After several years of steady growth, capital investment in Cambodia plunged more than 60 percent in the first half of 1998, according to the Cambodia Investment Board.
The board approved 65 projects worth $147.3 million during the first six months of 1998, a sharp decrease from the same period in 1997, when more than $400 million worth of investment projects were approved.
No statistics are available on how many of the approved projects have actually begun.
An official at the Council for the Development of Cambodia said he had not seen the figures yet so could not comment on them.
Regional analysts and diplomats, however, said the drop, which began last July, is due to worries about political stability and the regional currency and stock market crisis.
“It’s a mix,” said one Asean diplomat. “There is the regional crisis and the wait-and-see game in Cambodia.”
Analysts said the regional currency devaluations have made Cambodia’s labor comparatively more expensive because of the country’s dollarized economy. For investors of labor-intensive projects, such as garment manufacturing, Cambodia has suddenly become less attractive.
Finance Minister Keat Chhon said Monday at an Asean workshop that direct foreign investment from Southeast Asia could slow down or stop completely for at least one or two years.
He expressed hope that the drop might be offset by investment from other Asian countries, such as South Korea, Taiwan and China, “as long as Cambodia remains attractive.”
But South Korea—Cambodia’s biggest investor with $189 million worth of approved projects last year—had only one application this year, a $1.1 million plush toy factory.
A spokesman for the South Korean Embassy said large Korean investors are staying home because of their own economic problems and uncertainties over Cambodia’s political situation.
Although investment has dropped significantly, analysts said Tuesday that investors are still interested, provided that the election and transition period go smoothly. “They want to come,” said the Asian diplomat, “but probably will wait until after the government is formed. Give it three to six months and I think we will see a lot of investment.”
Among the projects approved this year were a $40 million palm oil plantation by Cambodia Haining Group, a $10 million plywood factory by the Malaysian logging company SL International, a $5 million dairy project by the Swiss firm Nestle, and Fantasy Villas, a residential development in Kompong Speu.
Garment manufacturing continues as the mainstay of foreign direct investment. The Cambodia Investment Board approved 36 garment manufacturing applications worth $38 million.
A recent report by the Cambodia Development Resource Institute noted that the regional crisis has had little impact on Cambodia’s growing garment sector, mainly because of Cambodia’s special trade privileges with the US and the European Union.
(Additional reporting by Khuy Sokhoeun)