Vong Sam Ang of the Asean-Japan Centre discusses the challenges of bringing Japanese investment to Cambodia
Vong Sam Ang, the director of the investment division of the Asean-Japan Centre.
What is the role the Asean-Japan Centre?
The centre was established in 1981 to boost investment, trade and tourism between Japan and Asean countries. Cambodia became a member of the centre in 2001 and has developed a good relationship with us. The Ministry of Foreign Affairs, Tourism, Commerce and the Cambodian Development Council are both members.
What is the current investment atmosphere in Cambodia?
The investment atmosphere in Cambodia is improving due to improvements made by the Cambodian government.
There are six main features drawing foreign investors to Cambodia: political stability, economical stability, investment environment, natural resources, cheap labour and duty-free exports.
How does the Asean-Japan Centre encourage Japanese investors to invest in Cambodia?
We have held investment workshops on Cambodia in Japanese cities. Japanese companies are invited to participate in the workshops, and afterwards, we prepare missions for them to see the reality of business development in Cambodia.
Also, to strengthen Cambodia's competency, we invite investors to visit businesses in Japan. So far, there have been six delegations of Japanese investors that have come to see the potential of investment in Cambodia. For our last missions, we invited the 20 biggest Japanese investors who focus mainly on the garment industry and shoe factories.
What are the outcomes of these missions on Cambodian investment?
After the missions we saw that many Japanese companies decided to invest, and some companies have filed investment applications.
There are 166 Japanese companies registered with the Ministry of Commerce, but not all have invested yet. the Japanese Business Association of Cambodia membership includes 426 Japanese companies in joint ventures with Cambodian investors and 36 Japanese companies. There are about 17 Japanese companies dealing in the production and agriculture sectors.
Cambodia has many
positive qualities, but foreign investment is low compared with Vietnam or Thailand.
During a recent mission, investors visited investment zones such as the Phnom Penh Economic Zone and the Sihanoukville Autonomous Port. They also met with government officials who were well-versed in the current investment climate and the five-year development policy in Cambodia. Now, there are three Japanese companies who are interested in investing in the textile sector, quality-control companies and the wire industry.
If Cambodia has a strong investment environment, why is foreign investment low compared with Thailand and Vietnam?
Cambodia has many positive qualities but foreign investment is low compared with Thailand or Vietnam.
Vietnam has over 1,400 foreign investment projects per year while Cambodia has only 100.
The reason is that Cambodia still faces two major investment challenges.
The first is lack of investment information; the second is poor infrastructure. But these are only barriers for production companies; for construction, electronic and other companies, it is an ideal opportunity.
Another issue is the lack of legal framework, which is important to shore up trust. But we are trying to improve all of these issues.
There are over 1,000 Japanese companies doing business in Vietnam while Thailand has over 7,000 Japanese companies.
Now, Vietnam and Thailand are facing new challenges, such as political upheaval in Thailand and increasing labour costs in Vietnam, so those companies are looking to Cambodia for investment opportunities.
What should Cambodia be doing to increase investment?
Investment promoters have to be flexible, friendly and caring about the image of Cambodia. When our government or officials visit foreign countries, they always say that we have everything for them to invest in country, however, when they come, the investment promoters don't follow what they said. All our relevant ministries have to cooperate and care about our new and old investors.
If we don't try our best to give them a positive experience, our regional competitors, such as Bangladesh, Burma, India and Laos will take this chance away from us.
I think we should use the Japan-Cambodia Initiative Channel to settle relevant issues and to ease investors into filling investment applications and confirmations. Although we have a Cambodian Chamber of Commerce, they are not able to give broad information about the investment situation in Cambodia as they are more concerned with their own businesses.
The Japanese government has funded bridges, roads and infrastructure in Cambodia since 1992. So why are there still so few Japanese investors here?
According to Official Development Assistance (ODA), Japan has been the No 1 investor in Cambodian infrastructure every year since 1992.
But there are still very few small Japanese investors, due mostly to the fact that Japanese companies are cooperation companies that set up a board of directors before they invest in a country.
They have to do research and take time to pass decisions through boards to get approval because they think risk judgment is important.
Once their decision is made, however, they don't care about how much capital they invest, as they know that it will encourage smaller companies to follow suit. Japanese companies are not like Korean or Chinese companies, which have an individual owner that makes decisions on their own.
What are the Asean-Japan Centre's main expectations?
There are two vital aspects to our expectations. First, we want governments to improve the investment environment, legal infrastructure, physical infrastructure and trade facilitation.
All of these factors improve the investment atmosphere.
One of our projects in this area ... is a highway that will connect all Asean countries and will be finished in 2012.
A project that we have just completed was the Coastal Economic Corridor. It is a bridge that connects Koh Kong province to Thailand.
This project made a big impression on foreign investors, who are eager to facilitate business economic zones at borders such as Bavet-Vietnam, Poipet, Koh Kong and Sihanoukville.
The second is improving the labour force and economic security.... We will draw more Japanese investors into our country because of the Japanese Investment Agreement which was made on June 14, 2007, when Prime Minister Hun Sen officially visited Japan.
This agreement came into effect in July 31, 2008. This agreement is really important to encourage Japanese investors to invest in the country.