Despite global economic challenges, Cambodia has seen a steady increase in foreign direct investment (FDI) inflows, with a notable boost of nine percent on an annual basis. This demonstrates the Kingdom’s ability to attract and retain investments, according to recent data from the National Bank of Cambodia and Council for the Development of Cambodia.
According to recent data from the National Bank of Cambodia (NBC) and Council for the Development of Cambodia, foreign direct investment (FDI) inflows into Cambodia have reached approximately $45.8 billion (185.7 trillion riel) as of March 31, 2023. This represents a year-on-year increase of nine percent. The Greater China region remains the largest source of FDI, accounting for 45 percent of the total. South Korea, Singapore, and Japan are also significant contributors to Cambodia’s FDI.
When broken down by sector, “financial activities” received the highest FDI amounting to around $17.4 billion, followed by manufacturing ($15.7 billion), real estate ($8.6 billion), accommodation ($7.6 billion), agriculture ($7 billion), hydropower ($4.6 billion), and construction ($3.9 billion). Other sectors received a total of $9.1 billion in FDI.
It is worth noting that FDI inflows into Cambodia have been steadily increasing over the past few years. In 2018, it stood at $50.8 billion, growing to $57.1 billion in 2019, $62.5 billion in 2020, $70 billion in 2021, and $76.7 billion in 2022. This shows a compound quarterly growth rate (CQGR) of approximately 2.4 percent over the past four years, excluding the pre-Covid-19 period.
Despite the ongoing global economic challenges, Cambodia has managed to attract continued FDI inflows. This can be attributed to various factors, including the country’s political stability, skilled labor pool, robust transportation infrastructure, and favorable legal investment framework. Additionally, Cambodia has benefited from the emergence of new international markets and preferential tariff arrangements or trade agreements with several countries, including those with developed or large economies.
Experts have expressed optimism regarding Cambodia’s FDI prospects. Lim Heng, the Vice President of the Cambodia Chamber of Commerce, believes that foreign investment in Cambodia will accelerate as the world economy recovers, particularly if the conflict in Ukraine is resolved. Hong Vanak, an economist at the Royal Academy of Cambodia, argues that the significant year-on-year boost in FDI inflows demonstrates the effectiveness of the Cambodian government’s efforts to create a favorable investment environment.
China’s position as Cambodia’s largest investor can be attributed to the strong relations between the two nations, as well as China’s role as a major supplier of raw materials for Cambodia’s export-oriented manufacturing and processing industries. The advantageous geographical location and diplomatic relations with China also contribute to Cambodia’s appeal as an investment destination.
In terms of trade, Cambodia’s international trade volume for the first half of 2023 totaled approximately $23.694 billion. This represents a year-on-year decrease of 13.03 percent. Exports accounted for 48.39 percent of the total, amounting to $11.464 billion, while imports stood at $12.229 billion. The trade deficit for the six-month period came in at $764.701 million, significantly reduced compared to the previous year.
Cambodia’s trade balance has been improving, with the best semi-annual trade balance figure since the second half of 2020. This is a positive development for the country’s economy, indicating a more balanced flow of goods and services.
Overall, Cambodia’s robust FDI inflows and the improving trade balance are encouraging signs for the country’s economic growth. The government’s continued efforts to create an attractive investment environment and strengthen diplomatic relations with key partners are critical to sustaining this positive momentum.
Source: The PhnomPenh Post