March 30, 2011

Cambodia's Consumer Sector To Liven Up

The consumer picture for Cambodia looks moderately bright in the near term. A strong showing in the Cambodian tourism industry coupled with robust agricultural export demand, which provides an impetus to increasing rural incomes, suggest that domestic demand is likely to hold up reasonably well over the coming quarters. Longer-term, the Cambodian government's supportive stance towards agricultural sector development will continue to encourage progress towards reducing poverty and income inequality, implying tremendous long-term growth potential for consumer product sales.

Boom In Agricultural Exports To Lift Consumer Incomes
With fortunes of the Cambodian consumer sector closely linked to the country's agricultural sector, a continued increase in the country's agricultural exports should provide a strong boost to domestic demand growth. Demand for Cambodia's milled rice exports, a major export commodity of the country, has climbed by 25% year-on-year (y-o-y) to reach 1mn tonnes in 2010 and is forecast to increase by another 20% y-o-y in 2011, according to estimates from the United States Department of Agriculture (USDA).

Given the government's increasing focus on boosting agricultural production - some of the government initiatives include the approval of more than US$230mn worth of investment for the agricultural sector in June 2010 and a guaranteed 50% of commercial bank loans for rice producers - and an improving demand picture in the European Union and the Association of Southeast Asian Nations (ASEAN) region (major importers of Cambodia's agricultural commodities), this growth estimate is not overly optimistic, in our view.

This optimism in the Cambodian agricultural sector is expected to filter through to the consumer and is likely to provide a spurt to consumer spending in 2011. A marked characteristic of the Cambodian population is its overarching reliance on the agricultural sector for employment (an estimated 60-70% of the population is employed in the agricultural sector in 2010) and higher export ... 

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