Cambodia Investment Review

European Investors Confront Taxation, Transparency & Global Image Hurdles in Cambodia 2024, Survey Reveals

European Investors Confront Taxation, Transparency & Global Image Hurdles in Cambodia 2024, Survey Reveals

Cambodia Investment Review

European investors are increasingly focusing on Cambodia, drawn by its growing business ecosystem and economic potential. However, concerns around taxation, transparency, and global image continue to impact the levels of European Foreign Direct Investment (FDI) into the country, as highlighted in a recent survey conducted by the European Union Delegation to Cambodia and the Cambodia ARISE+ team.

The survey, initiated following the ASEAN-Cambodia Business Summit in September 2023, sought to understand European businesses’ perspectives on the Cambodian business environment and the relatively low levels of European investment compared to American and Asian FDI. This report complements the Business Confidence Surveys, which focus on companies already operating in Cambodia, by shedding light on the views of potential European investors.

The research adopted a qualitative approach, interviewing representatives from six European companies with substantial operations across Southeast Asia, including Thailand, Vietnam, Singapore, Hong Kong, and Malaysia. These companies, active in emerging sectors like electrical and automotive parts manufacturing, tourism, and business development, offered insights into the Cambodian market’s attractiveness from a European perspective.

Primary Concern Is Administrative & Bureaucratic Challenges

One of the primary concerns highlighted by the survey is the administrative and bureaucratic challenges that investors face in Cambodia. The process is often described as time-consuming and detrimental to the swift execution of business operations. Particularly in the tourism sector, there is a call for Cambodia to relax its visa policies and simplify application processes, drawing a parallel with the more accommodating policies of its neighbors.

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The survey also sheds light on the complexities of the Cambodian tax system, a source of considerable frustration for European investors. The intricacies and perceived inequities in import procedures and customs duties were pointed out as major hurdles. Despite some positive developments over the past two decades, including a significant reduction in lump-sum payments, taxation remains a contentious issue.

The survey, initiated following the ASEAN-Cambodia Business Summit in September 2023.

Another critical area of concern is Cambodia’s global image. The country’s potential as a manufacturing and distribution hub is yet to be fully realized, partly due to its international reputation. Efforts by international Chambers of Commerce to foster a supportive business ecosystem are laudable, but the country’s image still hampers access to finance and broader investment opportunities. Enhancing Cambodia’s reputation on the global stage through international seminars and promotional tours is suggested as a strategic move to attract more investment.

Positive Changes in Climate Under The New Government

The survey also touches upon the limited interaction between Cambodia and Northern European markets, indicating a potential area for growth. Strengthening ties with foreign governments, industry organizations, and businesses could significantly elevate Cambodia’s status from a tourist hotspot to a lucrative investment destination.

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Despite the challenges, the survey notes positive changes in Cambodia’s investment climate, particularly under the new government that came into power in 2023. These changes are observed not only in the country’s robust economic growth but also in the government’s capacity to manage crises, as evidenced by the efficient national vaccination campaigns. Ongoing efforts in infrastructure development, especially in Phnom Penh and the port city of Sihanoukville, are beginning to yield results, contributing to a burgeoning business ecosystem suitable for both local subsidiary production and a growing domestic market.

The report concludes that while significant barriers to European investment in Cambodia exist, the opportunities are increasingly outweighing these challenges. Cambodia’s economic growth over the past two decades paints an optimistic picture for future investments. However, realizing this potential will depend on continued improvements in the identified areas, particularly in policy and administrative processes, transparency, and proactive international marketing.

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