The Japan External Trade Organization (JETRO) has signed two Memorandums of Cooperation with the Cambodian Chamber of Commerce as the two sides look for opportunities to increase Japanese investment in Cambodia and improve trade facilitation within ASEAN.
The MOC Signing Ceremony for Cooperation of ASEAN-Business Advisory Council (ASEAN-BAC) and East Asia Business Council (EABC) and Commerce Promotion was held at the CCC headquarters, with representatives from both sides committing to long-term economic cooperation.
The timing of the event was crucial as Cambodia is serving as ASEAN Chair for 2022 and has a unique opportunity to present itself as a regional economic leader while countries recover from the COVID-19 pandemic and struggle with new problems posed by the Russia-Ukraine war.
CCC President Neak Oknha Kith Meng said the MoCs represented a golden opportunity for the two countries to bolster their economic recoveries.
“I’m very happy that we are signing these MoCs to promote business opportunities between the two countries and encourage more Japanese investors to invest in Cambodia,” he said.
He added that he hoped Japan would soon resume direct flights between Cambodia and Japan and that quarantines in Japan would be lifted soon to encourage more tourist travel.
Marisa Haruta, JETRO’s chief representative in Phnom Penh, said JETRO and the CCC had shared a long history of collaboration since JETRO opened its Cambodian branch in 2010 and that the recently signed MoCs would strengthen the two organizations’ collaborative efforts.
She said one of JETRO’s missions was to spread awareness of Cambodia in Japan as a potential destination for investment and trade.
As part of this promotion, JETRO produced a YouTube video of Kith Meng making his pitch to Japanese investors to be shown throughout Japan.
In the video, Kith Meng said Cambodia was situated in a prime position in Southeast Asia with easy access to large surrounding markets such as Thailand, Singapore, the Philippines, and Indonesia.
He noted the country’s young, educated, and entrepreneurial population and the country’s improving infrastructure as reasons for investors to consider Cambodia.
To read more about JETRO plans to increase bilateral investment with Cambodia click here.
JETRO Senior Regional Research Director (ASEAN) Wataru Ueno made the trip from Indonesia for the signing ceremony and said the MOC concerning the ASEAN-BAC and EABC would allow JETRO to advise the two councils on policy recommendations and attempt to ease trade facilitation in the region.
ASEAN-BAC is comprised of business leaders from within ASEAN and the EABC consists of business leaders each from China, Japan, and Korea, as well as ASEAN countries.
Ueno said JETRO has been working with ASEAN-BAC to simplify the rules of origin under the ASEAN Trade in Goods Agreement (ATIGA) to help enable more Japanese companies to receive preferential tariffs.
He added that JETRO is also working with the EABC and ASEAN secretariat to disseminate information on how to utilize the recently enacted Regional Comprehensive Economic Partnership (RCEP).
Later this year, Cambodia will host the ASEAN Economic Ministers’ Meeting as well as ASEAN-BAC and EABC meetings that will engage the private sector.
ASEAN-BAC will also host the ASEAN Business Investment Summit, where leaders and businesspeople from around the world will discuss several large-scale issues such as how to promote a digital and sustainable economy.
Capitalizing on post-COVID optimism
Ueno also said JETRO was motivated to help Cambodia maximize its potential as an investment destination while it chairs ASEAN.
“From our perspective, 2022 this year is very important because Cambodia is the chair of ASEAN. If we miss the opportunity in 2022, we also miss the opportunity for investment from Japan,” he said.
Low-cost labor was discussed at the meeting as a prime selling point for Japanese manufacturers, and Kith Meng said improving infrastructure would only increase the Kingdom’s attractiveness as a destination for further investment.
Based on membership at Japanese chambers of commerce, about 7,000 companies are operating in ASEAN, with about 250 operating in Cambodia.
To read more about the economic outlook from the Cambodia Chamber of Commerce in 2022 click here.
AEON is perhaps the most recognizable Japanese company in Cambodia, and the company is currently creating a logistics hub in Sihanoukville that has the potential to spur more foreign direct investment.
The hub will allow companies to store imported products for a specified period and pay duties on the goods only when they clear customs.
As Cambodia starts to get involved in value-added manufacturing, opportunities exist in electrical components, spare car parts, and labor-intensive products like wire harnesses.
Haruta said Japanese manufacturers are indeed considering Cambodia as a destination for factories as companies look to diversify their risk after suffering during COVID-19.
JETRO survey reveals optimism
A 2021 survey on business conditions of Japanese companies conducted by JETRO revealed positive sentiment as COVID-19 continues to recede.
While many companies, especially SMEs, expected overall losses in 2021, the companies surveyed expected a bounce back in 2022.
“In interviews with manufacturing companies, it appears more positive factors are emerging in 2022, such as export expansion due to recovery, demand recovery in the target market, and strategic decisions from the view of the regional base to extend production capacity in Cambodia,” the report said.
Throughout all sectors, Japanese companies’ top three concerns in 2021 were increased wages, tax burdens, and quality of employees.
Cambodia’s market size and potential, its low labor costs, and stable politics were reported as top advantages for investing in Cambodia. On the other side, insufficient legal systems, unstable electricity and infrastructure, and complicated tax laws were listed as disadvantages.