FDI Down 35.2% in 2009; experts see better 2010

The financially troubled 2009 saw inflows of foreign direct investment to Cambodia drop by 35.2 percent to about $520 million, according to a National Bank of Cambodia report released yesterday, though business experts predict a better showing this year.

Neou Sieha, a senior researcher for the Economic Institute of Cambodia, predicted that foreign investment in 2010 will recover slowly and improve over last year, but not reach levels seen in 2007 or 2008.

“The FDI will come in the second half of the year. When the economy recovers it does not mean that the FDI will come immediately,” he said.

While agriculture and food processing has been widely predicted to grow this year, he said tourism will also see more investment.

“The international market for agro-processing is still good, even for 2009, and 2010 is also good,” he said, adding that nearly the same number of tourists visited Cambodia in 2009 as in 2008.

“This year is agriculture, tourism, but other sectors are unclear, and construction and real estate I don’t think will increase,” he said.

Approved investment projects also took a large hit last year dropping 46 percent from 2008 to 2009, reaching only $5.9 billion, according to information from the Council for the Development of Cambodia. Still, it is unknown how many of those projects will also bear fruit or when that pledged investment money will flow into country.

Stephen Higgins, CEO of ANZ Royal Bank, said aside from agro-processing, several infrastructure projects, including hydropower dams and transmission lines, should not only draw FDI to the country but also reduce production costs and spawn more investment projects.

The several tourism island projects near Sihanoukville could see more development this year, but it is unclear how much, he said.

“You are already starting to see it happening. It depends on how quickly and what scale,” he said. “You need something other than Angkor Wat to bring tourists to Cambodia and to stay in Cambodia and having a good beach destination is extremely important.”

Another difference and reason for optimism this year, he said, is the amount of interest from investors in the last few months.

“Back in the middle of 2008, we saw a constant stream of investors coming here to talk about investment. In 2009, that virtually ceased,” he said.

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