Investment in Cambodia is continuing to grow. Things aren’t quite as far along as in next door Vietnam which at nearly 95 million people is a much bigger market but they are progressing and growth prospects remain strong. The country’s gross domestic product has grown by 7 percent or more each year since 2011 and is expected to keep up this pace through 2017, according to the Asian Development Bank’s Asian Development Outlook 2016. According to statistics provided by the Council of Development of Cambodia, overall investments into Cambodia increased from $3.9 billion in 2014 to $4.6 billion in 2015.
Cambodia was historically a predominantly agricultural nation but in 2015 the industry sector grew at 11.7% last year according to the ADB. This was the the biggest overall contributor to GDP. This was bolstered by an increase in merchandise exports of about 14.1% to $8.5 billion in 2015, and a 10.2% increase in the shipments of garments and footwear, which comprise 70% of total exports. Growth was shown throughout the economy as a whole with services, the second biggest contributor to growth, growing by an estimated 7.1%. The finance, transport and communications sectors all grew by about 8%, and tourist arrivals rose by 6.1% in 2015. As much of the rest of Asia which has suffered through a multi-year drought caused by the El Nino Weather pattern, Agriculture has been the slowest growth sector with only minimal if any growth and growth is expected to remain under 2 percent next year as well in this sector.
In July 2016, I visited Phnom Penh for three days to see my good friend John Muller, the Managing Director of GSS Security Company Limited, the top security company in Cambodia and one of the most professional and innovative in the security field in Asia. I also went to get updated on recent developments in Cambodian business. John has been involved in Cambodia for over 20 years and is a great guide and advisor on Cambodia.
To give you a point of which to consider Cambodia, I believe the information on this sidebar is helpful.
Land Area : 181,035 km2
Population: 14 Million
Stable Political Environment - Election Every 5 Years
Stable Macroeconomic Environment
GDP Growth : 10.3% Per Annum Last 5 Years
GDP Per Capita : $716
Exchange Rate : US$ 1 = Riels 4, 700
Inflation Rate : 5% Per Annum last 5 Years
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In traveling around time I noticed and John pointed out that these investors are not only modernizing the city but also changing the culinary landscape as well. Chinese, Korean and Japanese restaurants are increasing daily. For example, Japanese restaurants have increased to more than 150 restaurants in order to please some 2,500 Japanese who were registered at the Japanese embassy in Cambodia as of January 2016. Similar or even higher figures are undoubtably true for Koreans and Chinese restaurants as well.
Phnom Penh is now a cosmopolitan and much more modern city in which new parks and roads are being hemmed in by new high rise buildings. I strongly recommend a visit as I found the Cambodians to be very pro-business and very competitive in the incentives and benefits they offer to investors.
One thing I noticed is that Asian investors are leading the way in Cambodia and their lead is building. In 2015, China was first as the largest investor with over 1,055 Chinese companies investing in Cambodia. In the hotels and on the streets of Phnom Penh you hear more Mandarin spoken than you hear any other non Cambodian language. South Korea is number 2 in terms of investment with 278 projects. Japan is very close to this in third place with 250 companies.
China’s projects in Cambodia tend to run the gamut from infrastructure like several controversial dams, roads, bridges and even some train lines plus tourism to agriculture to manufacture. Korean investment is much the same but seems to be more in manufacture and to not be so focussed on agriculture and processing businesses. Japanese investment ranges from import and export, tourism, small manufacture, consulting and real estate services, to agriculture and construction. Recently Japanese investment tends to be more in services like the Aeon shopping mall projects, the first of which is open and the second of which will be opening soon. According to the Japanese External Trade Office (Jetro) 250 Japanese companies had registered with Cambodia's Commerce Ministry in 2015. I remember in 2010 when I was assisting another project in Cambodia that the total number then of Japanese companies was less that two dozen. Three years ago, that figure had grown to just under 180. These figures show that Japanese investors are taking more of an interest in Cambodia.
About the Author:
Christopher W. Runckel, a former senior US diplomat who served in many counties in Asia, is a graduate of the University of Oregon and Lewis and Clark Law School. He served as Deputy General Counsel of President Gerald Ford’s Presidential Clemency Board. Mr. Runckel is the principal and founder of Runckel & Associates, a Portland, Oregon based consulting company that assists businesses expand business opportunities in Asia. (www.business-in-asia.com)
Until April of 1999, Mr. Runckel was Minister-Counselor of the US Embassy in Beijing, China. Mr. Runckel lived and worked in Thailand for over six years. He was the first permanently assigned U.S. diplomat to return to Vietnam after the Vietnam War. In 1997, he was awarded the U.S. Department of States highest award for service, the Distinguished Honor Award, for his contribution to improving U.S.-Vietnam relations.