With an economic growth rate of around 7% in recent years, one of the highest in the world, Cambodia is an attractive investment destination for businesses looking to expand in the ASEAN region.
“Cambodia has potential for development in agro-economy industries, labour-intensive industries and tourism, with an abundance of fertile land, natural resources, cultural heritage sites, tropical rainforests and beaches,” Consul General of Cambodia Sin Siya said as he delivered the welcome remarks at the Chamber’s ASEAN Series roundtable luncheon on 25 June. “There are many opportunities for sustainable investment projects.”
In fact, the business community has been quick to seize such opportunities – foreign direct investment in Cambodia nearly doubled year-on-year in 2017, with Mainland China being the biggest investor in the past five years. In 2018, Chinese firms pledged an additional US$7 billion in new projects, including a highway to connect the capital Phnom Penh with the coastal city of Sihanoukville.
Speaking at the roundtable, Tommy Yip, Personal Assistant to the Consul General, said the country offers a range of investment incentives, including up to nine years tax exemptions for select industries, customs duty exemption on construction materials and production equipment, and VAT-free exports of local goods.
Another benefit is its abundant labour supply. Cambodia possesses one of the youngest workforces in the world, with 60% of the population under 25 years old. However, costs are rising.
“With further skills training and education of the workforce commanding higher wages, Cambodia’s cost competitiveness is falling,” he told members. Businesses have seen a rapid increase in statutory minimum wage to US$182 per month from US$61 in 2010.
“Cambodia is gradually shifting from garment and footwear manufacturing to higher value-added and capital-intensive industries such as construction, telecommunications and financial services to offset this trend,” Yip added. “This is owing to the competition from other regional low-wage countries and also the US-dollar appreciation.”
Another consideration for foreign investors is land ownership. Although Cambodia allows 100% company ownership in all sectors, only Cambodians are allowed to own land.
With the renowned UNESCO World Heritage Site Angkor Wat, top class national parks and an almost uninterrupted string of beaches along the coast in Sihanoukville, Cambodia is also ripe for development in tourism. In 2018, the country received 6.2 million tourists, an increase of over 10% year on year.
“Asian tourists from Vietnam, China and Thailand contributed 60% of the arrivals, but we have also seen an increase in tourists from Europe and North America in recent years,” Yip said. The country is projected to double its visitors to 12 million by 2025 as it builds new airports in Phnom Penh and Siem Reap and upgrades the one in Sihanoukville.
Catherine Chan, Director of Goldfame Group and Urban Village, shared her experience in property investment in Cambodia. With a strong annual housing price growth and a healthy rental rate of return, in 2018 Phnom Penh had one of the highest annual returns on investment in property markets globally.
Despite increased competition with neighboring countries such as Vietnam and Myanmar, Cambodia remains competitive, as its property rental prices remain among the lowest in the region. At US$3,500 per square metre, Phnom Penh is even lower than Yangon, Myanmar (US$5,200) and Kuala Lumpur, Malaysia (US$8,700).
Managing risks and cash flow in Cambodia is also relatively straightforward, she explained.
“Cambodia uses the stable US dollar as a commonly traded currency, imposes no foreign exchange control, no pricing restrictions and allows full profit repatriation,”Chan said. “If you want to invest, now is the time.”