Cambodia Investment Review

AMRO urges more FDI inflow is needed in three priority sectors

AMRO urges more FDI inflow is needed in three priority sectors

Harrison White

Singaporean-based ASEAN+3 Macroeconomic Research Office (AMRO) has again expressed the need for more foreign direct investment into Cambodia’s heath, education and infrastructure sectors over the near to mid-term (three to eight-years) period.

The recommendations were made during the organization’s latest preliminary assessment between Cambodian officials and lead researchers held last week. The mission was led by AMRO Lead Specialist, Dr. Seung Hyun Luke Hong. AMRO Director, Toshinori Doi and Chief Economist, Dr. Hoe Ee Khor participated in the policy meetings.

The delegation also encouraged more domestic industry development while attracting more quality FDIs into all priority sectors to diversify the economy, citing “the pandemic has exposed the risks of relying on a few export products and markets”.

Quality FDI is characterized by contributing to the creation of decent and value-adding jobs; enhancing the skill base of host economies; facilitating the transfer of technology, knowledge, and know-how; boosting the competitiveness of domestic firms and enabling their access to markets; and operating in a socially and environmentally responsible manner.

In 2020, AMRO released a consultation report where it recommended Cambodia address its structural challenges, especially the relatively poor infrastructure, limited supply of skilled labor, and rapidly rising minimum wages.

“The major external vulnerabilities of Cambodia stem from its reliance on a few markets such as the EU and China. Domestically, rapidly rising minimum wages amid relatively high non-labor production costs such as logistics and electricity, could erode the cost competitiveness of Cambodia’s labor-intensive garment industry,” the report concluded.

In 2019, the Cambodian government announced a 17-point strategy, mostly aimed at facilitating trade and reducing the cost of doing business. The strategy involved several key money-saving initiatives, including reducing logistic and electricity costs, strengthening railway operation management, and decreasing the number of public holidays.

Last year overall FDI inflow to Cambodia remained steady with major infrastructure projects mostly originating from China however inflow into health and education remained low.

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