Cambodia's economy picking up after decades-long standstill

November 7, 2007 - A study conducted by Hong Kong Trade Development Council (TDC) has revealed that Cambodia's economy is picking up after decades of standstill caused by war and political strife and Hong Kong companies should now eye opportunities in this emerging market.

The survey showed the country's GDP registering an average 9.5 per cent growth continuously over the past six years, joining Thailand, Vietnam and Laos in what is popularly known these days as the "Mekong Four" of rising economies.

However, many regard Cambodia as the freest economy among the four and its investment offerings more attractive. Light-goods manufacturing, real estate and infrastructure, and tourism afford the best investment potentials, the TDC report says.
It says Hong Kong can tap profitably into industries such as garment manufacturing, tourism, financial services, arbitration and legal services as well as construction services.

As an emerging investment choice, Cambodia attracted FDI (Foreign Direct Investment) amounting to more than US$400 million in 2006, a figure that is expected to grow to US$600 million by 2011.

The recent discovery of offshore oil reserves near Cambodia's coast is expected to provide the country with a new and sustainable source of growth, the TDC report points out.

Cambodia's advantages include the preferential treatment it receives as a beneficiary of Generalised System of Preferences and a least developed country (LDC) under the WTO.

For Hong Kong garment manufacturers, Cambodia is a competitive production base outside the Chinese mainland because of its low labour cost and young workforce. The report notes that wages in Guangdong have continued to rise alongside stricter environmental protection laws imposed across China and cuts in export tax reimbursements.

The report notes that Hong Kong companies are no strangers to Thailand, Vietnam and Laos, having set up shops in those countries over the years, but says that examining what Cambodia can offer against what the other three offers is "certainly a worthwhile exercise." However, there's no straightforward answer as to which among the Mekong Four is the best production base.

Unlike Vietnam and Laos, Cambodia has no foreign exchange controls. And, unlike Thailand, Cambodia's investment policy is liberalising whereas Thailand's foreign ownership rules are thin and tightening.

Cambodia's business tax - at 22.3 per cent - is also lower compared to the Mekong Four's average of 42.2per cent.

Regarding tourism, the country received 1.7 million visitors in 2006, continuing the growth trend of previous years. The tourism and hotel sector as a whole enjoyed a 23 per cent jump in business in 2006.

Visitors, mainly from South Korea, Japan, America, Taiwan, the Chinese mainland and Vietnam stay an average 6.5 days per visit, spending US$95 per day per person.

But not all is rosy in Cambodia. The TDC report says the country is far from being a challenge-free market. The advice to Hong Kong companies planning to do business in the country is to exercise "cautious optimism."

About the TDC
Established in 1966, the Hong Kong Trade Development Council (TDC) is the international marketing arm for Hong Kong-based traders, manufacturers and service providers. With more than 40 offices worldwide, including 11 in the Chinese mainland, the TDC promotes Hong Kong as a platform for doing business with China and Asia. The TDC also organises trade fairs and business missions to connect companies with opportunities in Hong Kong and the mainland, while providing information via trade publications, research reports and online.