Cambodia: Great Growth, Great Risk

Cambodia offers foreign investors strong growth, but it’s a tiny market. Corruption doesn’t help.

Cambodia’s robust economic growth—annual GDP near 7% for most of a decade—is powered by agriculture, manufacturing (especially textiles), tourism and construction, according to Michael Sek Pheng Yeo, senior research manager for IDC Financial Insights and Retail Insights in Asia.

Cambodia is famous as a textile powerhouse; textiles are the lion’s share of exports—far outpacing the sector’s contribution to GDP. “Sixteen percent of GDP is from the textile industry, but that accounts for 80% of export revenues,” says Yeo. Part of the explanation lies in Cambodia’s access to the European Union through its Everything But Arms (EBA) initiative, which gives 49 of the world’s poorest countries duty-free access to EU markets. The initiative applies to any exports except arms and ammunition.

That access and other advantages have attracted foreign investors. Since 2008, annual foreign direct investment inflows have increased almost continuously, reaching $3.1 billion in 2018. Yeo credits the government’s open foreign investment policy. “Industries that traditionally would be quite restricted in other markets, such as the financial sector, can be majority or wholly owned by foreign entities,” he says.

In full: https://www.gfmag.com/magazine/october-2019/cambodie-great-growth-great-risk

© 2019, All rights reserved.