Supply Chains: Cambodia
Since 2010, Cambodia has witnessed robust economic growth, and its economy has been expanding rapidly due to its strong tourism sector and emergence as a manufacturing hub, particularly in textiles and apparel and agro-processing. The government has prioritized attracting foreign direct investment (FDI) and has established a fairly liberal foreign investment regime. However, Cambodia’s investment climate remains challenging for investors due to regulatory barriers. In 2021, Cambodia received US$3.4 billion of inbound FDI versus US$2.4 billion five years earlier, an increase of 41 percent, and real GDP grew by 2.1 percent.
Cambodia’s high growth potential, low-wage workers, few limitations on full foreign ownership of local assets, and tax holidays have prompted foreign firms to explore investments in the country. However, the country’s relatively low-skilled labor force, small market size, weak infrastructure, and lack of regulatory transparency have presented challenges. As Cambodia still primarily relies on tourism and the textile and apparel industries, it ranks low on economic complexity, where it currently stands at 112 out of 146.
Cambodia continues to actively attract FDI and has established a number of special economic zones (SEZs) to provide support in setting up and operating businesses; there were a total of 23 SEZs as of February 2020. Top sources of foreign investment in recent years have been South Korea, the United Kingdom, Malaysia, and Japan.
Recent Investment/Supply Chain Policies
- On June 15, 2020, the Cambodian government announced the launch of a "Single Portal" online business registration system, which allows investors to register their businesses and taxes within eight days and all on one streamlined online platform.
- On March 9, 2022, Cambodia’s General Department of Taxation issued Notification 4577, which delays the implementation of the capital gains tax to January 1, 2024. The policy is seen as a windfall for the heavily foreign invested real estate sector in Cambodia. The policy is a part of the Royal Government’s “Strategic Framework and Programs for Economic Recovery in the Context of Living with COVID-19 in a New Normal for 2021-2023.”
On November 4, 2021, the Council for the Development for Cambodia published the Law on Investment (2021) promulgated by Royal Kram No. NS/RKM/1021/014, which replaces the 1994 Law on Investment and its 2003 amendment. The law provides tax exemptions and additional “investment guarantees and protections” to investors for approved investment projects. The new law aims to “establish an open, transparent, predictable and favorable legal framework to attract investment” and “promote quality, efficient and effective investments by Cambodian nationals or foreigners.”
On November 15, 2021, the Cambodian government approved the draft Law on Public-Private Partnerships (PPP), which seeks to improve the investment climate in Cambodia for domestic and foreign companies. Based upon the Public-Private Partnerships for Public Investment Project Management 2016 – 2020, the new PPP law also will work to enhance the government’s provision of subsidies and improvement of its legal climate for private sector investment. The new law will boost project management, service delivery for investors in Cambodia.
Information and Communication Technology
- On November 25, 2020, the Cambodian government announced the official launch of its E-Commerce Strategy, building on the E-Commerce Law passed on November 2, 2019. According to Minister Pan Sorasak, the strategy aims to “develop domestic industry, diversify the economy and prop up capacity building for the Kingdom’s small and medium enterprises (SMEs).” The strategy consists of 10 chapters –– strategy, policy, and institutional coordination; legal and regulatory frameworks; SME regulations; information and communications technology (ICT) infrastructure; digital knowledge infrastructure; payment systems; domestic e-commerce logistics; cross-border trade; access to finance; and trade information and market support.