Energy ? Cambodia Sector Report Energy Cambodia Produced by: Reingsey Oum, Trade & Investment Officer, British Embassy Phnom Penh 08 July 2009 Whereas every effort has been made to ensure that the information given herein is accurate, UK Trade & Investment or its sponsoring Departments, the Department of Business, Innovation and Skills and the Foreign & Commonwealth Office, accept no responsibility for any errors, omissions or misleading statements in that information and no warranty is given or responsibility is accepted as to the standing of any firm, company or individual mentioned. Published July 2009 by UK Trade & Investment. Crown Copyright © www.uktradeinvest.gov.uk Energy - Cambodia Table of Contents OVERVIEW 3 OPPORTUNITIES CHARACTERISTICS OF MARKET 4 KEY METHODS OF DOING BUSINESS 5 MORE DETAILED SECTOR REPORTS 6 EVENTS 7 CONTACT LISTS www.uktradeinvest.gov.uk Page 2 Energy - Cambodia OVERVIEW Cambodia has sustained high economic growth for the past decade (an average of 9.8% during th the period 1997-2007 making it the 7 highest globally according to World Bank statistics). This is as a result of an open economy approach, stable macroeconomic environment, few policy instruments, narrowly based sectors and relatively high levels of domestic savings and investment. Cambodia?s economy began to decline in 2008 (7% growth) due to the global economic downturn. Inflation reached a peak of 25.7% in May 2008, driven largely by the global surge in oil and food prices. Later that year, both food and fuel prices declined in conjunction with the appreciation of the Riel and US dollar ? resulting in a reduced inflation rate of 13.5% by December. Plummeting exports, fewer tourist arrivals and a slowdown in real estate/construction-related activities seriously affected the economy. As such, growth in 2009 is expected to decline further to around the zero mark but it?s not all doom and gloom. The banking system remains largely unaffected thanks to the implementation of a public financial management reform programme. To address this economic downturn, the Government has developed a number of policy responses to reinforce export competitiveness, facilitate trade, invest in human capital capacity, promote both the important agriculture and tourism sectors. The Prime Minister has stated that public spending in 2009 will be redirected toward growth enhancement and social safety nets. By early March 2009, the authorities had announced their intention to double development spending in 2009 on transport, public infrastructure, and irrigation projects. Looking towards the future, the Government also has plans to undertake a variety of new projects including in key sectors such as energy, water management, public health, education, agriculture, tourism, and transport. Bilateral trade between Cambodia and the UK is relatively small but things are moving in the right direction (i.e. UK?s imports from Cambodia in 2008 totalled £124 million (25% increase over 2007) whilst exports although small (£3.4 million) also recorded a significant (32%) increase over 2007. With foreign products/services perceived to be of superior quality, and given the recent depreciation of the British Pound against both the Cambodian Riel and US dollar, there should be opportunities for British products/services which, if realised, should lead to a further increase in UK exports. OPPORTUNITIES Please contact the Trade and Investment Officer in Cambodia to discuss your particular interests and where UK Trade & Investment can help you to succeed in the Cambodian market. 1. There are few opportunities for big capacity power generation plants using HFO/LFO but room still exists for smaller power generation machines to fill the supply-demand gap in both the short and mid-long term. 2. Potential for hydropower is high but not yet fully exploited. According to the Electricity Authority of Cambodia, the country has more than 10,000 Megawatts potential from this resource. 3. We have seen the opportunities for investment in more affordable and cleaner power resources such as coal, natural gas, wind and solar energy. Prime Minister Hun Sen once raised the possibility of establishing a nuclear power plant. Against this background, www.uktradeinvest.gov.uk Page 3 Energy - Cambodia Cambodia joined the International Renewable Energy Agency in Germany demonstrating a keen interest in developing this type of energy source. 4. Imported electricity is playing an important role in the power sector and is expected to constitute a large percentage of the country?s electricity supply. It is a relatively cheap source but not a sustainable way to ensure the country?s security of supply. 5. We expect local demand for electricity to increase significantly to keep pace with future economic growth. Further increases are likely when local electricity distribution networks are expanded and power transmission lines are inter- connected with regional grids. UKTI publishes international business opportunities gathered by its large overseas network of Embassies, High Commissions and Consulates worldwide. These can be found on the UKTI website. By setting up a profile you can be alerted by email when relevant opportunities are published. CHARACTERISTICS OF MARKET The Power sector is key factor in Cambodia?s continued economic growth. In the past, the Government has developed its electricity infrastructure with support from international donors such as Asian Development Bank and the World Bank. From 1999 to 2007, a large number of projects were implemented focusing on power generation capacity and distribution network. The country doesn?t have a National Grid but three interconnected power systems: the Phnom Penh, North-Western Grid and the Southern Grid systems. The Government has also signed a number of Power Co-operation Agreements with Thailand, Laos, and Vietnam over the last 10 years and implemented several interconnection transmission projects. About 95% of the power generation capacity comes from diesel power plants while hydropower, wood/biomass, and steam coal plants constitute the remaining 5%. Access, however, to electricity remains low (16.41% in 2007) whilst the average power loss was 11.05%. Electricity Demand in City/Province (2007) Location Installed Capacity (kW) Banteay Meanchey 3,951.6 Battambang 1,414 Kampong Cham 17,003.6 Kampong Chhnang 2,975 Kampong Speu 13,562 Kampong Thom 3,130 Kampot 6,173 Kandal 2,226.4 Koh Kong 816 Kratie 232 Mondol Kiri - Phnom Penh 218,255 Preah Vihear 1,160 Prey Veng 4,418 Pursat 2,498.8 Ratanakiri 1,952 Siem Reap 11,658.4 www.uktradeinvest.gov.uk Page 4 Energy - Cambodia Sihanoukville 16,376.4 Stueng Treang 1,640 Svay Rieng 1,000 Takeo 3,910.1 Uddor Meanchey 60 Keb - Pailin - Total 314,412.3 According to Cambodia?s latest Power Development Plan, electricity generation is expected to be 808MW and 1550 GWh in 2009 due largely to the completion of Southern Grid. In 2015, these figures should reach 1915 MW and 3500 GWh respectively. It is worth noting that the electricity price in Cambodia is relatively high. This is partly because of high input costs. Environmental impact from electricity generation has long been a concern. The Government plans to stop purchasing electricity from some independent power producers (particularly HFO/LFO power plants) and encourage investments in renewable and more affordable power resources. It also plans to import cheaper electricity from neighbouring countries. There is no public process of bidding opportunities to supply electricity in Cambodia. Any interested investors must submit their project proposals to the Ministry of Energy, Mines and Industry for evaluation and approval. KEY METHODS OF DOING BUSINESS Initial research is strongly recommended to assess your prospective investments or potential business partners in Cambodia. In emerging markets, it can often prove difficult to source reliable information from the Internet. Some Cambodians can, at first, come across as being unduly suspicious but are generally keen to build and retain relationships. Therefore, firm commitment ? coupled with a willingness to visit the market ? is an important step in establishing a successful working relationship. Most successful foreign investors have some form of local representation (i.e. establishing an office, appointing an agent/distributor etc. This enables them to develop their brands, gain loyalty and ? in particular ? clearly demonstrate they are in the market seriously. Cambodians consider the trade-off between price and quality of products/services although the market, in general, is price sensitive. Reliable Technical support is also a key factor. Some Do?s and Don?ts: ? Language can be a problem although English is becoming more commonly used throughout Cambodia. Be sure to speak clearly, slowly and avoid slang/adages. ? Double check to ensure your counterparts fully understands your messages. ? Cambodian people care about their names (surnames precede given names) and title. It is not common to directly address Cambodian people?s surnames (e.g. Mr/Mrs. Surname). In fact, you can just call them by their titles only (e.g. Your Excellency, Lok Chum Teav, Okhna, Sir, and Madam) and/or their given names if they are junior and you know them well. ? Control your emotions ? any signs of anger, impatience, and frustration will not help matters! Do not point your finger or shout at Cambodian counterparts/colleagues as this can easily result in the loss of face, which is a very important issue in Cambodian society. www.uktradeinvest.gov.uk Page 5 Energy - Cambodia ? Avoid sitting with leg crossed and your feet pointing to the people you are meeting with as this can be interpreted as ?lack of respect?. ? Cambodian businessmen and consumers normally do not like to read very long text. Often, they prefer short versions with images and bullet points. Therefore, when presenting your products/services for the first time, try to make it attractive, short and straight to point. ? Do not interrupt an ongoing conversation even if you disagree. Many Cambodians perceive this as impolite. ? When planning your visit ? organise appointments before your departure. Follow up with telephone calls on arrival to confirm availability. Meeting for the first time should be arranged during normal working hours with subsequent meetings being arranged over breakfast, lunch, and dinner as well as normal office hours. ? Arrange a market discussion with the Trade and Investment Officer at the British Embassy in Phnom Penh. ? Take plenty of business cards and corporate literature. If possible have the reverse of your business card translated into Khmer. ? Follow up meetings by letter/e-mail on return to the UK. If possible keep the Embassy informed of progress. ? Do not expect to do business immediately or necessarily on the first visit to Cambodia. ? Think about intellectual property rights issues. ? Check carefully if your business activities relate to the use of lands. Other background information on doing business in Cambodia can be found on UKTI?s website. Simply go to the Cambodia country page where you will find information on: ? Economic background and geography ? Customs & regulations ? Selling & communications ? Contacts & setting up ? Visiting and social hints and tips MORE DETAILED SECTOR REPORTS Research is critical when considering new markets. UKTI provides market research services, which can help UK companies doing business overseas including: ? Overseas Market Introduction Service (OMIS). Bespoke research into potential markets, and support during your overseas visits. ? Export Marketing Research Scheme. In-depth and subsidised service administered by the British Chambers of Commerce on behalf of UKTI Contact your local International Trade Advisor if you are interested in accessing these services, or for general advice in developing your export strategy. When considering doing business in Cambodia, it is essential to obtain legal, financial and taxation advice. A useful list of contacts as well as further information on the energy sector in Cambodia is available from the British Embassy. For further details, please contact: Reingsey Oum Trade & Investment Officer British Embassy Phnom Penh No. 27.29, St. 75 Srass Chak, Daun Penh www.uktradeinvest.gov.uk Page 6 Energy - Cambodia Tel: +855 (0) 23 427 124/ 23 428 153 Extension: 2209 Fax: +855 (0) 427 125 Email: reingsey.oum@fco.gov.uk EVENTS th The Ministry of Commerce will organise its 4 Cambodia Import Export & One Province One Product Exhibition on 15-18 December 2009. Last year, the exhibition had 135 exhibitors and around 40,000 visitors. For further information, please contact: Trade Promotion Department # 65-69, St. 136, Psar Kandal 1 Daun Penh, Phnom Penh Tel: +855 (0) 12/13/15/18/98 814 418; +855 (0) 23 216 948 Fax: +855 (0) 23 211 745/ 23 217 353 Email: trenvithol@yahoo.com or btecambodia@yahoo.com Website: www.tpd.gov.kh UK Trade & Investment?s Tradeshow Access Programme (TAP) can help eligible UK businesses take part in overseas exhibitions. Attendance at TAP events offers significant benefits: ? possibilities for business opportunities both at the show and in the future ? a chance to assess new markets and develop useful contacts ? grants are available if you meet the criteria ? UKTI staff overseas will be available to assist delegates To find out if you are eligible to apply to attend an event, and more about the support UKTI can offer, look at the UKTI Market Entry web page. Details of TAP events can be found in the Events portlet on the Cambodia country page. Other Market Visit Support may be available via your local International Trade Advisor. CONTACT LISTS H.E TY Norin Chairman Electricity Authority of Cambodia 2, Street 282, Boeung Keng Kang 1, Khan Chamkarmon, Phnom Penh Tel.: +855 (0) 23 217 654/ 23 987 898 Fax: + 855 (0) 23 214 144 Email: admin@eac.gov.kh Website: www.eac.gov.kh H.E KEO Rottanak Managing Director Electricite Du Cambodge Street 19, Wat Phnom, Daun Penh, Phnom Penh Tel.: +855 (0) 23 724 771 Fax: +855(0) 23 426 018 www.uktradeinvest.gov.uk Page 7 Energy - Cambodia Email: edchq@edc.com.kh Website: www.edc.com.kh H.E TUN Lean Director General, General Department of Energy Ministry of Industry, Mines, and Energy 45, Norodom Blvd., Phnom Penh Mobile: +855 (0) 11 825 135 Fax: +855 (0) 23 218 634 Email: tunlean@forum.org.kh Mr. Senaka Fernando Chairman of British Business Association in Cambodia Director of PricewaterhouseCoopers (Cambodia) Ltd 124, Norodom Blvd, Chamkarmon Phnom Penh Tel: +855(0) 12 803891 / 23 218086 Fax: +855(0) 23 216 991 Email: senaka.fernando@kh.pwc.com Website: www.bigpond.com.kh/bbac UKTI?s International Trade Advisers can provide you with essential and impartial advice on all aspects of international trade. Every UK region also has dedicated sector specialists who can provide advice tailored to your industry. You can trace your nearest advisor by entering your postcode into the Local Office Database on the homepage of our website. For new and inexperienced exporters, our Passport to Export process will take you through the mechanics of exporting. An International Trade Adviser will provide professional advice on a range of services, including financial subsidies, export documentation, contacts in overseas markets, overseas visits, translating marketing material, e-commerce, subsidised export training and market research. www.uktradeinvest.gov.uk Page 8