Commerce Minister Cham Prasidh says Japanese firms can benefit from new agreement offering minimal tariffs on exports
SPEAKING to Asian business officials visiting Phnom Penh, Minister of Commerce Cham Prasidh Wednesday singled out Japan, encouraging firms from the country to do business and invest in Cambodia to take advantage of a recent trade deal.
On December 1, the Cambodia-Japan Free Trade Deal went into effect offering foreign firms that invest in the Kingdom access to the Japanese market with 98 percent of duties eliminated.
“Japanese companies should … take the chance to do business and invest in Cambodia to produce goods for duty-free export,” Cham Prasidh told the gathering of business leaders and officials.
According to the agreement, exporters to the world’s second-largest economy must produce a certificate proving country of origin.
Some Japanese companies are already taking advantage of tax breaks in the Kingdom. Ajinomoto, the world’s largest producer of monosodium glutamate (MSG), started building a packing factory at the Phnom Penh Special Economic Zone this quarter and has previously suggested it may expand operations further. However, there are markedly fewer Japanese companies operating in Cambodia than elsewhere in the region.
Hiroshi Hattori, an expert from the Japanese Overseas Development Corporation, said Wednesday that 3,000 firms from Japan operate in Thailand and 1,500 in Vietnam.
Last year, Japanese investment totalled just US$7.82 million, about a tenth of that from Singapore or Thailand. The figure will almost certainly drop this year, given that only $4.76 million was invested by Japan in the first 10 months.
Hattori said that numerous obstacles remain for Japanese companies considering doing business in Cambodia, namely the high price of electricity and the still-bureaucratic administrative system.
“Japanese companies spend a long time planning before starting businesses or investments,” he said, adding that firms from Japan are usually looking to the long term.
Doing Business, part of the World Bank Group, ranked Cambodia 145th out of 183 countries surveyed in terms of ease of doing business, six places lower than the 2009 position. For starting a business, Cambodia was at 173, falling two places on the 2009 survey result.
The project found that it took an average 85 days to start a business in the Kingdom, more than double the Asia Pacific average of 41 days – and was one of the main obstacles to launching investments here.
Cambodia faired much better in the category that measured how well investments were protected, ranking 73rd overall.
Cham Prasidh’s call to Japanese firms Wednesday echoed comments made earlier this year when he likened Japan to an economic magnet that could drag firms from other countries to invest in Cambodia.