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Crucial growth in FDI pledges

GOVERNMENT-approved investment rose by 53 percent last month compared with the same period in 2009, leading analysts to predict positive growth in a “crucial” area for Cambodia’s economic development.

Figures released by the Council for the Development of Cambodia (CDC) Monday stated that US$691 million of investment capital was approved by the government last month, compared with $452 million in March 2009.

The data represent the first sign this year that investment has shown positive growth, after monthly drops of 25 percent in January and 89 percent in February. That growth followed a miserable 2009, when the amount of approved investment shrunk by 46.18 percent over 2008, as the effects of the economic crisis ravaged global financial confidence.

On Monday, CDC officials welcomed the figures, expressing hopes that they mark the beginning of a positive trend for investment.

CDC President Kang Chandararoth told the Post that investment in Cambodia is set to improve this year because the country’s infrastructure has been better organised.

“I believe that overall investment in Cambodia’s economy will get better in the future because Cambodia now has strong agricultural infrastructure,” he said.

It is positive that investment interest in Cambodia seems to be reviving."

An official from the CDC explained that the sharp increase in investment values for March resulted from increased capital flow from China.
Chinese investment, the data shows, soared to $511.6 million from just $5.5 million.

According to the CDC, the funds are set to be invested in the development of energy and wood processing.

The industrial sector – which includes energy, food processing and garments – was where the vast majority of new investments were made, attracting nearly $500 million.

Duy Thouv, deputy secretary general of the CDC, added Monday: “We hope that investment in other important sectors will also increase this month and in the coming months.”

Analysts from the Kingdom’s business and economic community were cautiously optimistic about new data.

CEO of Leopard Captial’s $34 million investment fund, Douglas Clayton, warned in an email Monday that approved investment may not be translated into the real economy.

He said: “It is positive that investment interest in Cambodia seems to be reviving as the global economy stabilises.

“Attracting foreign direct investment (FDI) is crucial to Cambodia’s development, as the country’s investment needs far surpass the amount of domestic capital and business experience available,” he wrote.

He said that “it would be even better” to see major inflows from Japan and Germany, which have “leading edge technology and strong environmental standards”, adding: “But at this stage Cambodia cannot afford to be that discriminating, so most FDI could be considered as positive.”

Asian Development Bank’s Senior Country Economist Eric Sidgwick also added a note of caution.

He told the Post via email Monday: “Investments in a small economy like Cambodia are lumpy, and figures for one month do not necessarily entail any change in the underlying trend.”

Nevertheless, the figures are indicative of growing faith in Cambodia’s potential to rebound from the economic crisis.

Earlier this month, the World Bank forecasted GDP growth of 4.4 percent in 2010, up from a 4.2 percent prediction in November.

According to the World Bank’s country report on the Kingdom, produced in April, the international organisation expects foreign direct investment in Cambodia to reach $725 million this year, up from an estimated $515 million in 2009.

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