When Tanzaki Taro first arrived in Phnom Penh, the first thing he noticed was the ageing airport. It was in 1997, and Taro had taken two years off his university studies to volunteer at the Japanese Embassy in Cambodia.
Back then, he recalled, Phnom Penh was vastly different. There were no traffic lights, no tall buildings and even the main roads were a dusty, potholed mess.
“At that time, the city was quite dark,” Taro said. “It was difficult to find Japanese companies in Cambodia.” Japan’s presence was limited to developmental cooperation, with economic relations – and business opportunities – overlooked. “There were many development projects being undertaken through the Japan International Cooperation Agency (JICA), the Asian Development Bank, the World Bank or others countries, butno business.”
After finishing his two years in Cambodia, Taro completed a bachelor’s degree in Japan, a master of development studies in the US and a master of agricultural economics in the UK. In 2012, more than a decade after he left, Taro returned to Cambodia and saw that things had changed – a lot.This time around, Taro is not volunteering. He is a project formulation adviser for JICA, working at the the Japan Desk in the offices of the Council for Development of Cambodia (CDC). His job is to support the expansion of Japanese businesses in Cambodia.
Taro isn’t alone in finding success in the Kingdom. Prior to 2010, Japanese investment here was limited. Since then, however, economic cooperation between Cambodia and the world’s third-largest economy has been intensifying, with an ever-growing number of Japanese businesses setting up shop in the Kingdom.
“Now, many Japanese people come to start up a business. If we look at Phnom Penh, there are more than 100 Japanese restaurants,” Taro said.He also pointed out that though Cambodia is still in need of development assistance from foreign governments, this isn’t stopping enterprises from entering the country themselves. “The flow of development assistance and business is coming at the same, fast pace.”
According to investment figures from the CDC, Japanese investment grants in Cambodia from 1994 to last month totaled $822 million. That’s even more impressive considering that investment from 1994 to 2010 accounted for only $236 million – about one-third – of that total; in the past three and a half years, Japanese businesses have poured $586 million into the Kingdom’s economy.
Why such a sudden surge? Cambodia’s relative economic stability, cheap labour, duty-free exports and, most importantly, creation of special economic zones have been the most important factors in burnishing the country’s image as a good place to do business, Taro says. Not forgetting, of course, the advantages offered by the Japan Desk at the CDC.
The desk is a godsend for Japanese businesspeople trying to navigate Cambodia’s bureaucracy and get their project off the ground. Hurdles like getting and submitting the right paperwork (such as for a qualified investment project) and the language barrier make the Japan Desk’s dedication to smoothing out the process invaluable.
“If the Japan Desk can provide all the necessary information to the investor and help in the process to get the application forms from the CDC, it is extremely helpful,” he said. “If we look at the end of 2009 to now, a large amount of Japanese investment has started to come in, and this has been when the CDC Japan Desk has become really active.”
The level of Japanese investment appears set to continue rising, and many believe this will significantly contribute to the development of the industrial sector and to the diversification of the Kingdom’s economy.
With Cambodia readying to join its Southeast Asian neighbors in the planned launch of the ASEAN Economic Community next year, the trend of Japanese investment in the Kingdom shows no signs of abating, Taro said. In fact, there may be even more opportunities, as Japanese companies are considering new emerging countries for investment because of labour shortages and increasing wages in China, Thailand, and Vietnam. Japanese firms have been researching Cambodia’s business potential and comparing it with Myanmar, Bangladesh and Laos, as they consider their next step.
“I think the garment sector and labour-intensive industries will keep coming; the trend will be the same,” Taro said. “Plus, the number of big investment projects like in the automotive and electronics industries will just keep rising.”