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Big dip in approved investments

Big dip in approved investments

120814_07

Concrete results: Phnom Penh’s growing skyline at sunset. Photograph: Heng Chivoan/Phnom Penh Post

Latest figures show the total value of approved investment in the Kingdom declined by more than 70 per cent in the first half of this year compared to the equivalent period a year before.

Economists and officials are unconcerned, however, saying that some big projects during the previous period may have skewed the numbers.

According to data from the Council for the Development of Cambodia (CDC), the total value of approved investment was just US$692 million in the period, compared to $2.92 billion during the corresponding period last year.

Peter Brimble, deputy country director for the Asian Development Bank, said the CDC’s number represented investment approval only – “hence, it captures investment intent rather than actual investment.”

Brimble said that as such, the CDC data was heavily influenced by very large approvals, many of which may not be realised in whole or in part.

“This has certainly happened when comparing 2011 to 2012,” he said. “A large approval in the first half of 2011 clearly led to the appearance of a fall in 2012.”

Hiroshi Suzuki, CEO and chief economist at the Business Research Institute for Cambodia (BRIC), also said the approval amount noted by the CDC had fluctuated because of a few large investment projects.

Suzuki said he was watching the real inflow of foreign direct investment (FDI).

“In the case of the Cambodian economy, FDI is one of the important sources of foreign currency. Also, FDI is a very important engine of growth,” he said.

“If FDI decreases, the negative impact to the Cambodian economy would be very serious.”

The CDC’s data shows that during the period, the government approved 72 investment projects compared with 51 the year before.

The breakdown by sector showed the agricultural sector had attracted seven projects worth $242 million, industry had 60, valued at $381 million, one for the service industry worth $18 million, and four for the tourism sector worth about $51 million.

Brimble said that given international aid was likely to fall, maintaining FDI inflows and increasing them needed to be a critical focus of government policy.

“Also, ensuring that the FDI that does occur has the maximum effectiveness in terms of employment, skill development, technology transfer, backwards linkage development and so on,” he said.

BRIC’s Hiroshi also saw the importance of investment. “I hope the government will continue to attract FDI by improving the investment environment,” he said.

To contact the reporter on this story: May Kunmakara at [email protected]

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