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Cambodia’s Foreign Direct Investment (FDI) Inflows Show Promising Growth Despite Global Financial Weakness

by Surya Narayan
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Amidst the challenging global financial situation, Cambodia has emerged as an attractive investment destination, with foreign direct investment (FDI) inflows in the first half of 2023 witnessing an impressive increase of 41.6 percent compared to the same period in 2022.

The Council of Ministers, following their plenary session on September 20, highlighted this remarkable growth in FDI inflow, particularly noteworthy considering the prevailing global financial constraints. In contrast, FDI inflows in 2022 saw a mere 0.4 percent hike.

According to a statement by the Council of Ministers, the positive FDI trend is expected to foster growth in several sectors. The agricultural sector, for instance, is projected to grow by 0.9 percent, while the hotel and restaurant sub-sectors are anticipated to recover at an impressive rate of 41.5 percent.

Likewise, the non-garment manufacturing sub-sector is estimated to experience robust growth at 11.7 percent, primarily driven by the increased investment flow in solar panel exports, especially to the US market. Notably, investments in the non-garment manufacturing sub-sector skyrocketed by 172 percent.

Recognizing the importance of economic growth and farmer support, Prime Minister Hun Manet has directed relevant ministries, institutions, and stakeholders to explore new markets for agricultural products, particularly as the upcoming harvest season approaches. Additionally, advice on potential crops for the next season will be provided to ensure continued progress in the agricultural sector.

Economist Hong Vannak from the Institute of International Relations at the Royal Academy of Cambodia has attributed Cambodia’s investment potential to factors such as geographical location, skilled human resources, export markets, and recent investment law reforms. These elements have rendered Cambodia an attractive investment destination across various sectors.

Alongside significant investments from foreign companies, local investors are also increasingly participating in Cambodia’s growing investment landscape. Vannak emphasized that free trade agreements and preferential tariffs with major countries play a significant role in attracting foreign investors to Cambodia.

Assessing Cambodia’s potential, Vannak confidently predicts further FDI growth, particularly once the global crisis subsides. Moreover, investments in Cambodia have diversified significantly, contributing to the country’s overall economic development.

During a business forum held on August 11, Chea Vuthy, deputy secretary-general of the Council for the Development of Cambodia, stressed the stability of foreign investment inflows in Cambodia despite the prolonged Covid-19 outbreak and Sino-US tensions. In fact, Cambodia outperformed several ASEAN member countries in terms of maintaining a stable flow of foreign investment.

Vuthy revealed that Cambodia’s foreign investments originate from various countries, including China, Thailand, Japan, the Cayman Islands, South Korea, the UK, Singapore, and Malaysia. Such diverse sources of foreign investments further solidify Cambodia’s growing status as an investment hub in the region.

Despite the global financial weaknesses, Cambodia’s strong FDI inflows reflect its resilience and attractiveness to global investors. With a conducive investment climate, strategic location, and ongoing reforms, Cambodia remains optimistic about further economic advancement through foreign investments.

Source: The PhnomPenh Post

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