Approvals Fall, but Capital Inflows Rise in 2010

Cambodia’s investment board approved projects worth $2.94 billion in 2010, a drop of 51 percent compared to the previous year, and South Korea overtook China as the foreign country with the most approved investment, ac­cording to data from the Council for the Development of Cambodia.

Experts say that though investment approvals fell, the actual amount of capital inflows increas­ed, a sign that investors are starting to rekindle some confidence in Cam­bodia after the 2009 recession.

Given the large size of some in­vestments—for example Chi­na’s Union Development Group was ap­proved for a $3.8 billion investment in 2008 for a tourism project in Koh Kong province—foreign direct investment figures can vary considerably from year to year.

The data, which appeared in a report on private investment activity in 2010 released by the Cam­bodia Investment Board yesterday, show that South Korea had $1.06 billion of investment projects approved in 2010, of which $973.3 million came from a project for a new international airport in Siem Reap by NSRIA Co Ltd.

The remainder of South Korea’s approved investment came from projects in the agricultural and garment sectors.

China was approved $829 million of investment in 2010 compared to $930 million the previous year. But $469.7 million of last year’s approved investment was for a project currently being carried out by China Huadian Corp for a 338-magawatt dam on the lower Russei Chrum river in Koh Kong province.

Domestic companies went from being the largest investor in Cambodia in 2009 (mainly due to a $3 billion investment by Cambodian conglomerate Royal Group for an island project on Koh Rong off the coast of Sihanoukville) to the third largest in 2010. A total of $447 million of investment was approved for Cambodian companies in 2010, accounting for 15.19 percent of the total amount of approved investment.

Malaysia rose to third spot among foreign countries in 2010 from ninth place the previous year with investment rising from $27 million to $256 million. Most of this investment came from a $107.6 million project for a transmission line from Phnom Penh to Kompong Cham province with the rest coming in rubber plantations and industry.

Approved investment coming form both Vietnam and Thailand dropped considerably. Vietnamese investment dropped by 56 percent to $153.2 million while Thai investment fell by 99 percent to a little over $2 million.

Indeed, just two projects (the South Korean airport in Siem Reap and the Chinese dam in Koh Kong) accounted for almost half of the total amount of approved investment in the country last year.

Experts say that the reality of last year’s investment climate was one of low confidence and little activity up until the end of the year when interest started to pick up again.

“It was not a good year. Everybody is waiting for 2011,” said Christophe Forsinetti, vice president of Devenco, an investment consultancy firm here. “The whole business community was pretty unhappy with 2010 including lawyers and investment consultants like us who are the first ones to see investors come to Cambodia. Cambodia was not on the map in 2010.”

Mr Forsinetti said, however, that there was a markup in investor interest toward the end of the year in areas such as agriculture, microfinance and retail.

The World Bank estimates that $632 million of investment projects previously approved by the CDC actually entered the economy in capital inflows last year.

That amount is more than the total amount of foreign money invested during 2009 but still less than in both 2008 and 2007.

National Bank of Cambodia show that actual capital inflow during the first two quarters of 2010, the latest quarter for which information in available, amounted to just $313 million, compared to $515 for the whole of 2009.

Peter Brimble, senior country economist for the Asian Development Bank in Cambodia, said that capital inflows in the country during the first three quarters of 2010 had actually overtaken the amount for the whole of 2009.

“That reflects what I think of 2010. Most indicators appear to be moving up,” he said, adding that GDP growth of more than 5 percent for 2010 was still possible once all the data has been evaluated.

Though investors where far from pouring into Cambodia last year, equity funds say that raising capital was easier in 2010 than in 2009 and the garment sector made an almost full recovery in terms of the amount being exported.

According to the report, there was a healthy uptick in investment approvals for projects in the industrial and manufacturing sectors, which rose from $272.9 million in 2009 to $478 million in 2010. The number of projects in these sectors increased to 80 in 2010 from 49 the previous year. It also said that 161,855 jobs had been created from 118 projects but did not job losses for the period.

Approvals in agriculture remained relatively stable with approved investment falling by just 6 percent to $598.7 million and projects dropping by just one to 27.

“What is notable is that the figure on investment in industry doubled in 2010 compared to 2009,” Suon Sothy, secretary general of the CDC said in the report. “This growth reflects the clear investment climate in Cambodia, which still can attract investors.”

(Additional reporting by Hul Reaksmey)


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