To know why Cambodia is attractive for foreign investment, one need look no further than the Prime Minister.
“To ensure a sound macro economy and political and social stability, the government is open to all to do business and invest in the Kingdom.” (December 2019 PM Hun Sen)
Cambodia has about 100,000 expats enjoying low living costs, relaxed lifestyles and the Buddhist influence. It lures many into business and investment and it’s easy to see why.
Strong growth and a resilient economy
Cambodia’s economy was one of the fastest growing 1998 – 2018. It had an average GDP growth rate of 8% driven by the garment and tourism industries. According to the World Bank, Cambodia was “… reaching lower middle income status in 2015 and aspiring to upper middle income status by 2030”.
Cambodia is a frontier market, making it less dependent on China, USA and Europe. This buffered it from crises like the 1992 financial crisis, 2000’s .com bubble and 2008 bust.
Up to the pandemic, the economy was growing at around 7%. Although the main industry, tourism, was hit hard, the economy weathered Covid better than most. Cambodia’s economy in FY 2021-22 is predicted to grow around 6%.
The Cambodian government has a pro business approach. In 2019 it announced a raft of reforms designed to attract new business, investment and foreign capital. These included tax incentives, lower freight costs, fewer national holidays, new investment tools and Special Economic Zone (SEZ) laws. Other incentives include 100% foreign company ownership, tax holidays, 20% corporate tax rates, duty free imports and no restrictions on capital repatriation.
Cambodia competitive labour force attractive for foreign investment
Around 50% of the Cambodian population is under 25. They are tech savvy users of social media, influencing local culture with new ideas. Since the minimum wage is lower than neighbouring countries, it makes for good competition along with a plentiful young workforce. At the same time, rising incomes provide more disposable income and opportunities for local businesses.
Strategic location, market access and infrastructure
Located in central SE Asia, Cambodia borders Thailand, Laos, and Vietnam. This makes it an easy to reach, low cost manufacturing base with good regional demand. Being a member of AFTA and enjoying benefits from the CEPT Agreement, Cambodia is able to trade on good terms and, sometimes, tariff free. It is also a member of the WTO and trades with the EU under the ASEAN EU dialogue.
Although its infrastructure was largely destroyed over 15 years of war and foreign aid in transport, power and communication networks is making better links for trade and foreign investment.