Electricity subsidy to boost manufacturing

Cambodia’s upcoming cut in electricity costs will likely lower manufacturing and operation costs for the export-reliant 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.

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