Singapore replaces China as Cambodia’s top FDI source

Singapore has replaced China as the leading investing country in Cambodia in 2021, accounting for six projects, or 40 percent of Cambodia’s inward FDI, revealed the Investment Monitor’s ‘2022 Inward FDI Performance Index’, released recently.

China, which held the top position in both 2019 and 2020, dropped to joint second, alongside the US, recording three projects. Myanmar, Hong Kong and the Netherlands made up the remaining investments.

According to a report by Investment Monitor, titled ‘Cambodia punches above its weight in attracting FDI,’ the Kingdom is also the third most attractive investment location for foreign money in Asia Pacific after Singapore and New Zealand.

“Cambodia is a lesser-known FDI location in South East Asia, must compete against the likes of Singapore and Vietnam to attract inward investment. Despite the stiff competition it has managed to win more than its fair share of greenfield projects,” the report said.

The Index measures a country’s inward investment levels against its gross domestic product (GDP) using GlobalData’s FDI Projects Database, which tracks greenfield projects. “This means that Cambodia, with a score of 3.26, received more than three times its fair share of inward greenfield FDI compared with what could be expected given its level of GDP. In that regard, Cambodia is punching well above its weight in FDI terms,” the report said.

According to it, FDI peaked in Cambodia in 2019, with 43 projects. In terms of capital investment, this represented a 15.5 percent increase over 2018 figures, to $3.7 billion, said the UN Conference on Trade and Development’s 2020 World Investment Report.

FDI experienced a steep decline in 2020 due to the global coronavirus pandemic, with project numbers dropping by 65.1 percent to 18. In 2021, it fell further to 15.

The majority of inward FDI in 2021 went to the country’s capital Phnom Penh which recorded eight investments. Coastal city Sihanoukville ranked second, while Siem Reap and Aoral district in Kampong Speu province ranked joint third.

Tourism, the leading sector for FDI in Cambodia in 2019 and 2020, remained top in 2021 too, ranking joint first alongside business and professional services.

Business and professional services returned to its 2019 level of three projects in 2021, having dipped to two projects in 2020. Rubber, which previously recorded no investments in 2019 and 2020, ranked joint third for FDI into Cambodia in 2021 with two investments.

Rubber was also the leading sector in terms of job creation and capital investment, with China-based conglomerate Hodo Group announcing the investment of $300 million to open a tyre factory in Sihanoukville. The new facility is expected to create 1,600 new jobs when it becomes operational soon and will be located at Sihanoukville Special Economic Zone.

GlobalData’s FDI projects database shows that Asia-Pacific was the top source market for investment in Cambodia accounting for 11 out of the 15 FDI projects. North America invested in three projects and western Europe, one.

Of the 15 projects recorded in 2021, 14 were new FDI projects while only one was an expansion investment, showing that Cambodia is significantly above the global average when it comes to attracting greenfield FDI.

Cambodia has recorded more FDI projects thus far in 2022 than the full year in 2021.

Cambodia has emerged as one of the fastest-growing economies with per capita income now reaching close to $1,900 compared to $260 in the late 1990s. Similarly, poverty rates have dropped from 54 percent in 1993 to less than 10 percent in 2019.

The government also launched an online registration system whereby new companies can get approval within eight working days. In October 2021, authorities put a new law in place to help strengthen investments.

Cambodia now offers no limits on shareholding and allows 100 percent foreign ownership for companies setting up operations in the country.

The Kingdom also signed free trade agreements with China and South Korea this year to promote Cambodian exports and encourage further FDI. China and Cambodia have pledged to increase bilateral trade to $10 billion by 2023, up from $8 billion in 2021.

These initiatives are expected to help Cambodia achieve its ambitious plan to become a high-middle-income country by 2030.

Senior economist and Director General of the Institute of China Studies at Royal Academy of Cambodia, K Y Sereyvath told Khmer Times that the high level of vaccination and successful Covid-19 management has helped Cambodia to get back into the growth trajectory sooner than expected. “The country’s economic structure is resilient and strong for growth with many FTAs in place as well,” he noted.