisis cuts sales

A Ford dealership in Phnom Penh. Ford has fared better than other companies in Cambodia, yet has seen sales slip 10 percent. (Photo by: GEORGE MCLEOD)

Wednesday, 24 December 2008
Written by Nguon Sovan
The Phnom Penh Post

With global automobile sales in freefall, local dealers are expecting the worst as some importers predict a drop of more than 40 percent over two years

AMID tumbling real estate values and growing concern over the local implications of the global economic slowdown, Cambodia's auto sales are expected to drop as much as 40 percent over the next two years, economists and auto distributors say.

"We predict car demand in Cambodia will drop by as much as 40 percent within the next two years," said Kong Nuon, president of Toyota distributor TTHK Co Ltd on Sunday.

The declines in local sales come as the global market plummets with Toyota forecast it first reported loss Monday and US auto giants on the brink of bankruptcy.

"Unpopular models may face higher declines," he said, adding that the previously booming real estate market had fuelled an increase in consumer spending on automobiles.

Kong Nuon estimated that demand for new car models in Cambodia was about 2,800 per year on average, with an additional 20,000 second-hand cars changing owners annually.

Toyota remains the Kingdom's most popular import maker, with up to 70 percent market share, he said.

"In past years, six importers brought in an estimated 300 Toyota models each per year," Kong Nuon said, adding that TTHK Co inked an agreement with the Toyota Motor Corp last week to become the exclusive distributor of Toyotas in Cambodia.

"With the global crisis ... It is impossible for auto sales to increase next year. "

"From now on, we have exclusive rights to distribute Toyotas. We have submitted documents to register with the Commerce Ministry to help curb any further imports of Toyotas by other importers," Kong Nuon said.

But the dire state of international markets and a local economy marked by rising commodity prices and shrinking real estate and construction sectors have stripped Toyota of up to 40 percent of annual sales over last year.

The sales slowdown could have indirect implications for Cambodia's auto industry as importers face cutbacks.

TTHK currently employs 88 people and has no immediate plans for layoffs, but the company has been forced to cut expenses by 10 percent, Kong Nuon said.

Ford still strong
But Ngorn Saing, deputy general manager of RM Asia, a Ford distributor and Cambodia's second-largest automobile importer, said Monday its sales could see a rise of up to 10 percent next year.

"Our customers are mostly businesspeople rather than those who have made profits on real estate," he said.

Sales of Ford models this year have dropped just 10 percent over last year, Ngorn Saing said.

Kang Chandararot, president of the Cambodia Institute of Development Study, told the Post Monday that a drop over the next two years was likely because of its traditional link to the property sector.

"With the global crisis and a recession in Cambodia's real estate market, it is impossible for auto sales to increase next year," he said, adding that it could take until 2010 for a recovery.