Cambodia is to sign an investment agreement with North Korea next month in an effort to help the communist country emerge from economic isolation, Commerce Minister Cham Prasidh announced Wednesday.
Officials from both countries plan to conclude the agreement during a four-day visit by North Korean Prime Minister Kim Yong Il, scheduled to begin Nov 1.
“There will be the signing of [a memorandum of understanding] between North Korea and Cambodia,” said Cham Prasidh, speaking at an event to unveil the 2007 World Investment Report from the UN Conference on Trade and Development.
“Hopefully, after we sign this MOU we will be able to attract some North Korean investors to Cambodia,” he added.
Cham Prasidh said he was unsure which Cambodian sectors North Korea could invest in but possibilities included the production of cement and fertilizer.
He compared the current ostracism of the secretive communist country and the economic sanctions imposed on it to the experiences of the People’s Republic of Kampuchea.
“Today North Korea is living in the same way Cambodia was living in the 1980s after we were liberated from the Khmer Rouge,” he said. “If you don’t offer them an exit door, air to breathe, they are going to fight. I believe that the approach so far has been the wrong approach. It is not the Asian way.”
Countries including the US and Japan currently impose bilateral trade sanctions on North Korea while the UN Security Council a year ago voted to impose financial and weapons sanctions on the regime following its proclaimed testing of a nuclear device.
North Korea announced earlier this month that it had agreed to disable its main nuclear reactor complex at Yongbyon by Dec 31.
Su Yong, first secretary at the North Korean Embassy in Phnom Penh, said details about the agreement would not be available until next week.
The South Korean Embassy declined to comment while the Japanese Embassy did not respond to requests for comment.
A US Embassy spokesman said the US has itself sought to increase bilateral ties with the regime.
“In general, we believe it is healthy for [North Korea] to develop normal diplomatic relationships,” the spokesman wrote in an e-mail.
Government spokesman and Information Minister Khieu Kanharith said that in dealing with North Korea, Cambodia was not discounting other countries’ concerns or the North’s long-criticized human rights record.
“What we want is to have a peaceful relationship,” he said. “Because we are not on the UN Security Council, right now what we’re trying to do is develop our economy.”
Cambodian trade with North Korea is currently valued at about $3 million a year, said Thon Virak, deputy director of the Commerce Ministry’s foreign trade department.
Cambodia imports about 20 items, mainly consisting of leather and cotton goods, while it exports tobacco, optical equipment and finishing items for clothing, such as buttons, he said.
According to the World Investment Report released Wednesday, inward flows of foreign direct investment in Cambodia rose 27 percent to $483 million between 2005 and 2006, and rose from 32.3 percent to 38.9 percent when expressed as a share of gross fixed capital formation, or the total value of fixed assets in Cambodia.
Foreign direct investment in 2006 was recorded at $2.3 billion in Vietnam, up 15 percent over 2005, and at $9.7 billion in Thailand, up 9 percent, according to the report.
“Although the investment figures in this book are much lower than those of other countries…in spite of that, they are a national pride for Cambodia, a country that has achieved peace for just 10 years,” Cham Prasidh said at the launch of the UN report.
Using a more conservative definition of transfers of capital between affiliated companies, the report produced figures lower than those recorded by the Council for the Development of Cambodia.
As of September, total investments in Cambodia recorded in 2007 amounted to $1.8 billion, Cham Prasidh said.
The report also said the value of worldwide transnational investments in 2006 was $1.3 trillion, the highest since 2000—a record $51 billion of which was invested in Southeast Asia, an increase of 25 percent over 2005.
However, much of the investment in the developing world was attracted to larger economies, such as India and China, which can engage in large-scale industrial projects attractive to investors, said Peter Brimble, research director at the private equity fund the Leopard Group.
“The smaller countries, like Cambodia, Laos, to some extent Vietnam, [Burma] and Thailand, will have to fight harder to attract increasing levels of foreign direct investment,” Brimble said at the report launch.
