Cambodia’s investment board approved projects valued at $5.9 billion during the course of 2009, a 46 percent drop compared to the previous year when Cambodia become enveloped in the global financial crisis, according to information from the Council for the Development of Cambodia.
The CDC data show China to be the country’s largest foreign investor last year with $892.7 million worth of approved projects, a drop of nearly 80 percent from 2008. (The 2008 figure was boosted by plans for a giant $3.8 billion coastal development in Koh Kong province by China-based Union Development Group. That project is still believed to be in its very early stages.)
Chinese investment in 2009, however, still accounted for more than 15 percent of total approved projects.
Given the size of some large individual investments, foreign direct investment figures, which represent pledged investments rather than the transfer of capital, can vary widely from year to year. However, even accounting for fluctuations, 2009 still appeared to have recorded a significant drop in investment.
Despite the overall fall, some countries increased their presence in Cambodia. Singapore accounted for $272.5 million of approved investment, five times the amount in 2008, and Russia, Cambodia’s third largest foreign investor in 2008, more than doubled its investments to $234.7 million last year. Vietnam also saw approved investment levels shoot upward, from $20.9 million in 2008 to $210 million last year, according to the CDC data.
South Korea on the other hand saw its investment share in the country fall from 11.4 percent, or $1.2 billion in 2008, to just 2 percent, or $121 million in 2009. South Korean firms heavily invested in Cambodia’s property market in the lead up to the financial crisis, which sent the sector spiraling downward.
The late arrival of the economic crisis in Cambodia compared to other countries in the world will probably lead to a delay in any recovery, according to Julia Brickell, resident representative in Cambodia for the International Finance Corporation, the private sector arm of the World Bank.
“Cambodia is probably one of the most vulnerable countries in terms of the ways if was affected from the economic crisis,” Ms Brickell said.
The CDC figures only refer to approved investment and not the actual amount of capital present in the country.
Locally approved investment dropped by just 4.6 percent to $3.8 billion in 2009, a sign that confidence levels on the domestic front have remained stable.
Moreover, investment projects in agriculture jumped from $106.7 million in 2008 to $589.9 million in 2009.
Ms Brickell said the ascent in investor interest in the agricultural sector was “not surprising” due to the spike in food prices during the course of 2008, which helped rekindle some hope that agricultural produce could muster up a decent profit.
“A lot of…neighboring countries looked to the land and saw its fertility and potential,” she said, adding that proactive policy making in the sector had also encouraged new players.
Investment in energy projects rose by 42 percent to $664.7 million, though the garment sector, as expected, saw investment levels fall by 36 percent to $90.1 million, according to the CDC.
Heightened confidence in Cambodia’s natural resource potential saw investment approvals for mining ventures rise by 153 percent to $11.8 million in 2009. Investment in the tourism sector took the biggest hit, dropping 46 percent to $4 billion in 2009.
“Some projects keep delaying, not pushing to try and finish the project,” said Ho Vandy, co-chair of the government-private sector Tourism Working Group. “But the beginning of this year should see some projects start again.”
Mr Vandy said that 2010 would see three boutique hotels being built in the capital.
Despite the drop in approved investment, he said, many projects pledged in 2008 had been delayed throughout 2009 and were likely to be realized this year.
Hence, the actual level of capital flowing through the sector in 2009 compared to 2008 had appeared to be smaller, he said.
Yuji Imamura, an advisor to the CDC from the Japan International Cooperation Agency, said in an email that the levels of approved investment in 2008 were largely propped up by sizeable real estate projects from China and South Korea, many of which have not yet seen the light of day.
The total amount of approved investment in Cambodia registered between 1994 and 2009 was $15.1 billion, he said, compared to $145 billion in Vietnam between 1989 and 2008, a difference of nearly ten fold in Vietnam’s favor over a similar period.
Mr Imamura said be believed Vietnam’s rapid development has driven up labor costs in that country, urging investors to seek new, cheaper opportunities in Cambodia.
Economists expect the three main driving forces for growth in 2010 to center around agriculture, natural resources and labor-intensive industries.
