Logo of Phnom Penh Post newspaper Phnom Penh Post - Charting changes in Japanese FDI

Charting changes in Japanese FDI

Yasuhara Hiroto, head of the Japan Desk at the Council for the Development of Cambodia (CDC).
Yasuhara Hiroto, head of the Japan Desk at the Council for the Development of Cambodia (CDC). Hong Menea

Charting changes in Japanese FDI

Japan’s investment in Cambodia continues to grow and its investors are playing a leading role in developing and diversifying the Kingdom’s light industrial sector. The Post’s Hor Kimsay sat down with Yasuhara Hiroto, head of the Japan Desk at the Council for the Development of Cambodia (CDC), to discuss what is drawing Japanese investors to Cambodia, and where they are directing their capital.

Japan was the first country to set up its own department at the Council for Development of Cambodia, called CDC-Japan Desk. Why?

Japanese companies that are interested in investing in Cambodia found difficulties communicating in this country. It is not only the language, but also how to access the correct information about investment laws and the procedures for starting a business. There are also obstacles for getting and submitting the right paperwork for QIPs (Qualified Investment Projects). So, with the Japan Desk, investors can communicate easier.

What is attracting Japanese FDI and where is it being directed?

Japanese companies see Cambodia as a promising market, and that is why we have seen many investments towards the service industry so far this year. Most of this investment is in the second Aeon mall project, the new Starts hotel, an All Nippon Airways (ANA) direct flight between Phnom Penh and Tokyo, as well as a Japanese hospital. However, at the same time, Cambodia is receiving less investment into its manufacturing sector.

What is causing Japanese investment into manufacturing to slow down?

Cambodia used to be considered as a low-wage country, but the minimum wage has been increasing gradually. We understand that higher salary is needed for the people to improve their lives, but at the same time it causes Cambodia to lose its advantage as an attractive place for investment. Plus, there is the high cost of electricity that Japanese investors always complain about and the administrative complexity of the infamous unofficial payment requests that are demanded.

There is also the high cost of logistics that include a forwarding charge and transportation charge. According to new data from Japan International Cooperation Agency (JICA), the forwarding charge of goods in Cambodia totals $540 per TEU (twenty-foot equivalent unit, the size of a standard container), while in Thailand it is just $200 and for Vietnam $250.

Lastly, Vietnam is also a member of Trans-Pacific Partnership (TPP), which has made it quite attractive for Japanese companies.

What are your expectations on the flow of investment for the rest of this year?

I think it will slow down because manufacturing investment is very low. Surprisingly, we haven’t seen any Japanese investment at Phnom Penh SEZ for the first half of this year.

However, I expect that with the rebound of Thailand’s economy, we could see more Japanese investment going to Poipet in the second half of this year.

How are the economic changes in Japan affecting companies that are considering investing Cambodia?

The Japanese yen has appreciated over the last six months, making it more difficult for Japanese-made products to compete in the international market. This could motivate more Japanese investors to explore opportunities overseas, including Cambodia. Cambodia is a dollarised economy, and while the US dollar has depreciated compared to the yen, it makes production costs here lower.

This interview has been edited for length and clarity.

MOST VIEWED

  • Two luxury hotels latest quarantine options for inbound travellers

    The Inter-Ministerial Committee to Combat Covid-19 has designated two luxury hotels as alternative quarantine options for travellers who wish to enter Cambodia through Phnom Penh International Airport – Sokha Phnom Penh Hotel & Residence and the Courtyard by Marriott Phnom Penh. In a notice detailing guidelines issued

  • Visa A holders get to quarantine at Himawari Hotel

    The Ministry of Health has permitted foreign diplomats, UN and International NGO officials to undergo quarantine at Himawari Hotel in the capital in case they do not have a separate place suitable for this purpose, but the government would not be responsible for the expenses.

  • Jabs for kids bring hope for school reopenings

    Cambodia is tentatively planning to reopen schools – at least at the secondary level – when the vaccination of children aged 12-17 is completed, even though daily transmissions and deaths in other age groups remain high. Schools across the country have been suspended since March 20, one month

  • China denies Mekong hacking

    As the US and its allies joined hands last week to expose what they allege to be China’s Ministry of State Security’s malicious cyber activities around the world, the attention also turned to Cambodia with the US Department of Justice claiming that four

  • Governor: Covid subsides in capital

    Phnom Penh municipal governor Khuong Sreng said the Covid-19 situation in the capital’s 14 districts has eased, with only two districts still recording a high number of infections. “Transmission cases in all districts are dropping, though they are relatively higher Meanchey and Por Sen Chey.

  • Hun Sen: Get 12-17 age group ready for Covid jabs

    Prime Minister Hun Sen has told parents of children aged 12-17 in Phnom Penh and the provinces of Kandal and Preah Sihanouk to get them ready for vaccinations soon. “There is a need to vaccinate children and youths aged 12 to 17. According to the statistics provided