Japanese capital flooding in to Cambodia
Japanese capital flooding in to Cambodia
Total Japanese investment in Cambodia under the Kingdom’s qualified investment project (QIP) scheme surged tenfold during the first half of the year, driven by Japan’s improved economy and a hefty capital injection by one of its biggest retail giants.
The Council for Development of Cambodia (CDC) approved a total of seven Japanese investment projects as QIPs during the first six months of the year, with total investment of $259.7 million, compared to just $22.3 million during the same period a year earlier.
Yasuhara Hiroto, head of the Japan Desk at the CDC, said while the number of approved QIPs was similar to last year, total investment soared as the result of Aeon Mall Co Ltd investing in construction of its second mall in Phnom Penh.
“This big investment in the first half is heavily dependent on the Aeon investment,” he said, declining to disclose Aeon’s share of the total. Aeon’s Cambodian office could not be reached yesterday for details on the investment amount, but the company previously said it sunk $205 million into building its first 108,000 square metre mall in Phnom Penh, which opened in June 2014.
Aeon’s second mall, currently under construction inside Pong Peay City on the northern flank of the capital, is set to cover more than 151,000 square metres of floor space.
Apart from Aeon’s investment in the shopping mall, the CDC also approved Toyota Tsusho’s project to develop an industrial park in Poipet, as well as a new hotel by Japanese conglomerate Starts Corporation. QIPs approved by the CDC are eligible for tax holidays and other investor incentives.
Hiroto, who is also a project formulation adviser for Japan International Cooperation Agency (JICA), said the new investment demonstrates Cambodia’s attractiveness as a destination for Japanese capital.
“Japanese companies see Cambodia as a promising market, thus we see many service industry investments in the first half,” he said.
In Channy, board chairman of the Cambodia-Japan Association for Business and Investment (CJBI), said the growing strength of Japan’s Yen currency and the Bank of Japan’s adoption of negative interest rates on bank deposits were pushing Japanese investors to look afield.
“With fewer and fewer growth opportunities at home, Japanese investors are turning to invest more overseas rather than locally,” he said. “There is a good return on investment in Cambodia. Japanese firms that are already here are getting returns of between 15 and 20 per cent, while they get 10 per cent at best in Japan.”
Hiroshi Suzuki, chief economist at the Business Research Institute for Cambodia (BRIC), said Japan’s investment in Cambodia tends to ebb and flow with changes in the yen’s exchange rate. Yet the continuous effort to improve the Kingdom’s investment climate has proven a magnet for Japanese FDI.
Suzuki said Aeon’s large investment in a retail project was a good sign, as it indicated Japanese investment in Cambodia was diversifying and extending the benefits to a broader section of society.
“It shows that not only manufacturing, but also the service sector, could be a good opportunity for investment,” he said.
Increased Japanese investment in the Kingdom also appears to be driving the growth of trade between the two countries. According to Japan External Trade Organization (JETRO), Cambodia exported goods valued at over $481 million to Japan during the first five months of the year, a 30 per cent increase over the same period a year earlier.
