Recent data for the first quarter show that $2.87 billion was invested in Cambodia during the first three months, a staggering 573 per cent increase from the same period last year, according to data released by the Council for Development of Cambodia on Friday.
The Kingdom recorded nearly $3 billion in private investments, both local and foreign, in the first quarter of 2015 with a large chunk of the investment being made in March – around $2.7 billion – though the CDC did not release specific details of projects or their country of origin.
While the total amount invested during January to March may have gone up, the number of projects shrunk by 14.2 per cent.
Hiroshi Suzuki, chief economist at the Business Research Institute for Cambodia, said Cambodia was conducive to investments, specifically foreign direct investment, for two reasons – low labour costs compared with China, Thailand and Vietnam, and good connectivity to neighbouring countries.
“[W]e can expect the inflow of investment by labour- intensive parts manufacturing sector, which could use these two advantages very well,” Suzuki said.
Suzuki added that the government needed to work on improving investment opportunities in the Kingdom by maintaining good communication with the private sector.
“The investment climate of Cambodia is one of the most open and free from the viewpoint of foreign direct investment,” said Suzuki.
Srey Chanthy, an independent economic analyst, said investments are helped by the special trade status Cambodia enjoys with the US, European Union and Japan, as well as its access to China’s market.
He added that political stability after the last general elections in 2013, Cambodia’s dollarised economy and cheap labor made it an alluring investment prospect.
“You see a dramatic increase in private investments and these investments, I can say, come mainly from FDI. Yes, the increase in private investments goes hand-in-hand with the economic situation of Cambodia and its political maturity,” Chanthy said.
Sectors like agro-processing, soft drinks, certain kinds of assembly plants, construction and services were expected to see increased investments, Chanthy added.
Recently, the National Bank of Cambodia and National Institute of Statistics signed an agreement for FDI survey 2015 that aims to understand the economic value foreign investors bring.
However, Chanthy said it was critical to increase engagement between government and private sector.
“I appreciate the government’s efforts to communicate with the private sector. For example, Cambodia and Japan have had bilateral meetings for the improvement of investment climate and for the prompt solution of problems that the Japanese private sector is facing [in Cambodia].”
Total foreign direct investment in Cambodia hit $4 billion last year, with China, Malaysia and Japan taking the top three spots. The US, which was only sixth with $1.3 billion invested between 1994 and September 2014, has been reluctant in setting up in the Kingdom due to corruption concerns, an unpredictable regulatory environment, and a lack of economic attractiveness .
According to the World Bank, slower exports in 2014 has caused a rise in the current account deficit and was kept in check on account of healthy foreign direct investment.
The CDC could not be reached for comment.