Promoted Sectors For Investment in Cambodia
Cambodia’s Long-term Plan to Attract Investments and Promote Job Creation in the Kingdom
The economic growth rate of Cambodia has consistently been around 7% in the past years. It is recorded as the highest amongst the fast-growing ASEAN countries. This proves that Cambodia has a steady economic development which is forecasted to foster in the coming years.
Cambodia is on the 8th place of the Top 10 fastest-growing economies in the world, surpassing Indonesia, Thailand, and Vietnam. This is based on the average GDP Growth Rate of the countries recorded by the World Bank’s Global Economic Prospects from 2018 to 2021.
It stands out in emerging markets for being in a particular strategical spot. Located in the southern part of the Indochina Peninsula in Southeast Asia, its bordering countries are Laos, Thailand, and Vietnam. It only takes an average of 1 hour and 30 mins to reach other countries throughout ASEAN member states by plane.
In an interview with H.E Sun Chanthol, Senior Minister of Commerce, he emphasized the benefit of Cambodia’s location. It is in the center of Southeast Asia, an investment advantage for building production centers and serving ASEAN countries. It has 16.2 million consumers and can reach 600 million more at a doorstep.
Cambodia is indeed an attractive investment destination for investors and entrepreneurs who are after big profits and higher investment returns. Despite its drastic history, the country rose itself to becoming a widely commercialized country. It has developed massive improvements in different sectors opening a wide-range of investment opportunities today.
A Glimpse of Cambodia’s Strategic Location
What are the promoted sectors for investment in Cambodia?
In 2015, Cambodia has reached the lower middle-income status and aims to achieve higher in the future. The Royal Government of Cambodia developed a National Strategic Development Plan for 2014 to 2018. It aims to make the country a middle-income economy by 2030 and a high-income by 2050. In order to achieve this, the economy should be driven by the country’s rising industries.
The government believes that the Kingdom can offer unlimited investment opportunities from garments and light manufacturing, infrastructure and construction, education and health to a huge array of untapped natural resources and agro industry businesses. Each industry has a huge contribution to the economic performance of Cambodia but most especially industrial and infrastructure sectors.
The following are the leading sectors accounting for a total of 72% combined investments in the last five years.
- Agriculture » The agricultural sector has contributed about one-fourth of the economic growth of Cambodia in 2016. It continues to grow with the support of the government to strengthen the agricultural industry. A policy has been implemented exempting agricultural materials and equipment from import duties and taxes. Another emerging industry in agriculture is the process of rice milling.
It is an essential industry in the Cambodian economy since majority of the population resides in rural areas. The majority of the rural population are poor residents and farmers. Thus, the agricultural sector accounts for 40% of the total employment of the labor force. It is also the key aspect that can sustain the country’s economic growth, development of rural areas, and reduction in poverty rate. However, Cambodia is still struggling to serve the great demand for agricultural supplies. This is due to lack of infrastructures, low production, inadequate transportation, inefficient marketing support, and inconsistent institutional efforts. These gaps open opportunities for improvement and development. It then increases the potential involvement of the foreign investments and private sectors.
Read: U.S. and Cambodian Businesses in the Agriculture Sector Discuss Prospects
- Manufacturing Industries » Light Manufacturing
The economic growth of Cambodia is relatively accounted to the manufacturing sector with a growth rate of 9.2% in the economy. Its emerging industries include the automobile components, milled rice production, bicycles, electrical parts, and rubber. The bicycle industry of the country even became the number one supplier of the European Union in 2017.The light manufacturing assembly sector is primarily found in special economic zones which principally covers the labor force operations. Special economic zones offer easy access to supply the industries of the neighboring countries, as well as to export in farther countries.
The still growing manufacturing industry can strategically position itself as the most affordable alternative supplier. Currently, the manufacturing sites in the country cater food, beverages, plastic, chemical rubber, and paper processing.In 2015, the government developed an Industrial Development Policy (IDP) to support the industrial sector in Cambodia. It aims to drive the diversification of manufacturing industries by investing in variety of products, variety of merchandise, and variety of securities. This will prevent the country from getting affected by a possible economic fall in case one will turn into failure. It also targets to gain a total export of products to 45% by 2020 and 50% by 2025.
The World Bank is also supporting the government’s policy on industrial sector. It has contributed $540 million to the finance economic development of Cambodia for 2018 to 2021.The government is still seeking for a more advanced technology since some industries remain weak. It has a narrow and low-quality technological support, and low-value segmentation and concentration. As a result, the production of in-demand supplies still falls short in terms of quality and amount. These supplies are construction materials, machinery, electronics, engines, and chemical products.
- Manufacturing Industries » Garment Manufacturing
The garment sector continues to dominate the economy’s performance today. It already accounts for 80% of the total exports and 16% of the country’s GDP. Garments and footwear remain the largest export category, followed by bicycles. A great expansion in the garment industry came after the relocation of Chinese businesses in Cambodia. Based on the Ministry of Industry and Handicraft, there is an estimated amount of 1,528 factories in the country. Among those, over 900 factories are focused on weaving, garment, footwear, and bag production.
- Infrastructure and Construction » The real estate industry in Cambodia is the second largest contributor to the economic growth of Cambodia. It surpassed the agriculture and tourism sector with an extensive number of constructions mainly in the capital city of Phnom Penh. The growth in construction and real estate simultaneously develops the growth in the tourism sector.The significant rise in tourism arrivals presses demand for more diverse accommodation, possibly a world-class standard. It has also jump-started the development of more business areas and opened many doors for foreign investors to start taking their business into the Kingdom. This vision of turning Cambodia into a world-class tourist destination will need private sectors and development investors. However, the lack of construction regulations remains a concern.
- Tourism » Cambodia has been one of top tourists’ destinations because of the diversity of its tourism offer. From the urban center of Phnom Penh, the historic and cultural sites in Siem Reap Angkor to the pristine beauty of the tropical coastline in Sihanoukville.The Angkor Wat is one of the world’s largest recognized heritage sites occupying an area of more than 400 square kilometers. It remains to be the country’s most visited destination. It is also a representation of the Cambodian people for they have preserved a beauty for thousands of years.The tourism sector has made a significant impact on the growth of the economy of Cambodia. It has an estimated growth rate of 5% to 7% each year which is forecasted to grow a double number in 10 years. Maintaining a steady growth, there’s an increase of 11% of international tourists coming to the country.In 2014, 4.5 million tourists visited Cambodia compared to less than 200,000 visitors in 2000. Tourism has become the one of the country’s largest source of income. It has contributed to 28% of Cambodia’s GDP and 26% of employment in 2017.The majority of the tourists coming from countries have changed over the last decade. In the early 2000s, westerners were the top tourists visiting the country. Today, the countries leading the foreign tourism are China, Vietnam, and other neighboring Asian countries.There are also parts of Cambodia that are now being developed. These include Tonle Sap Lake, the still-natural lands and mountains, and the country’s southern coast. In fact, there are interested investors wanting to build hotels in Sihanoukville and Kep Province. Other places on the southern coast are composed of stunning islands which are still undeveloped.
Cambodia’s Continuously Growing Economy
Cambodia is dependent on imported resources mainly gas, oil, and coal. This offers a huge potential especially offshore oil resources have yet to be exploited due to the regional conflict with Thailand. The government of Cambodia is starting to facilitate the agreements on exploration industry on local oil resources. The future progress in the oil resources sector offers opportunities for investment projects.
Cambodia is a country of many opportunities. The industries of Cambodia have contributed to the continuous growth of the Kingdom’s economy. The key industries are centered on Agriculture, Manufacturing, Tourism, and Infrastructure. The Mining and Exploration sectors are the emerging industries that are still developing.
Investors benefit from the country’s strategic location, supportive government initiatives, investment incentives, and competitive labor force. Along with that, Cambodia has a strong access to the major markets particularly ASEAN, European Union and the United States.
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