Cambodia, a Southeast Asia country that is rich in culture and traditions, has seen rapid growth in the last two decades. Cambodia’s GDP has grown at an average annual rate of 7%, ranking 6th globally. Cambodia is strategically located at the heart of the Belt and Road Initiative (known in Chinese as the “One Belt One Road Initiative”), the 21st-century maritime silk road. The proportion of Cambodian industries in terms of GDP is 43. 5% for the service industry, 26. 7% for agriculture, and 16% for manufacturing. The services industry is led by tourism and the manufacturing industry is mainly clothing and footwear. Cambodia’s unique charms have made it become a well-known tourist country on the globe. The prosperity of tourism directly promotes Cambodia’s economic development. In addition to tourism revenue, it provides 1 million job opportunities.
High Economic Growth
Cambodia is the No.1 in ASEAN countries with an average GDP growth rate of 7% in recent years. And during the worldwide pandemic crisis period, Cambodia has continued to achieve strong economic growth. It is expected that Foreign Direct Investment (FDI) mainly in the garment and real estate industries will continue to expand and that the construction and tourism industries will grow as well. As a result, foreign investors have become very interested in Cambodia as an investment destination. In addition, the number of companies expanding into Cambodia as bases in Asia is increasing year by year.
According to 2020 Investment Climate Statements: Cambodia by the State government report by U. S Department of State, U. S. dollars are highly used and preferred and remain the primary currency for most large transactions in Cambodia despite the country has its own currency, the Riel (denoted as KHR). As a matter of fact, there are no regulation on the conversion of capital for foreign investors. The exchange rate between KHR and U. S. dollars has been leveled off at around 1 U. S. dollar to 4,000 KHR for the past decades. Day to day fluctuations of the exchange rate, which is inevitable, are remarkably low, typically under 3%. For the past several years, the Cambodian government has been putting efforts to increase the generalization of the KHR but, as stated above, Cambodia’s economy remains largely dollarized. While each country has regulations such as restrictions on converting money into foreign currencies and restrictions on remittances abroad, and to do so requires complicated procedures, Cambodia has no restrictions on remittances so far. In addition, Cambodia’s interest rate on time deposit is currently about 4. 5% to 6. 5% per annum, making it extremely attractive from a financial perspective.
Overwhelming Young Energy and Population Growth
In Cambodia, there are many young people who are at the center of economic growth and the demographic chart is ideal. With an average age of 27, and 70% of the population consisting of the younger generation age 34 and below, Cambodia’s market has growth potential to grow for years to come. The labor force is sufficient to supply until 2070. The consumer market is also expected to continue to expand over the next 60 years. *Source: United Nations World Population
Special Economic Zone
In Cambodia, the Special Economic Zone (SEZ) has been set as a special zone for the development of the economic sector, where all industries are concentrated. Phnom Penh has the “Phnom Penh Special Economic Zone (PPSEZ)” which has the largest premises and number of tenants in Cambodia. Currently, there are about 100 companies from 15 countries in PPSEZ, of which 48 are Japanese companies. In addition to tax incentives, it is characterized by a well-developed infrastructure and a one-stop office for government office procedures for the Cambodian government such as customs clearance, various certifications, and work permits. It is expected to advance further.