In December 2019 Cambodia’s prime minister, Hun Sen addressed the attendees of the 14th Cambodian Import-Export Goods Exhibition, an event intended to showcase the country’s positive business and investment climate. He made it crystal clear that Cambodia is open for business, saying ‘To ensure a sound macro-economy and political and social stability, the government is open to all investors to do business and invest in the Kingdom.’

Cambodia is home to an estimated 100,000 expatriates who come for a variety of reasons including the low cost of living, business opportunities, the laid-back lifestyle and the influence of Buddhist culture. Infinity set up its Phnom Penh office in 2014 so we understand exactly what makes Cambodia attractive for business.  Let’s take a look at some of its advantages here.

Why Cambodia is attractive for business

  1. Strong economic growth in recent decades

Cambodia was one of the fastest-growing economies in the world between 1998 and 2018 with an average growth rate of 8%. The main drivers of growth have been the garment and tourism industries.

The World Bank states that ‘Over the past two decades, Cambodia has undergone a significant transition, reaching lower middle-income status in 2015 and aspiring to attain upper middle-income status by 2030.’

The economy was still flying until the end of last year, with growth of 7.1% in 2019 according to the National Bank of Cambodia (NBC), but has inevitably been hit hard by the Covid-19 pandemic, with the tourist industry particularly badly affected.

That said, the Asian Development Bank (ADB) has stated that Cambodia has fared better than many other countries in Asia and is expecting a resurgence of the economy in 2021, with predicted GDP growth of 5.9%.

  1. A resilient economy

Cambodia is a frontier market and as such it is less dependent on the world’s biggest economies – China, the US and Europe – than some other more developed economies. Historically, this has given it some degree of protection through global upsets. The kingdom has escaped recession for over 20 years and proved resilient through the financial crisis of the 1990s in Asia, the tech bubble of the early 2000s and even in the aftermath of the financial crisis in 2008.

  1. Government incentive

The Cambodian government is known for its pro-business stance and in March 2019 it announced an ambitious programme of economic reforms including many measures designed to attract new business, investment and capital flows to the country. These included tax incentives, lower costs associated with shipping, a reduction in the number of national holidays, new investment measures and special economic zone laws. Prime Minister Hun Sen predicted savings for producers and exporters of US$400 million per year. In addition, unlike some Asian countries, Cambodia allows 100% foreign-owned companies.

  1. A youthful population

Also notable is Cambodia’s youthful population:  of almost 16 million Cambodians, around half are under 25. According to the Institute of Export & International Trade’s Doing Business in Cambodia guide ‘the young generation coming through are tech-savvy and avid users of social media platforms like Facebook and YouTube. This is having a significant impact on Cambodian culture as a whole and opens up new opportunities and routes to market.’

  1. A strategic location

Cambodia is strategically located in the heart of Southeast Asia and shares borders with Thailand, Laos, and Vietnam with the Gulf of Thailand to its south-west. The access it enjoys to key world markets makes it a popular low-cost manufacturing base for several industries with significant demand for its products in other Asian countries.

  1. A competitive labour force

The Cambodian minimum wage is lower than in neighbouring countries Thailand and Vietnam making it more competitive for service and manufacturing industries looking to recruit from the plentiful young workforce.

  1. Preferential market access

Cambodia is a member of the ASEAN Free Trade Area (AFTA), one of the largest and most important free trade areas in the world, and benefits from the Common Effective Preferential Tariff (CEPT) agreement. This means that it can trade with other member countries on preferential terms and, in some cases, tariff-free.

It is also a member of the World Trade Organization and trades with the EU under the ASEAN-EU dialogue.

  1. A rapidly growing consumer class

Rising incomes mean more disposable income and the country’s young, tech-savvy and worldly population provides a growing market offering fantastic potential for businesses.

  1. Improving infrastructure

Cambodia’s infrastructure has historically been weak but the government is investing heavily to develop the nationwide network of transit routes, power and telecommunications with the help of foreign aid. There has been a focus on improving Cambodia’s links with neighbouring countries to advance trade and boost foreign investment.

Setting up a business in Cambodia is not without its challenges but the great strength of the Kingdom of Wonder is its potential. It is definitely worth serious consideration for businesses looking to set up a base in Asia.

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