May 31, 2022
PHNOM PENH – Local private tourism-oriented businesses are reportedly struggling to secure funds from a recently-launched $150 million co-financing scheme meant to bolster the industry still reeling from Covid-19 restrictions.
And emerging as a primary issue among a slew of complaints and points of contention is the initiative’s requirements concerning financial statements over the past two years.
The government on May 17 launched the $150 million Tourism Recovery Co-Financing Scheme (TRCS), financed by a counterpart fund between the government and financial institutions.
A total of $75 million is to be disbursed from the national budget in the form of loans issued by state-run Small and Medium-sized Enterprise Bank of Cambodia Plc (SME Bank), and the other $75 million through loans made via participating financial institutions (PFI).
Key offerings of the scheme include a maximum interest rate of 6.5 per cent per annum, a 12-month grace period, loan term of up to seven years, loan amount of up to $400,000 and the option of receiving funds in either riel or US dollars.
The scheme purportedly prioritises tourism-related businesses across the country that are deemed to have been significantly affected by the Covid-19 crisis, particularly hotels, guesthouses, restaurants and tourism sector suppliers.
Cambodia Association of Travel Agents (CATA) president Chhay Sivlin believes that the TRCS will stimulate recovery in the tourism sector, but remarked that PFIs would require coherent and solid financial statements to benefit from the scheme.
“This is an obstacle that the private sector cannot overcome, because for more than two years, revenues have plummeted, leading some companies and businesses in the industry to collapse and unable to be saved.
“Although the government reopened Cambodia to foreign tourists in November 2021, only about 40 per cent of tourism businesses have resumed so far.
“This lending requires further coordination between SME Bank and private banks vis-a-vis financial statements, as no tourism company has been able to remain buoyant for more than two years,” she said.
Pacific Asia Travel Association (PATA) Cambodia chapter chairman Thourn Sinan told The Post on May 29 that the 6.5 per cent annual interest rate cap was set too high, which he said was near private bank levels.
He suggested a three-to-five per cent annual interest rate and loan term of 10-15 years to effectively support the tourism sector.
Covid era reports from independent financial information provider Credit Bureau (Cambodia) Co Ltd (CBC) painted a grim picture of cash-strapped tourism businesses with reduced trade failing to repay loans and seeing their credit profiles deteriorate, he said, describing this as the root of a major chunk of the industry’s woes.
The greater degree of uncertainty than usual in the timing and size of cash flows underscores the inherent difficulty of assessing the future of these businesses, Sinan said.
Kim Nou, owner of Maisons Wat Kor in Battambang town, echoed Sinan’s view that getting tourism services back on track following the Covid-enforced hiatus would require more favourable terms and conditions for interest rates and collateral.
“If the conditions are lenient, I’ll consider taking out a loan to develop my place with better quality, and prepare to receive some of the growing number of tourists, especially foreigners,” he said.
The Covid-19 crisis has ravaged the national and global tourism sector, driving down foreign tourist arrivals to the Kingdom by nearly 84.96 per cent in 2021 from a year earlier. Revenue from international tourism plummeted 82 per cent to $184 million last year from 2020.
The tourism and travel industry accounted for 1.8 per cent of gross domestic product (GDP) in 2021, down from the three per cent and 12.1 per cent recorded in 2020 and 2019, respectively.