Cambodia Investment Review
Cambodia’s business climate for 2024 is marked by optimism, but also tempered by a set of ongoing challenges that could affect the country’s long-term economic trajectory. The 2024 Business Climate Survey conducted by the American Chamber of Commerce in Cambodia (AmCham) has provided valuable insights into the outlook of businesses operating in the Kingdom.
While the majority of respondents expect profit growth and increased investment in the coming year, several key issues, including regulatory uncertainty, high energy costs, and infrastructure limitations, remain areas of concern for businesses.
Optimism in Cambodia’s Business Growth
According to the survey, over 70% of companies operating in Cambodia expect their profits to grow in 2024, and more than 65% plan to increase their investments. This positive outlook is driven by Cambodia’s strong economic fundamentals, including a 7% average annual GDP growth over the last decade and the ongoing recovery of the economy post-COVID-19. This growth has positioned Cambodia as a competitive market in Southeast Asia, drawing interest from foreign investors, especially from the United States and China.
Read More: AmCham Announces New Board and Discloses Positive Financial Position For 2024
The survey highlights that the availability of 100% foreign ownership is a significant advantage for investors. This policy removes the need for joint ventures, thus allowing full control over operations, profits, and intellectual property. Additionally, Cambodia’s use of the U.S. dollar in daily transactions adds stability to the economy, easing international trade and investment operations. Other advantages include Cambodia’s strategic location in the heart of Southeast Asia, a growing market, political stability, and attractive tax incentives aimed at fostering foreign investment.
Challenges to Sustained Investment
While Cambodia’s investment climate remains generally favorable, the survey also sheds light on some persistent challenges that may hinder further growth. A major concern for businesses in Cambodia is the uncertainty surrounding the enforcement and interpretation of laws and regulations. Cambodia’s legal framework, still relatively young, is often seen as opaque, with businesses relying heavily on the expertise of legal advisors to navigate complex regulatory environments. This lack of transparency has prompted calls for stronger consistency and clearer guidelines from the Cambodian government to provide greater predictability and reduce risks for investors.
Another significant challenge is Cambodia’s energy sector. The cost of electricity in Cambodia is one of the highest in Southeast Asia, with the average rate standing at 13.7 cents per kilowatt-hour—roughly twice the rate in neighboring Vietnam. This is especially burdensome for energy-intensive industries, such as manufacturing, where high electricity costs can significantly erode profit margins. Furthermore, businesses have expressed concerns about the quality and reliability of electricity supply, which is critical for ensuring smooth operations, particularly for industries that rely on constant power.
Transportation infrastructure is another key area of concern. While Cambodia has made strides in improving its road networks and logistics capabilities, businesses still face logistical challenges that impact the cost of doing business. The survey reveals that improving transportation infrastructure, including roads, ports, and railways, is essential for increasing Cambodia’s competitiveness in the global market. Addressing these issues could lead to lower operational costs and greater ease in accessing both local and international markets.
Areas for Improvement and Future Outlook
Despite these challenges, the survey indicates that businesses remain hopeful about Cambodia’s future economic trajectory. A large number of respondents expressed confidence in the Cambodian government’s commitment to improving the business environment. Key initiatives, such as the creation of private sector working groups and increased efforts to streamline business procedures, have helped address some concerns. For instance, the government has introduced several tax incentives aimed at attracting foreign investment, including exemptions from income taxes for qualified investment projects.
Moreover, the survey points to the growing role of digitalization in Cambodia’s business landscape. The widespread adoption of digital payment systems and the government’s push for greater digital infrastructure are expected to create new opportunities, particularly in e-commerce and fintech. The increasing use of mobile phones and the internet among Cambodians is also opening up new markets for digital services and products, further bolstering the country’s economic prospects.
However, the need to develop human capital remains a critical issue. Despite improvements in education and vocational training, businesses continue to struggle with a shortage of skilled workers in key sectors such as technology, manufacturing, and services. There is a growing demand for specialized training and language skills that align with the evolving needs of the economy. Strengthening Cambodia’s education system to meet these demands will be crucial for ensuring a sustainable and diversified workforce that can support future economic growth.
