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FDI inflow seen as driving economic development

FDI inflow seen as driving economic development

A modest increase in the inflow of foreign direct investment is a sign that Cambodia remains an attractive destination to investors, and will go a long way toward the country’s development, analysts said yesterday.

Total capital inflow of foreign direct investment (FDI) to Cambodia amounted to $511 million during the first half of the year, a 6 per cent increase over the same period last year, central bank data show.

The figures, contained in a government mid-year assessment of Cambodia’s macroeconomic outlook released on Tuesday, did not indicate how the FDI was distributed. However, less than a quarter of these capital inflows went to the banking sector, “indicating that a high proportion of these flows went into productive sectors”, the report said.

Hing Thoraxy, senior researcher at the Cambodian Institute for Cooperation and Peace (CICP), said that more than half a billion dollars in FDI in just six months was a respectable performance, and the foreign capital would help reduce poverty and develop the economy.

“When we can receive capital inflow from FDI at more than $1 billion per year . . . it will greatly assist in quickening the development of our country,” he said. “It will help to provide jobs to the Cambodian people and provide many benefits to the economy.”

While the central bank’s data show $511 million in capital inflow from FDI during the first six months of the year, the Council for the Development of Cambodia (CDC) has reported approving $1.1 billion in foreign investment projects during this period. The higher figure suggests the real flow of capital from FDI will remain strong during the coming period.

The foreign capital could push forward plans to broaden the Cambodian economy. Last year, the government released a 10-year industrial development policy (IDP) that outlines strategies to expand the country’s narrow industrial base beyond garments and rice. It is hoped the policy in turn will attract more FDI.

“Our IDP is a good tool to attract more investment to diversify our economy,” Vongsey Vissoth, secretary of state at the Ministry of Economy and Finance (MEF), said at the report’s release.“It is a new engine to drive investment in our country.”

Cambodian investors accounted for nearly 70 per cent of the $4.6 billion in total committed investment that the CDC reported last year. China was the top foreign investor, contributing nearly 20 per cent of overall investment.

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