Construction proceeds at full tilt earlier this year on the US$280 million, 180-megawatt Kamchay hydro-power dam project being built with Chinese investment from Sinohydro Corporation. Photo by: David Boyle

THE Council for the Development of Cambodia forecast yesterday that approved foreign investment in the Kingdom would drop 27 percent this year, compared to 2009, but was set to make a gradual recovery.

In a presentation given at Phnom Penh’s Koh Pich Island yesterday, Council for the Development of Cambodia’s investment board deputy secretary general Duy Thouv forecast projects worth $4.25 billion would be approved this year.

The fall would be the second year that approved Foreign Direct Investment has plummeted. In 2008, FDI hit a massive US$10.891 billion but fell 46 percent to $5.859 billion in 2009.

The CDC has predicted that after this year, approvals would gradually improve, to $4.46 billion in 2011, $5.8 billion in 2012 and $6.96 billion in 2013.

Despite the figures, officials remained positive about the Kingdom’s economy.

The 27 percent decline was not an indication of weakness, Duy Thouv said yesterday.

Instead, he said, 2009 had been a strong year, despite the global financial crisis.

“Of course the economy was hit by the crisis, but foreign direct investment was still high because of a sharp increase [in approvals] from Vietnam and China,” he said.

“Investment this year will be lower since there was no similar rush.”

Growth in FDI would stem from both internal and external factors, he said, highlighting a new rice policy boosting exports and the prospect of oil and gas production in 2012.

Special Economic Zones would also be established to attract additional businesses, he said.

The Kingdom has approved 21 SEZs. Of those, four are in operation, and two are being built, according to Duy Thouv’s presentation.

As of 2009, Cambodia had attracted more than $488 million worth of investment in the areas.

Economic experts also emphasised the importance of counting the impact of approved investment in real terms.

Chan Sophal, president of Cambodian Economic Association, said it was important to note the data registered only investment plans, and that many projects had never been implemented. There had been “huge investment figures” particularly in 2008, he said; however, some of the approved projects had never materialised.

“What we want to see is more implementation, more injection of capital on to those investment projects, not just papers showing approvals,” he said.

He said Cambodia had done well to attract investment, but that more could be done especially improving laws and regulations as well as easing restrictions inhibiting imports and exports.

Bretton Sciaroni, senior partner at Sciaroni and Associates, said that approved-investment data, although useful, did not make clear how much of the investments were actually made.

While Joshua Morris, managing director at Emerging Market Investments, echoed statements that figures could be misleading. Investors were becoming more critical when choosing potential projects, he warned.

“Foreign investment looking at the market now is more stable, more critical, with an eye to long-term goals,” he said. “Previously I think there were somewhat euphoric expectations of Cambodia.”

ADDITIONAL REPORTING CATHERINE JAMES