It’s been hailed as one of Southeast Asia’s last investment frontiers. So what can Cambodia offer to lure more investors from abroad?
According to Minister of Commerce Sun Chanthol, who was recently interviewed by CNBC’s Squawk Box in Hong Kong, there are many advantages of investing in Cambodia.
Thirteen things, to be exact. (We’ll get to them in a bit.)
Indeed, with the country’s improving visibility in many local and foreign investors’ radar, the Asian Development Bank (ADB) this month urged Cambodian authorities to build up its infrastructure, further develop the skills of its labour force, and even raise incentives for foreign investment, the Cambodia Daily reported.
Over the last few months, overseas investors have been flocking to Cambodia to bet on the country’s relatively strong economic growth, which ADB predicted to be 7.3 percent in 2015 and 7.5 in 2016.
In a new report by Singapore-based AsiaOne Business, Cambodia also steadily attracts real estate investors and developers from around the region, including those from the Lion State, one of the country’s largest trading partners.
The article noted that foreign investors in Cambodia are “well-received” and that local authorities are very cooperative when it came to getting developer’s permits and licences, quoting Darren Yap, director and chief executive of Yuen Development.
However, some analysts recommend that while Cambodia has no real estate driven bubble, its banking industry should monitor its credit growth in relation to the thriving property sector, particularly the commercial segment.
“Commercial property busts are the single biggest cause of banks getting in to trouble, so you wouldn’t want to see too much lending to that sector. In the past, the National Bank of Cambodia (NBC) has been fairly vigilant on that,” Stephen Higgins, a banking industry expert and managing partner of corporate investment and advisory firm Mekong Strategic Partners, told The Phnom Penh Post this week. He agreed with the ADB’s call for greater regulatory supervision in the property sector, which he called “not unreasonable.”
Recognising the country’s vulnerabilities, minister of commerce Chantol believes that Cambodia offers several advantages for foreign investors, especially when compared with near-neighbour Thailand, whose kingdom has been rocked by political woes in the past few years.
Here, Chantol cites the 13 things that foreign investors in Cambodia would appreciate:
1. Political stability. Although in the past decades the country witnessed war and civil unrest, in recent years the ASEAN member’s socio-political has turned 180 degrees, and it enjoys a relatively peaceful era under Prime Minister Hun Sen.
2. Macroeconomic stability. Chantol notes that Cambodia’s developing economy has an anticipated high-growth outlook.
3. Low inflation.
4. Stable exchange rate.
5. Low debt-to-GDP rate.
6. Investment incentives. The country has an existing investment law that provides very generous incentives for investors.
7. No exchange control.
8. Lack of alien business law.
9. Openness. Every economic sector is open to foreign investors. But the 2015 World Justice Project states that the country has a long way to go in legal openness, ranking 102 out of 102 in its latest index.
10. Full ownership. Foreign investors can own 100 percent of their business or enter into joint ventures.
11. Fluidity. Money can be easily transferred into or out of the country.
12. Young workforce. Chantol says that Cambodia has a “young, dynamic, and hard-working work force” with a nation-wide average age of 24.1 years, which means its labour force offers another 30 years of productivity.
13. Strategic location. The country is located in the heart of ASEAN region.
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