Cambodia Investment Environment 2019

Cambodia is located between Thailand and Vietnam and is an attractive investment destination for companies looking to expand their business in ASEAN. Cambodia has recovered from its domestic and turbulent 20th century and now aims to become the center of global economic activity.

Cambodia has continued to record a GDP growth of approximately 7% in recent years, and is expected to continue to perform at the same level in 2019. Among the rapidly growing ASEAN countries, Cambodia's GDP growth rate is among the highest. However, if we are to continue to increase our competitiveness on a global level, major reforms are the immediate challenge.

⇒Cambodia infrastructure development

Cambodia economic performance in 2018

In the second quarter of 2018, foreign direct investment (FDI) inflows increased for the fifth consecutive quarter in the past two years to approximately 94 billion yen (US$832 million). Consistent growth over the past decade has been supported by more developed countries such as neighboring Thailand and Vietnam.

In 2018, the garment industry and tourism supported the country's economic performance. The tourism industry grew steadily, with 11% of international tourists visiting. Due to rising wage pressure in China and a number of incidents that occurred at factories in Bangladesh, many foreign companies have decided to relocate their factories to Cambodia. As a result, the garment industry grew rapidly in 2018, with garment exports increasing by 11% year-on-year in the first half of 2018.

investment environment

Cambodia's domestic investment environment is rapidly expanding due to foreign FDI. Cambodia is very open to foreign companies and investors and offers a variety of incentives. Production facilities in Thailand and Vietnam, as well as proximity to China's huge market, also support a favorable investment environment.

Cambodia's SEZ (Special Economic Zone) near the border provides the perfect environment for investment and export industries from neighboring countries. If you invest in Cambodia, you can enjoy corporate tax exemption for up to eight years, which is one of the attractive incentives for investors. Additionally, there is a system in place to exempt export industries from customs duties.

In Cambodia, local subsidiaries can be owned 100% by foreign companies in a wide range of industries.

At the beginning of 2018, Cambodia reached an agreement on patent validity with the European Patent Organization, making it easier to register patents in Cambodia. Through this agreement, companies based in the EU can now easily protect their technology and rights by establishing production bases in Cambodia.

Cambodia Economic outlook for 2019

This year, Cambodia's economy is expected to grow at around 7% GDP, the same as in previous years. Although there are concerns about the US-China trade war, it is predicted that Cambodia will continue to drive the economy through trade and exports as Chinese manufacturing bases move to Cambodia.

The garment sewing industry is also important in the economy of 2019. Cambodia, like Kodema, plays an important role in the manufacturing supply chain of global companies. . The tourism, agriculture and natural resources industries have great potential but are seen as requiring further investment to be competitive in global markets.

Cambodia's major industry: Growth in the garment sector and energy issues

In Cambodia, the garment industry accounts for 16% of GDP and 80% of total exports. The sector has significant growth potential due to Cambodia's strategic location in the heart of Southeast Asia, competitive workforce and access to key markets such as the EU and the US. Although the environment is favorable, we still face the challenge of energy problems.

In Cambodia, the ability to provide a stable supply of energy to major industries is an urgent issue. Energy production relies on oil, coal, and hydropower. However, these sectors are mainly dependent on imports, causing problems such as high electricity and oil prices within Cambodia. Going forward, we will incorporate our energy portfolio and strengthen our energy mix with biogas, solar, and wind power to provide a stable supply of energy at a fixed price.

Cambodia's hidden oil reserves

Currently, Cambodia relies on imports for energy resources such as oil, gas, and coal, but in the future it has the potential to mine its own resources. Until now, offshore oil resources had not been exploited, but in 2018 the Cambodian government began exploring oil resources. Extraction of energy resources will bring significant benefits to foreign investors due to the significant capital and technology needs of the infrastructure sector.

Cambodian manufacturing industry growth potential

With its open investment environment and strategic location, Cambodia offers a variety of opportunities for manufacturing industries and contributes to the rapidly growing economies of Thailand and Vietnam. Current manufacturing focuses on food and beverages, chemical rubber, plastics, and paper processing.

Cambodia's special economic zone will not only be able to smoothly supply products to Thailand and Vietnam, but will also be able to export products to countries around the world. Due to the US-China trade war, Cambodia, with its low labor costs, will be able to establish itself as an alternative country to China.

Challenging industries in Cambodia Agriculture field

Approximately 40% of Cambodia's working population is involved in the agricultural sector, and it is a major industry along with the garment industry. Agricultural products accounted for 27% of total exports in 2018, and China's demand for agricultural products supports local production. ASEAN countries have recently reached agreements on the production and promotion of organic foods, further accelerating the development of the food industry.

However, on the other hand, the rural agricultural sector faces the problem of lack of infrastructure. In the agricultural sector, there are many countries that can be replaced by Bangladesh and Myanmar, which lacks global competitiveness, and infrastructure problems are causing transaction prices to rise.

Should you invest in Cambodia in 2019? ?

Cambodia has one of the most open policies in Asia to foreign investors. The investment environment, cheap labor force, and location in the heart of Southeast Asia are factors that are leading to the rise in foreign FDI. EU patent protection and improvements in Cambodia's domestic infrastructure (especially the SEZ) are attracting inward investment in the manufacturing sector as well as the garment industry. In the near future, energy resources will be produced domestically and will support the domestic resource industry.