Cambodia Investment Review

US diplomat flags ‘energy and infrastructure’ as key inflow sectors during meeting with PM

US diplomat flags ‘energy and infrastructure’ as key inflow sectors during meeting with PM

Harrison White

United States Deputy Secretary of State Wendy Sherman has expressed interest in more US investment in Cambodia’s energy and infrastructure sectors during a meeting with Prime Minister Hun Sen.

State media quoted the conversation between Sherman and Prime Minister Hun Sen as, “opportunities under various bilateral arrangements, including debt settlement and US investment in the oil and gas sector, infrastructure, green energy, among others”.

Sherman also noted the more than $3 billion in assistance the United States has provided since then to support the country’s development and generous US trade benefits that have fueled economic growth in the Kingdom.

The remarks were made as the two countries looked to reset both diplomatic and economic ties under the new US administration led by President Joe Biden.

Last year, large US firms Chevron, ConocoPhillips, Amazon, Bell Texton, Ford, Visa discussed investment opportunities in the areas of oil, natural gas, and renewable energy in Cambodia, according to the Ministry of Mines and Energy.

The firms also planned to import assembly materials and equipment for renewable energy development infrastructure in Cambodia. In addition, they expressed support for the cooperation on development in the overlapping oil zone between Cambodia and Thailand.

Despite this increased rhetoric total US FDI inflow last year last remained at only 2% of total FDI or approximately $70 million out of $3.5 billion.

In contrast China, Cambodia’s leading source of FDI inflow accounted for 51% or approximately $1.78 billion mainly directed to Cambodia’s garments and footwear, hydropower, real estate, finance, and accommodation sectors.

In response the US Embassy in Phnom Penh also released a report last year describing that despite very attractive incentives mitigating factors have meant Cambodia has not historically attracted significant US investment.

The report listed incentives as 100% foreign ownership of companies, corporate tax holidays of up to eight years, a 20% corporate tax rate after the incentive period ends, duty-free import of capital goods, and no restrictions on capital repatriation.

Mitigating factors were listed as relatively small market size, limited supply of skilled labor, inadequate infrastructure (including high energy costs), and a lack of transparency in some government approval processes.

Development organizations have also outlined Cambodia needs to rapidly address these mitigating factors to attract more quality investment in three priority sectors; health, education, and infrastructure over the near to mid-term (three to eight-years) period.

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