New legislation and global partnerships reignite foreign investment in Cambodia

Through targeted legislation and international cooperation, Cambodia is working to improve its standing as a destination for foreign investment. 

Over the past twenty years Cambodia has seen a steady increase in foreign direct investment, with inflows rising from just over $81 million in 2003 to $3.48 billion in 2021. Today, thanks in part to a regional pact of cooperation and a revamped investment law, the Southeast Asian nation is recommitted to bolstering its reputation as a destination for foreign firms and international investment. 

According to the Khmer Times, the Council for the Development of Cambodia (CDC) approved fixed asset investment projects in the country valued at more than $4.5 billion in 2022, up 7% from the previous year. The government body, whose responsibility is “to promote and facilitate foreign and local investments to achieve a healthy private sector in Cambodia’s development,” issued permits for non-special economic zone (SEZ) projects worth $3.4 billion, representing a 49% year-on-year increase.

The bulk of this investment – $2.7 billion – came from local projects, with Chinese operations accounting for another $1.4 billion, or 30% of total figures. According to the CDC’s report, other notable foreign investment projects came from Korea, Japan, Thailand, Singapore, Malaysia, the Cayman Islands, the British Virgin Islands, and Australia. 

According to statements from Lim Heng, vice president of the Cambodia Chamber of Commerce, a number of factors contribute to this renewed interest in the Southeast Asian nation’s economic potential. 

“The new investment law, with free preferences – Cambodia-China FTA and Cambodia-Korea FTA, RCEP – are giving a big impetus in attracting investment to the Kingdom,” he told the Khmer Times.

The RCEP, or Regional Comprehensive Economic Partnership, is a free trade agreement between the ten ASEAN nations and the Pacific FTA partners Australia, New Zealand, Japan, Korea and China. According to the agreement’s summary, the central goal is the establishment of a “modern, comprehensive, high-quality and mutually beneficial economic partnership” between the fifteen member countries. 

For Cambodia, the RCEP has renewed the public and private sector’s efforts to draw foreign capital into the country and further integrate the nation into global value chains. The RCEP agreement, which came into force 15 months ago, has officials optimistic about the future of international trade in the country and will amplify the positive impacts of Cambodia’s updated 2021 investment law.

Put into effect in October 2021, the new investment law was designed to increase Cambodia competitiveness in attracting foreign investors through a number of mechanisms. Income tax exemptions, customs/duties incentives and other efforts were designed to modernise the nation’s investment climate and bring regulations closer in line with ASEAN standards. 

Now, thanks to the success of Cambodia’s Covid-19 response and vaccine rollout alongside these regulatory milestones, government officials and international experts are optimistic about the nation’s further integration into the global economy. The Economist Intelligence Unit, the research and analysis division of the Economist Group, is predicting that Cambodia’s GDP will increase from last year’s levels, thanks in large part to foreign investment. 

Speaking at an economic function in Bangkok, Deputy Prime Minister and Secretary-General of the CDC Sok Chenda is enthusiastic about the new legislation’s role in driving international investment in the country.

“The Royal Government of Cambodia welcomes foreign investment by opening the door to investors from all countries in all fields without discrimination. In particular, the Cambodian Investment Law provides an open, transparent incentive to all investors, guaranteeing and protecting investment without discrimination.”

Reference :

Summary Of The Regional Comprehensive Economic Partnership Agreement. link