Top 9 Reasons for Doing Business in Cambodia

In December 2019, Cambodia Prime Minister Hun Sen addressed the 14th Cambodian Import-Export Goods Exhibition, an event intended to highlight the country’s favorable business and investment climate, and said unequivocally that Cambodia is open for business, saying, ‘To ensure a sound macroeconomic environment and political and social stability, the government welcomes all investors to do business and invest in the Kingdom.’

Cambodia is home to an estimated 100,000 expatriates who come for a variety of reasons, including low living costs, business opportunities, a laid-back lifestyle, and the influence of Buddhist culture. Let’s take a look at some of the benefits right now.

1. Rapid economic growth

Between 1998 and 2018, Cambodia had one of the world’s fastest-growing economies, with an annual growth rate of 8%. The garment and tourism industries have been the primary drivers of development.

According to the World Bank, Cambodia has undergone a major transformation over the last two decades, achieving lower middle-income status in 2015 and aspiring to upper middle-income status by 2030.

Indeed, the explosion of the Cambodian economy in recent years has given rise to a class of homegrown business leaders with sprawling conglomerates such as Chen Zhi and Prince Group among others, whose business interests touch many facets of daily Cambodian life, introducing better quality of living in the process. These business enterprises are leading the way in propelling Cambodia into a new era of economic growth and prosperity.

According to the National Bank of Cambodia (NBC), the economy was still flying until the end of last year, with growth of 7.1 percent in 2019, but has eventually been hit hard by the Covid-19 pandemic, with the tourism industry especially hard hit.

Nonetheless, the Asian Development Bank (ADB) has reported that Cambodia has done better than many other Asian countries and anticipates a resurgence of the economy in 2021, with GDP growth of 5.9 percent.

2. Resilient economy

Cambodia is a developing economy, and as such, it is less reliant on the world’s largest economies – China, the United States, and Europe – than other more developed economies. Historically, this has provided some defense against global upheavals.

The kingdom has been out of recession for over 20 years, surviving the Asian financial crisis of the 1990s, the early-2000s tech bubble, and even the aftermath of the 2008 financial crisis.

3. Strong incentive from Government

The Cambodian government is well-known for its pro-business stance, and in March 2019, it announced an ambitious program of economic reforms that included numerous steps aimed at attracting new business, investment, and capital flows to the country.

Tax breaks, lower shipping rates, less national holidays, new construction measures, and special economic zone legislation were among them.

Prime Minister Hun Sen estimated that producers and exporters would save $400 million per year.

Furthermore, unlike some Asian nations, Cambodia makes 100 percent foreign-owned businesses.

4. Young population

Cambodia’s young demographic is also notable: nearly half of the country’s population of nearly 16 million Cambodians are under the age of 25.

According to the Institute of Export & International Trade’s Doing Business in Cambodia guide, the young generation coming through is tech-savvy and frequent users of social media sites such as Facebook and YouTube.

This has a huge effect on Cambodian society as a whole, as well as opening up new markets and business routes.

5. Strategic location

Cambodia is geographically situated in Southeast Asia, sharing boundaries with Thailand, Laos, and Vietnam, as well as the Gulf of Thailand to the south-west.

Because of its proximity to key global markets, it is a common low-cost manufacturing base for a variety of industries, with substantial demand for its products in other Asian countries.

6. Competitive labour force

Cambodia’s minimum wage is lower than in neighboring Thailand and Vietnam, making it more affordable for service and manufacturing industries looking to hire from the country’s large youth population.

7. Advantageous market access

Cambodia is a member of the ASEAN Free Trade Agreement (AFTA), one of the world’s largest and most important free trade zones, and enjoys the benefits of the Common Effective Preferential Tariff (CEPT) agreement. This means it will trade with other members on preferential terms and, in some cases, tariff-free.

It is also a World Trade Organization member and trades with the EU through the ASEAN-EU dialogue.

8. Rising consumer class

Rising incomes mean more disposable income, and the country’s young, tech-savvy, and globally minded population offers a growing market with tremendous opportunity for businesses.

9. Improving infrastructure

Cambodia’s infrastructure has traditionally been poor, but with foreign assistance, the government is investing heavily in developing a national network of transit routes, electricity, and telecommunications.

There has been an emphasis on strengthening Cambodia’s relations with neighboring countries in order to advance trade and attract foreign investment.