Cambodia: Kingdom must scrutinise FDI projects before giving go-ahead

A leading developmental economist and expert on Cambodian economic affairs has urged the government to scrutinise Foreign Direct Investments (FDIs) before giving the nod for implementation.

Dr Jayant Menon, Senior Fellow at Yusof Ishak Institute, Singapore, ex-board director of Cambodia Development Resource Institute and formerly Lead Economist at the Asian Development Bank, said the country’s concerned authorities must carry out a formal assessment of the potential costs and benefits of all project proposals as part of conventional approval process.

“Cambodia could consider setting up a new Projects Review Board, which could operate as a non-statutory body with inter-ministerial and multi-stakeholder (community leaders, academics, and private sector) representation, to assess individual proposals in a purely advisory capacity to the government.

“It should be supported by technically competent staff that are capable of undertaking comprehensive cost-benefit analysis as an input to the assessment,” Dr Jayant pointed out, in his latest opinion piece on Yusof Ishak Institute’s website.

The renowned economist further said that a transitional economy like Cambodia “should be selective and strategic in its choice of projects, whether financed by foreign investment or borrowings, if it is to grow in a sustainable and inclusive manner”.

The alert call comes amidst the government leaving no stone unturned in its efforts to attract FDI from across the world while facing a tough competition from other neighbouring countries in the region such as Thailand, Vietnam and Malaysia.

Speaking to Khmer Times, Vichet Lor, Vice-President of Cambodia Chinese Commerce Association, said the Royal Government of Cambodia has hugely invested in the Kingdom’s infrastructure, deep sea port and irrigation projects, among others. “In this regard, it is very important to scrutinise the projects that come under the priority sectors,” he pointed out.

Vichet said that the government is embarking on e-governance and digital wallet economy, which has grown very fast in recent years, better than neighbouring countries. “Cambodia must identify which are the key FDI sectors that require more attention, incentives and government facilitations, in order to continue the success. Maintaining the sustainability of FDIs is definitely of utmost importance.”

He said agriculture, agro-processing and SEZ must be the major areas of focus in terms of attracting FDIs. “The government needs to do further to enhance eCommerce investments so that more tech companies come to Cambodia in future. Right investments in human capital would certainly bring the tech giants like Apple or Intel to Cambodia considering its transformational success towards becoming a digital economy.”

Vongsey Vissoth, Permanent Secretary of State of the Ministry of Economy and Finance, was earlier quoted by Khmer Times as saying that Cambodia must prepare for a competition in the coming days to attract FDI even though it has entered into bilateral and multilateral free trade agreements.

“The context of Foreign
Direct Investment has changed comprehensively, becoming more complex in light of changing geo-politics and geo-economic situations.”

“Cambodia must be proactive when it comes to setting up specific goals and action plans to maximise attracting FDI which is very necessary for the country to be developed, increase value-added elements in its economy and raise the standard of living of the people.”

It is learnt that Cambodia has attracted nearly $45 billion in Foreign Direct Investment over the past 30 years and this figure has more than doubled since 2014 when it was approximately $20 billion.

Last year, the country attracted an overall FDI of $4.68 billion, 7.5 percent up from $4.35 billion compared to the previous year.

The country’s recent FDI success could be attributed to the Regional Comprehensive Economic Partnership Trade Pact, the Cambodia-China Free Trade Agreement and Cambodia’s favourable investment laws.

Commerce Ministry data reveal that majority of foreign investors in the Kingdom in 2022 were from China, Japan, Cayman Islands, Thailand and Singapore and the investment projects would mainly focus on agriculture and agro-industry sectors, manufacturing, tourism and infrastructure.