The factors driving foreign direct investment in Cambodia

PHNOM PENH: Cambodia has a stream of direct investment from many major countries, including South Korea, Singapore, Japan, Vietnam, Malaysia, Thailand, the United Kingdom, especially China and the United States.

Foreign direct investment (FDI) in Cambodia amounted to 185.7 trillion Riel (Cambodian currency roughly US$45.8 billion), as of the first quarter of 2023, according to the (NBC).

The main advantages include solid economic growth, a strategic geographical location, a favorable investment climate, abundant natural resources, a competitive labor market, strategic trade agreements, growing infrastructure development, a supportive legal framework, and social and political stability.

Khmer Enterprise (KE) recently published a topic on the reasons why Cambodia attracts the most foreign direct investment (FDI) from China and the United States. The following are some of the factors mentioned:

Low-cost labor: Cambodia has a young and growing population, with an average age of 25. This means that there is a large pool of potential workers available, and wages are relatively low. This makes Cambodia an attractive destination for labor-intensive industries, such as the and textile industries.

Economic growth: Cambodia has experienced strong economic growth in recent years. The GDP growth rate was 7.5% in 2022, and the government is targeting a growth rate of 8% per year for the next few years. This economic growth is creating new opportunities for investment in a variety of sectors, including manufacturing, tourism, and infrastructure.

Strategic location: Cambodia is located in Southeast Asia, and is a member of the Association of Southeast Asian Nations (ASEAN). This gives Cambodia access to a large and growing market of over 650 million people. Cambodia is also well-positioned to serve as a gateway to other countries in the region, such as China and Vietnam.

Favorable investment climate: Cambodia is an attractive country for foreign investors because of its open legal framework and favorable trade agreements. Most sectors are open to foreign direct investment, and investors may be eligible for tax breaks and import tax exemptions. In addition, Cambodia is a member of several free trade agreements, including the China-Cambodia Free Trade Agreement (CCFTA), the Regional Comprehensive Economic Partnership (RCEP), and the ASEAN Comprehensive Investment Agreement.

Good security and social stability: Cambodia has good security and social stability. The country has been relatively peaceful in recent years, and the government is committed to maintaining a stable investment climate. This makes Cambodia an attractive destination for investors who are looking for a safe and secure place to do business.

Last year, local investment accounted for 53.54% of total investment, while Foreign Direct Investment made up the remaining 46.46%. China stood out as a significant foreign investor, contributing 42% of the total.

Khmer Enterprise (KE) was established as an implementation unit of the Entrepreneurship Development Fund (EDF) to implement the support programs and directly work with partners and beneficiaries. It aims to mobilize, invest, and manage resources, from all legitimate sources, to support the development of a vibrant entrepreneurial ecosystem and to provide financial and non-financial support to related entrepreneurial ecosystem builders.

They are entrepreneurs, innovative startups, potential SMEs, and partner institutions who participate in promoting entrepreneurial activities driving innovation and value-added creation in Cambodia's economy.

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