First Quarter Investment Plans Drop Sharply

Capital investment plans ap­proved by the government during the first three months of 2000 plunged to their lowest levels since 1997 with tourism projects surprisingly absent, according to government figures released Wednesday.

Only 23 proposed projects totaling $31.6 million were approved, compared with 32 proposed projects worth $120 million for the same period of 1999, according to the Council for the Development of Cambodia. The totals for the first quarter also were down dramatically from fourth-quarter 1999 figures of 31 pledged projects worth $239.4 million.

“It’s not encouraging at all,” said Sok Hach, macro-economist with the Cambodia Development Research Institute. “There were no investment projects in tourism. That’s a big surprise.”

Analysts attributed the decline to a lingering negative image and the slow recovery in Asian financial markets.

“[Slow investment] probably reflects negative perception on Cambodia,” said Sok Hach, citing poor infrastructure and poor governance. “And neighboring countries have not fully recovered from the Asian crisis. There’s some increase in investment in their own countries, but it does not reach Cambodia yet.”

Kimthy Chao, an economic analyst with the International Management & Investment Consultants, which works with prospective investors, noted that in the last couple of years investment growth has been driven by the garment, construction and service sectors.

Now, “it seems investors are thinking twice be­fore putting money into Cambod­ia,” Kimthy Chao said.

But David Doran, an investment lawyer with Dirksen Flipse Doran and Le, noted another reason why investment figures might be down:

The government’s newest investment policy requires investors to deposit up to 2 percent of the project’s capital amount into a performance bond. That, he said, has brought only serious investors.

“In the past, there was no risk for investors to get approval from the investment board, but now the new requirement discourages [some] investors, which is good for Cambodia.”

A government official on Wednesday dismissed the notion that the first-quarter investment figures reflect negatively on Cambodia’s business climate.

“The data are down, but we are not looking at the quantity of investment,” said Chea Vuthy, director for the Council for the Development of Cambodia’s Information Bureau. “We’re looking at the quality of investment.”

He also emphasized that the development council’s Invest­ment Board only is approving projects that will be implemented immediately.

“CDC is proactive to promote foreign investments, especially in tourism and agro-business industry,” Chea Vuthy said, noting that a group of government officials will tour Europe, US and Japan later this month to drum up business.

However, the tourism industry, which grew by 41 percent last year, had no investment plans approved in the first quarter, according to development council figures.

By comparison, in 1999 several major hotels and a duty-free shop in Koh Kong were ap­proved by the investment board.

According to the development council data, almost all of the investment approved in the first quarter was for manufacturing industries such as textiles and machine assembly. While garment manufacturing accounted for 12 projects totaling $18.7 million, that was down significantly from peak levels in 1997 and 1998.

Chea Vuthy said the government is encouraging investments in labor-intensive industries to create more jobs in Cambodia.

This year’s figures also show that nearly 60 percent of investments were made by investors from the Asia-Pacific region ex­cluding Asean members. Invest­ments from Asean countries accounted for only 7.6 percent.

The lackluster investment figures for the first quarter come on the heels of projections by the government and Cambodian Development Resource Institute that the country’s economy will grow by about 5 percent this year. The re­source institute in February also projected that private foreign investment would grow by 20 percent and that tourism would increase by 30 percent.

Late last year, Prime Minister Hun Sen vowed to private invest­ors that the government would take every measure to encourage foreign businesses to come to Cambodia.

 

some increase in investment in their own countries, but it does not reach Cambodia yet.”

Kimthy Chao, an economic analyst with the International Management & Investment Consultants, which works with prospective investors, noted that in the last couple of years investment growth has been driven by the garment, construction and service sectors. Now, “it seems investors are thinking twice before putting money into Cambodia,” Kimthy Chao said.

But David Doran, an investment lawyer with Dirksen Flipse Doran and Le, noted another reason why investment figures might be down: The government’s new investment policy requires investors to deposit up to 2 percent of the project’s capital amount into a performance bond. That, he said, has brought only serious investors.

“In the past, there was no risk for investors to get approval from the investment board, but now the new requirement discourages [some] investors, which is good for Cambodia.”

A government official on Wednesday dismissed the notion that the first-quarter investment figures reflect negatively on Cambodia’s business climate.

“The data are down, but we are not looking at the quantity of investment,” said Chea Vuthy, director for the Council for the Development of Cambodia’s Information Bureau. “We’re looking at the quality of investment.”

He also emphasized that the development council’s Investment Board only is approving projects that will be implemented immediately. “CDC is proactive to promote foreign investments, especially in tourism and agro-business industry,” Chea Vuthy said, noting that a group of government officials will tour Europe, US and Japan later this month to drum up business.

However, the tourism industry, which grew by 41 percent last year, had no investment plans approved in the first quarter, according to development council figures. By comparison, in 1999 several major hotels and a duty-free shop in Koh Kong were approved by the investment board.

According to the development council data, almost all of the investment approved in the first quarter was for manufacturing industries such as textiles and machine assembly. While garment manufacturing accounted for 12 projects totaling $18.7 million, that was down significantly from peak levels in 1997 and 1998.

Chea Vuthy said the government is encouraging investments in labor-intensive industries to create more jobs in Cambodia.

This year’s figures also show that nearly 60 percent of investments were made by investors from the Asia-Pacific region excluding Asean members. Investments from Asean countries accounted for only 7.6 percent.

The lackluster investment figures for the first quarter come on the heels of projections by the government and Cambodian Development Resource Institute that the country’s economy will grow by about 5 percent this year.

The resource institute in February also projected that private foreign investment would grow by 20 percent and that tourism would increase by 30 percent.

Late last year, Prime Minister Hun Sen vowed to private investors that the government would take every measure to encourage foreign businesses to come to Cambodia.

 

 

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