South Korean investment in Cambodia dropped by 25 percent last year and could plummet by as much as 58 percent more in 2009, an embassy official said Monday.
Although $1.25 billion in Cambodian investments was registered with the Bank of Korea for 2008, only $473 million actually made it into the country, Lee Sang-kwang, commercial attaché for the South Korean Embassy, said by telephone Monday. That’s compared to $629 million in realized investments for 2007, a drop Lee attributed to Korea’s sluggish economy.
“Many Korean companies are facing difficulties when they manage their businesses,” Lee said. “I think most of the big projects have postponed their actual investment programs.”
He predicted that actual Korean investments in Cambodia could fall to as low as $250 million or $200 million in 2009, although he added that it was difficult for him to produce an accurate projection.
Until last year, Korean firms were realizing between 70 and 75 percent of their registered investments in Cambodia, Lee said, but last year’s ratio stood at less than 40 percent. He predicted it wouldn’t rise above 50 percent in 2009.
“Because of financial difficulties, they cannot transfer money to Cambodia,” he said. “But maybe they will invest in the near future.”
Lee added that he did not know which specific Korean companies were having trouble following through on their planned investments as sometimes companies were not forthcoming with such information.
Lee also predicted that Korea’s current economic troubles could hurt its trade relationship with Cambodia. Last year, imports from Korea amounted to $290 million, of which he estimated about 60 percent was fabric and textiles to be used by the garment industry.
However, Cambodia’s garment industry has suffered heavy losses in recent months, a deterioration that has been attributed to decreasing demand in some Western markets, particularly the US.
“I think if the demand from the USA [for Cambodian-made garments] is going down, the Korean textile exports to Cambodia will also go down,” Lee said.
Cambodian exports to Korea totaled just $15 million in 2008, and mainly consisted of garments and agricultural products, Lee said.
Cheam Yeap, CPP lawmaker and chairman of the National Assembly economy and finance commission, said by telephone Monday that South Korean companies ranked third in investment in Cambodia last year, after China and Japan. He insisted that investment links between South Korea and Cambodia remain strong.
“I’m not worried about a downturn in Korean investments because we have a system of mutual investment, although we have seen a decrease because of the global economic crisis,” he said.
He added that the current uncertainty in Korean markets made it difficult to predict investment levels for 2009.
“Korea stands with two other countries-Singapore and Japan-that were hardest hit by the crisis,” he said.
On Wednesday, the Korea Trace-Investment Promotion Agency will re-open its Phnom Penh office to support Korean businesses in Cambodia. The previous KOTRA office closed in 2007, under what Lee described as pressure from the Korean government to cut back on the agency’s worldwide operating costs.
The purpose of the new office, Lee said, is “to provide more comprehensive investment information” to Korean companies. The office will also organize trade delegations and investment fairs.
(Additional reporting by Rann Reuy)
