Elec­tric­ity sub­sidy to boost man­u­fac­tur­ing

The Myanmar Times - Weekend - - Business / International - DE­CEM­BER 21, 2018

CAM­BO­DIA’S up­com­ing cut in elec­tric­ity costs will likely lower man­u­fac­tur­ing and op­er­a­tion costs for the ex­portre­liant na­tion, de­liv­er­ing a boost to the busi­ness sec­tor while po­ten­tially at­tract­ing more for­eign in­vest­ment, top ex­ec­u­tives said. The cut is made pos­si­ble through the gov­ern­ment’s plan to sub­sidise the elec­tric­ity sec­tor with a $50 mil­lion pack­age that will bring down elec­tric­ity costs from 2019 on­wards.

Prime Min­is­ter Hun Sen on Mon­day con­firmed the gov­ern­ment’s de­ci­sion to bring down elec­tric­ity costs while speak­ing at the launch of the Lower Se­san II hy­dro pro­ject.

“If the price of elec­tric­ity could drop sig­nif­i­cantly to be on par with Viet­nam’s, it will also help pro­mote in­vest­ment in lo­cal fab­ric mills, as Cam­bo­dia now im­ports al­most all of its fab­rics,” said Kaing Monika, the deputy sec­re­tary-gen­eral of the Gar­ment Man­u­fac­tur­ers As­so­ci­a­tion of Cam­bo­dia.

Fab­ric mills con­sume sig­nif­i­cantly more power than gar­ment fac­to­ries, he noted.

“The lower the elec­tric­ity bill, the higher the chance for price com­pe­ti­tion,” said In Channy, pres­i­dent and group man­ag­ing di­rec­tor of Acleda Bank. News of the cut is “a bless­ing for the New Year, for ev­ery Cam­bo­dian and for those who do busi­ness in Cam­bo­dia.”

Re­duced power costs will also help the lender as it rolls out its ‘dig­i­tal bank’, a strat­egy that will min­imise the use of phys­i­cal branches and of­fices while cut­ting time and costs, Mr Channy said.

While the gov­ern­ment should be lauded for its “strong in­ten­tion” to cut elec­tric­ity costs, “one of the most crit­i­cal” is­sues in at­tract­ing for­eign di­rect in­vest­ment, it would be very chal­leng­ing for the gov­ern­ment to re­duce the tar­iff dras­ti­cally due to the small size of Cam­bo­dia’s power gen­er­a­tors, said Hiroshi Suzuki, an econ­o­mist and the chief ex­ec­u­tive of the Busi­ness Re­search In­sti­tute for Cam­bo­dia.

Re­duc­ing tar­iffs dras­ti­cally would re­quire the in­tro­duc­tion of much larger fa­cil­i­ties that can gen­er­ate 350-500 megawatts of power, Mr Suzuki said.

Of­fi­cial de­vel­op­ment as­sis­tance (ODA) loans from the Or­gan­i­sa­tion for Eco­nomic Co-op­er­a­tion and De­vel­op­ment could be of help here, Mr Suzuki sug­gested. The in­ter­est rate of Ja­pan’s ODA loans is about 0.01 per­cent a year.

Un­der the plan, elec­tric tar­iffs for the in­dus­trial sec­tor will be low­ered to 595 riel in 2019 and 592 riel by 2020, for Ph­nom Penh. Cur­rently, elec­tric tar­iffs stand at 676 riel in Ph­nom Penh and 672 riel in pro­vin­cial ar­eas. For ad­min­is­tra­tive users, tar­iff charges will drop to 640 riel in 2019, from 676 riel in Ph­nom Penh and 672 riel in pro­vin­cial ar­eas.

House­holds con­sum­ing be­tween 1-10 kilo­watt hour per month will see a drop in tar­iffs to 380 riel in 2019 from 480 riel per kwh. Those con­sum­ing be­tween 11-15 kwh per month will pay 480 riel per kwh, down from at 610 riel cur­rently. House­holds that use 51-200 kwh per month will pay 720 riel in 2019 and 610 riel in 2020, com­pared to 770 riel cur­rently, while those who use more than 200 kwh per month will pay 610 riel in 2019 and 2020, com­pared to 720 riel pre­vi­ously.

At the Cam­bo­dian Peo­ple’s Party congress yes­ter­day, gov­ern­ment spokesman Phay Siphan said Prime Min­is­ter Hun Sen – also the party’s leader – has asked his of­fi­cers to move quickly to in­tro­duce the new, cheaper elec­tric­ity prices.

The gov­ern­ment should con­sider more sub­si­dies, Mr Monika of the Gar­ment Man­u­fac­turer’s As­so­ci­a­tion said. “While this would cost EDC (Elec­tricite Du Cam­bodge) more, the gov­ern­ment could con­sider this as in­vest­ment that would yield higher re­turn in the form of more jobs and more taxes when busi­ness and in­dus­try pros­per,” Mr Monika said. – Kh­mer Times

The gov­ern­ment will sub­sidise the elec­tric­ity sec­tor with a $50 mil­lion pack­age that will lower elec­tric­ity costs from 2019 on­wards.

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