Cambodia restructured its economy after many years of protracted war and instability. The economy grew strongly following the country’s transition to a free-market economy as it opened to trade and capital flows. Growth was supported by the flow of development assistance, access to the European Union and United States’ markets and large amounts of foreign direct investment (FDI).1
In the third quarter of 2020, the CDC approved 21 new investment projects decreased by 28 investment projects. However, the invested capital stood at $3.6 billion or rose 220,7% comparing to the same quarter last year with a majority of invested capital was centered on the construction of five-stars hotels, business centers and big livestock farms.2 Of the approved investment projects during 1994–2019, China took the largest share with approximately 21.8%. The investment projects were tied to the development of infrastructure, agro-industry products such as rubber, and tourism.3 Between 1995 and 2018, Cambodia was considered to have one of the fastest-growing economies in the world thanks to its average growth rate of 7.7%.4
Net FDI almost doubled in the last decade, with its share as a percentage of GDP growing from 7.8% in 2008 to 13.1% in 2018. In 2019, FDI represented 13.5% of Cambodia’s GDP, which is considerably higher than in other countries in the region such as Thailand (1.1%) and Vietnam (6.1%).5 The below graph illustrates the net inflows of foreign direct investment and its percentage share on Cambodia’s GDP (%) from 2000 to 2019.
In 1994, the Council for the Development of Cambodia (CDC) was established to take responsibility for the development and management of FDI.6 The establishment of the CDC was part of the Cambodian Government’s reform program around the promotion of private sector investment. The CDC is an operating agency of the Government which its governing body is drawn from the Cabinet. The CDC is structured with two executive boards – the Cambodian Rehabilitation and Development Board (CRDB) and the Cambodian Investment Board (CIB). The CRDB works on public investment and the coordination of international assistance, while the CIB has the mandate for dealing with private investment.7
The CDC also acts as the secretariat to Cambodia’s Government-Private Sector Forum known as (G-PSF). The G-PSF is a public-private consultation mechanism that plays the role of facilitator for dialogue within and among 10 government and private sector Working Groups. It also serves as a platform where the private sector can voice issues and recommend solutions to the government.8
Generally, FDI is viewed as a fuel for economic growth and social improvement for both developed and developing countries alike. Cambodia’s economy has benefited a lot from FDI. FDI inflows to Cambodia have increased from the early 2000s thanks to the country’s prudent macroeconomic policies, political stability and open market as well as the growth of the wider regional economy.9 These favorable environments provide an appealing investment opportunity for investors.10
FDI has been a large part of the substantial inflows of financial capital.11 According to a report published by the National Bank of Cambodia (NBC), the inflows of FDI in 2019 rose by 12% to $3.5 billion and projected to decrease by 10% to Of this FDI inflow, $2.3 billion went to the financial sector. In that, China still makes up the largest share of FDI invested capital at 43%, followed by South Korea 11%, Vietnam 7%, Japan and Singapore 6% each.12 This huge flow of capital investment was mainly due to robust investments in the manufacturing and services sectors.13
The data below reflects investment trends from 2012 to 2016 for major Qualified Investment Projects (QIPs) in the industrial and infrastructure sectors, which together accounted for 72% of total investments. The data excludes those investments ineligible for incentives, such as in the financial and construction sectors.14 Below table shows the investment trend in Cambodia between 2012 to 2016.
Investment trend in Cambodia between 2012 to 2016 (billion USD)
Investment into infrastructure as a share of total capital investment doubled from 2012 to 2016, while the share of investment into industries decreased. In 2016, 39% of the investment was directed to the tourism sector, a 16% increase compared to 2012.15 In 2016, the services sector took the lead in contributing to economic growth which resulted in the growing construction and tourism sectors.16
In 2019, the majority of committed investments were centered on the industrial and infrastructure sectors. When combined together, these accounted for 53% of total investments in the period 2015 to 2019, followed by the tourism sector at 41%, and agriculture at 6%.17 Physical infrastructure investment projects such as commercial and residential real estate developments have continued to greatly attract FDI. However, there has also been the growth of investment in manufacturing such as garment and travel goods factories, as well as agro-processing plants.18
- 1. Asian Development Bank, “Cambodia: Country partnership strategy 2019-2023”, October 2019. Accessed 06 February 2021.
- 2. Ministry of Economy and Finance, “Bulletin of economic and financial statistics for the third quarter of 2020”, October 2020. Accessed 02 February 2021.
- 3. Council for the Development of Cambodia (CDC), “Cambodia investment trend” 2020. Accessed 01 February 2021.
- 4. World Bank, “The World Bank in Cambodia: Overview”, 01 October 2018. Accessed 01 February 2021.
- 5. World Bank, “Foreign Direct Investment, Net inflows (%GDP) – Cambodia”, 2020. Accessed 03 February 2021.
- 6. United Nations Conference on Trade and Development (UNCTAD), “An investment guide to Cambodia: Opportunities and conditions”, September 2003. Accessed 01 February 2021.
- 7. Royal Government of Cambodia, “Sub-Decree on the Organization and Functioning of the Council for the Development of Cambodia”, 27 July 2001. Accessed 07 February 2021.
- 8. U.S. Department of State, “2020 Investment Climate Statements: Cambodia”, 2020. Accessed 01 February 2021.
- 9. United Nations Conference on Trade and Development (UNCTAD), “World Investment Report 2020”, 2020. Accessed 01 February 2021
- 10. United Nations Conference on Trade and Development (UNCTAD), “An investment guide to Cambodia: Opportunities and conditions”, September 2003. Accessed 01 February 2021
- 11. Cuyvers, et al.,“Productivity spillovers from foreign direct investment in the Cambodian manufacturing sector: Evidence from establishment-level data”, March 2008. Accessed 04 February 2021
- 12. National Bank of Cambodia, “Macroeconomic and banking sector development in 2019 and outlook for 2020”, 02 January 2020. Accessed 01 February 2021
- 13. United Nations Conference on Trade and Development (UNCTAD), “World Investment Report 2020: Cambodia Investment Factsheet”, 2020. Accessed 01 February 2021
- 14. Council for the Development of Cambodia (CDC), “Investment scheme: Investment application procedures”, 2020. Accessed 01 February 2021
- 15. Sun Chanthol, “Investing in Cambodia”, 2015. Accessed 03 February 2021
- 16. Emerging Markets Consulting, “Cambodia economy in charts”, 2017. Accessed 05 February 2021.
- 17. Council for the Development of Cambodia (CDC), “Cambodia investment trend” 2020. Accessed 01 February 2021.
- 18. U.S. Department of State, “2020 Investment Climate Statements: Cambodia”, 2020. Accessed 01 February 2021.