Due to the effect of the global economic slowdown, the large-scale investments in Cambodia are slowing down. It is hopeful that small and medium enterprises (SMEs) play an important role in improving economic development and creating sustainable employment and income, said Cham Prasidh, Ministry of Commerce, at the Tuesday’s meeting in Phnom Penh.
The meeting came a day after the release of three highly critical reports on the state of the Cambodian economy from the UNDP, the World Bank, the International Finance Corporation and the Asian Foundation. The World Bank report showing that a lack of regulation, widespread corruption and a poorly skilled labor force are hampering business growth.
“A multitude of barriers are preventing Cambodia’s business community from gaining access to finance,” Cham Prasidh was quoted by the Cambodia Daily as saying.
“This will include a new facility to provide loans to SMEs in agriculture and agribusiness to be launched tentatively in fall, 2009,” the government said in a joint statement with UNDP and the International Trade Center, reported VOA.
According to the UNDP’s report, Cambodia has attracted an increasing amount of direct foreign investment in the past five years. And bankers say that funds are available for loans to be given to SMEs, throwing up the question as to why financing is not more accessible.
“Increasing Cambodia’s competitiveness is a necessity, not a choice, if the country is to sustain economic growth, reduce poverty and keep pace with its ASEAN neighbors,” the report by the UN Development Programme said.
“Cambodian SMEs are suffering from a shortage of credit, coupled with relatively high interest rates applied by banks to small businesses, resulting in, often, a lack of sufficient working capital for the enterprises,” Cham Prasidh said. “Access to finance is one of the major impediments in Cambodia to producers and exporters of commodities,” reported VOA.
According to the joint World Bank and IFC Investment Climate Assessment, these constraints on SMEs are having serious effects on the country’s economy, particularly as 93 percent of Cambodia’s business is defined as being a small- or medium-size enterprise, reported the Daily.
National Bank Director-General Tay Nay Im said local and international partners were giving training to smaller enterprises “by all means” to help produce “more reliable financial statements and applicable business plans” to help assess the risks of their businesses, reported VOA.
In Channy, CEO and president of ACLEDA bank, was quoted by the Daily as saying that “we have the funds and the bank is ready to lend.” He added that the ability of his bank to lend was considerable. At the end of last month, the bank had a total of $448 million in outstanding loans, of which $300 million belonged to SMEs.
The International Trade Center has negotiated with commercial banks to provide small loans, Roger Megelas, the center’s senior adviser for small and medium enterprises, told reporters Tuesday, reported VOA.
“SMEs must obey the laws and regulations when they are set up,” Tal Nay Im said, adding that taking those necessary steps would be the only way enterprises could gain the confidence of the banking sector, reported the Daily.
Roger Megelas said that “we reached two commercial banks which will begin to provide loans in October 2009,” adding that “We will provide loans to 100 small and medium enterprises,” reported VOA.
The World Bank’s second Investment Climate Assessment showed that corruption was the most pressing concern among 500 entrepreneurs in Phnom Penh, Siem Reap, Sihanoukville, Battambang and Kampong Cham provinces, as it was for a similar survey released in 2003, reported the Phnom Penh Post.
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