With GDP growth averaging around 9% for the past decade, Cambodia is
certainly attracting interest from potential investors.
It has possibly the most investor-friendly environment in Asean with
no exchange controls, no restrictions on repatriation of profit, and
no discrimination between foreign and local investors.
Moreover, corporate income tax is 20% and there are tax holidays of up
to nine years.
Foreigners can also take out leases on land for up to 99 years and
foreign companies can buy land.
--
For Thai investors, the interest so far has been in Cambodia's growing
footwear and garment industry.
This is Cambodia's biggest employer and key export earner and there
are over 300 garment or textile factories.
Low wages – about one-third the level of Thailand's – are a big
attraction for investors, even though the minimum wage for garment
workers in Cambodia rose from $61 a month to $66 earlier this year.
Cambodian garments and footwear also enjoy favourable tariff-free
access to markets in the United States and Europe.
Many American and European brands are already outsourcing their
production to Cambodia.
One of the benefits for these companies is the unionised workforce and
labour laws in Cambodia, as it is assumed that basic rights of workers
are protected.
This provides insurance for big-name brand companies concerned about
possible consumer boycotts over poorly treated workers.
There are challenges, however, for investors in Cambodia's textile and
garment industry.
For example, there are already signs of labour shortages – earlier
this year the Cambodian industry association said that many vacancies
had gone unfilled as more young people were being lured to work
overseas.
--
Another potential problem is strong competition from Myanmar as
economic sanctions fade and investors from developed economies begin
establishing businesses there.
A third problem facing all manufacturers is the electricity supply –
electricity in Cambodia is expensive and access is largely restricted
to urban centres, with only 20% of households nationwide connected to
the power grid.
However, these issues do not seem to be a major concern to Japanese
investors who last year more than doubled their investment in Cambodia
to around $75 million.
According to the Japan Times, Japanese investors are focusing on
Cambodia as labour costs are rising in Thailand, China and Vietnam.
Although Japanese investors are interested in the garment and textile
industry, they are also concentrating on food processing, agriculture
and tourism, retail, transport services and natural resources
development.
--
The Japanese government has also worked with the Cambodian government
to develop the Sihanoukville Special Economic Zone near Thailand's
eastern border.
This industrial zone adjoins the Sihanoukville Port, which is the only
deep-water port in Cambodia, and the infrastructure is being developed
by Japanese engineers and contractors.
Sihanoukville Port is being prepared for listing on the Cambodian
Stock Exchange later this year and is expected to attract great
interest, given the success of the Exchange's first listing, in April
this year, when the IPO of the Phnom Penh Water Supply Authority was
many times oversubscribed.
As one of the frontier economies of Southeast Asia, and a close
neighbour, Cambodia should certainly be of interest to Thai SMEs
considering expanding their production base.
Although Cambodia has been mainly limited up until now to small scale
enterprises dominated by tourism and the garment and textile industry,
the new developments taking place are a sign of things to come.
Cambodia opening its doors to investment
10 Sept 2012
http://www.bangkokpost.com/business/economics/311715/cambodia-opening-its-doors-to-investment
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