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New Investment Laws to lure more foreign investors to Cambodia
CAMBODIA has now introduced new laws on investments in its bid to attract more foreign investors into the country. A special briefing session was held yesterday between the Malaysian Ambassador to Cambodia Eldeen Husaini Mohd Hashim, Cambodian Ambassador to Malaysia Cheuy Vichet with special keynote remarks by the Minister attached to the Prime Minister Secretary-General of Council for the Development of Cambodia (CDC) and the Malaysian Business Chamber of Cambodia (MBCC) President Oknha Tan Khee Meng.
On October 15, Cambodia had promulgated new legislation on investment titled the Law on Investment in the Kingdom of Cambodia (Investment Law of 2021)
According to the country’s Constitution which provides that urgent laws are to come into force immediately, the Investment Law of 2021 became effective on October 16, repealing its predecessor legislation under the same name that was enacted in 1994 and amended in 2003.
In his opening remarks, Eldeen Husaini said, “We will have to be on the same page and agree that a workable and practical law that will benefit both the investors and the people of Cambodia is essential. For example, by doing so we will be able to create more jobs and the burden brought about by having new workers will be considerably lessened, no longer must they become obstacles to foreign investments.”
Further he said, “I believe this is what Cambodia is striving for, this new law certainly highlights the seriousness of the Cambodian government to become more business-friendly and to put in more investment and I am sure their painstaking efforts will bear fruit in the coming months and years.”
A booklet on the Law On Investment was also handed out to businessmen and investors from various sectors in Cambodia who belong to the MBCC as well as some guests. Luu Meng, a Chef Entrepreneur of Thalias in Phnom Penh thinks Cambodia is a country like no other that provides opportunities for the initiated. “Where else can you have full investment and ownership of a company in a country you are not originally from.?”
“In Cambodia, they appreciate skills and opportunities to trade, never mind our origin as long as we provide to their country’s socio-economic growth, you can own businesses and invest in anything without having to have locals having a stake. Where can you find a Malaysian fully owning a business in other countries? Only in Cambodia, this is possible,” he told Khmer Times.
The booklet which comprises 12 chapters of the Law on Investment, available in both English and Bahasa Malaysia , especially drew the interest of many to Chapter Six that includes incentives for investors through Article 24 for those from the high-tech industries involving innovation or research and development; innovative or highly competitive new industries or manufacturing with high added value.
Industries supplying regional and global production chains consist of industries supporting agriculture, tourism, manufacturing, regional and global production chains and supply chains.
Besides, it also includes electrical and electronic industries, spare parts, assembly and installation industries, mechanical and machinery industries, agriculture, agro-industry, agro-processing industry and food processing industries serving the domestic market or export, small and medium-sized enterprises in priority sectors and small and medium-sized enterprise cluster development.
Similarly, digital industries, education, vocational training and productivity promotion, health, physical infrastructure, logistics, environmental management and protection, biodiversity conservation and the circular economy, green energy, technology contributing to climate change adaptation and mitigation came under special economic zones.
One of the new law’s main changes to the previous investment law regime is its expansion of the number of priority areas that qualify for investment and tax incentives. Approved projects in these priority areas are known as Qualified Investment Projects (QIPs).
New notable priority sectors are technological innovation, research and development, digital industries, mechanical and machinery industries, electrical and electronics industries, green energy and climate change adaptation or mitigation technology, biodiversity conservation, health, and small and medium enterprises.
This addition will help shift Cambodia’s economy from labour-intensive industries, such as the garment and footwear manufacturing sector, to more modernised sectors, like technology and e-commerce.
Investment and Tax Incentives
The investment and tax incentive framework under the new investment law has three main categories: basic incentives, additional incentives, and special incentives, according to Articles 25, 27 and 28. For the basic incentives, qualified investors may choose either full income-tax exemptions for three to nine years, depending on the investment sectors and activities, or a collection of other incentives, including special depreciation treatment and eligibility to deduct expenses with a higher rate.
The distinct change under the new investment law is that the tax exemption period for the basic incentives starts from the date when the project earns its first profits. Furthermore, after the tax exemption period ends, investors will enjoy an additional six years of income-tax discounts through a gradual phase-in tax rate. (Art. 26.)
Cambodia’s Law on Investment guarantees that foreign investments are generally treated in the same manner as domestic investments. The one notable exception to this rule is that foreign-owned companies (companies incorporated in Cambodia with foreign shareholders owning more than 49 per cent of the shares) are not allowed to own land in Cambodia. For that reason, there are no specific oversight or review mechanisms for foreign investments in Cambodia, and foreign investors do not require any specific approvals to invest in Cambodia.
In addition, the Law on Investment allows certain foreign investments to apply for qualified investment project (QIP) status. A QIP is entitled to receive a number of investment incentives from the Cambodian government.
Minister attached to the Prime Minister and CDC Secretary-General Sok Chenda Sophea described the meeting as being very important and held at the right time. He also expressed appreciation and gratitude to the MBCC for its initiative.
“Back in 1994, Cambodia adopted laws on an investment in the Kingdom of Cambodia to open up private investments for the country. In many countries, there are two laws. First, it is the national law and second, it is foreign investment.”
“Prime Minister Hun Sen was the one who made the decision to open Cambodia’s doors to foreign investors,” he said, adding that there were already the same laws on investments applying to national and foreign investors.
At that time, however, foreign investors could only have a 49 percent stake but in 1994, Cambodia welcomed 100 percent ownership for foreign investors in Cambodia regardless of sectors or industries.
In1999, the CDC organised a joint forum by both the government and private sectors chaired by the Prime Minister to incentivise the private sector. He opined that the new investment law as being better than the old ones in terms of incentives.
“In the context of the Asean economic community, our laws are properly outlined. This law was drafted in 2019 but was delayed for enactment in the National Assembly due to the Covid-19 Pandemic,” he said.
Source: https://www.khmertimeskh.com/501027371/new-investment-laws-to-lure-more-foreign-investors-to-cambodia/