Cambodia – Business confidence down in 2020: EuroCham member survey

• May 25, 2021

Business confidence among EuroCham Cambodia’s membership has dropped over the past year but silver linings in the business climate offer some glimmers of hope for a post-Covid turnaround, according to their Business Confidence Survey 2021.

EuroCham has released a business confidence index every two years since 2015. This year’s score of 46.1 represented a drop of 6.8 points from 2019’s high water score to date of 52.9. In 2017, the index stood at 48.8, which was a slight decline from the 2015 index of 50.4.

The report noted that Covid-19 likely played a large role in the decline in business confidence but the overall decline was not as drastic as expected.

Several EuroCham member businesses expressed plans to grow in 2021 partly because of improved infrastructure and improved human resources combined with less perceived obstacles regarding unfair competition and taxation.

The survey queried 111 members representing more than 20 sectors on their assessment of the business environment in 2020 and their thoughts on business prospects for 2021.

While Covid-19 may not have dramatically dampened outlooks, 87 percent of survey respondents estimated a loss of revenue from pandemic-related factors. A majority (23 percent) of businesses reported a 20 to 30 percent loss of revenue while 39 percent reported a loss of 30 to more than 50 percent.

The most-affected departments were sales (77 percent), operations (55 percent) and finance and cash flow (53 percent).

To help offset losses caused by the pandemic, more than half (64 percent) of businesses reported that they would like to see the government offer a corporate income tax rebate for 2020, 48 percent said they would like taxes to be deferred and 36 percent requested improvements in e-commerce and cashless transactions.

The low cost of human resources was listed as the top competitive advantage by respondents (69 percent) in 2020 and they listed an increased availability of human resources as another positive development over the past year.

However, concerns were noted related to worker productivity and retention.

The biggest obstacles to doing business, according to respondents, was “non-transparent practices and unofficial fees”.

In more positive trends, taxation was mentioned as less of a challenge for businesses and improvements in infrastructure increased business confidence. However, businesses reported a desire to ease obstacles regarding bureaucratic procedures.

Only 12 percent of respondents reported that it became easier to do business in the Kingdom, compared with 18 percent in 2019 survey.

Profitability was one area hit hard by Covid-19, with 77 percent of businesses reporting they did not reach their profit targets over the past year, compared with 32 percent in 2019.

Concerning trade agreements and preferences, most businesses (67 percent) said they had not been affected by the partial removal of the Everything But Arms (EBA) preferential trade deal with the European Union.

The Cambodia-China Free Trade Agreement (CCFTA) and the Regional Comprehensive Economic Partnership (RECP) appeared to have instilled confidence in businesses, as 33 percent reported that the CCFTA will improve their businesses with only 11 percent reporting it would negatively affect their operations.

There were almost no negative associations with RECP (2 percent) whereas 40 percent of businesses expect it to positively affect their business and 58 percent perceived it to have no effect at all.

The most influential determinant to increased investment potential may be ensuring fair taxation enforcement and a fair playing field.

“With more compliant investors entering the market to utilise the Kingdom’s competitive advantages and service rapidly growing demand, our results show that businesses are willing to invest further to increase the quality of their products and services – as long as they are provided with appropriate support and a level playing field,” the report said.

“Cambodia has a very dynamic business environment. Its sustainability would be strengthened even further through clearer and more transparent implementation of business procedures.”

Source: https://www.khmertimeskh.com/50861798/business-confidence-down-in-2020-eurocham-member-survey/