Start up and Give back: Establishing a Business in Cambodia
Cambodia has a highly diverse consumer market. With a history of strong tourism and foreign investment, there is a large expat population always eager to try new trends. That’s in addition to locals who have likewise developed a taste of international brands and products.
As such, opportunity is ripe in the Kingdom for nearly any type of enterprise. While business registration used to be a painstaking process, the government fortunately took measures to expedite the process amid the pandemic.
Read ahead for a rundown of the business registration process, as well as practical advice on preparing to launch a business in Cambodia.
Before anything else, connect with culture
If you’re planning to start a business in Cambodia, it’s important not to take shortcuts – especially in knowing your target market and locality. The level of consumer diversity demands that even prior to the planning stage, you begin connecting with locals and learning the dominant culture. Otherwise, your star product or service may just get lost in translation.
Taking the time to build relationships with residents will help you familiarize with social customs and general preferences of your locality. When you have a deep understanding of your clients’ lifestyles, you can come up with a more concrete picture of what you envision your business to do in Cambodia.
Invest in a good location
Congruent with getting to know your market will be deciding on your business location. There are certain districts better suited to business professionals and other corporate workers, while others are popular for family outings. Several establishments position themselves close to schools, with offerings and price lists curated for the average student budget.
A good location is essential to a thriving new business, coupled with effective promotion. Moreover, a tangible location is among the requirements to apply for a business license in Cambodia. It pays to seek a well-known and reliable real estate agency to aid your search for the best location, expediting the process and finding the best property and lease/sale conditions geared towards your own criteria.
Initial requirements and the single e-portal
After you have conceptualized your business framework and acquired a location, you can proceed with registering your business. According to the World Bank, it takes almost a hundred days (roughly three months or more) to accomplish business registration in Cambodia. To begin, you’ll need the following:
- Valid visa and work permit;
- Cambodian bank account with minimum balance of US$1,400 or 4 million Riels;
- Certificate of good health;
- Police clearance from your home country.
Once secured, the first step is online business registration with the Cambodia Ministry of Commerce, a system launched only last June 2020. With a Single Portal, it integrates six ministries* into the registration system. It aims to get applications approved within eight (8) working days. Fees can also be paid online.
Other ministries involved in business registration are the Ministry of Tax Administration and Ministry of Procurement and Finance. Some businesses, depending on nature or category, will also need additional licensure from the specific government department concerned. For example, a publishing agency should acquire a license from the Ministry of Information, while tourist-centered businesses should apply with the Ministry of Tourism.
Online business registration in Cambodia applies whether you are registering as a sole proprietor, partner, private or public limited company, or foreign company. The MoC website is straightforward, requiring information, documents, and a registration fee for your application to be reviewed.
Cost of registration depends on the type of enterprise and taxpayer classification based on the General Department of Taxation. In general, foreign companies need to pay US$6 or 25,000 Riels to reserve a company name while registration fee is US$246 or 1 million Riels.
To register a sole proprietorship, you will need to fill out your proposed name and business activities. In case of a company or partnership, you might also need to provide share par value; number of employees; and director’s, shareholder’s, partner’s, or manager’s information. Note that in for foreign-owned companies, Cambodia requires that at least 90% of your workforce are locals.
Moreover, if you have under eight (8) total employees, you are required to contact the Ministry of Labor and give a Declaration of the Opening of Business either before start of operations, or within 30 days of opening. This notice for enterprise opening is also charged US$30 or 120,000 Riels, regardless of the type of business.
The value of connection
Maneuvering through the entire process may be too time-consuming for some, thus it may be most efficient o hire a professional business advisory to smooth out your registration.
If you have taken the time to connect with locals, their assistance would also be valuable in overcoming the language barrier and ensuring clarity in all types of transactions, from registration to actual operations.
It is also important to adopt the mindset of being committed to the country in which you are establishing a business – in this case, Cambodia. The goal of making a quick buck won’t sustain your business; rather, a genuine commitment to mutual benefit for you and the country will.
While you may be tempted to have a staff base dominated by professionals from your own country, there is a priceless return of investment if you are able to train and empower locals. Consider it your corporate social responsibility to the host country of boundless business potential.
As you demonstrate such benefits as instigated by your business in Cambodia, the government will even consider your enterprise as a Qualified Investment Project (QIP). You could then receive incentives, financial or otherwise, from the Cambodian Investment Board, such as tax exemption on profits or duty-free importation.
The value of human connection stands in business, from planning and registration to operations and long-term objectives. In the first place, local preferences act as a compass for feasibility, and truly understanding the culture and government system will aid in navigating registration and other technicalities.
Meanwhile, actual business operations set the stage for a two-pronged benefit: your own canvas for creative execution, promotion, and service or sales as an entrepreneur, and an arena for training locals.
Keep in mind that even if your own workers eventually decide to move on and seek employment elsewhere, it will have been your business that endowed them with the necessary skills and credentials.
That is a priceless investment that will inevitably “give back” to Cambodia, developing the country’s labor force and stimulating economic activity.