Jan-Jun investment capital hike raises trade, production hopes
The nearly 160 per cent surge in investment capital behind a slew of new large-scale investment projects outside of Cambodia’s special economic zones (SEZ) reported for the first half of 2022 has fanned optimism for a boom in production and exports – underpinned by favourable international commercial arrangements – as well as a reduction in the over $6 billion trade deficit logged for the January-August period.
Effective control of Covid-19 coupled with a rapid and essentially full resumption of economic activity has led to largely positive trends in all areas for the Kingdom, with 75 private non-SEZ investment projects approved between January and June by the Council for the Development of Cambodia (CDC), government’s highest decision-making body for large-scale investments.
For comparison, this figure was 53 in the same six-month period last year.
This is according to a report from the Ministry of Economy and Finance released last week, which noted that the 75 projects had a total investment capital of $2.4 billion and the potential to create about 62,000 new jobs – up by 159.3 per cent and 65.9 per cent respectively. Services, industry, energy and tourism were the leading sectors represented.
Similarly, General Department of Customs and Excise statistics show that, in the first eight months of 2022, Cambodia’s international trade totalled $37.406 billion, up by 21.48 per cent year-on-year from $30.793 billion.
Cambodia’s exports were to the tune of $15.642 billion, rising by 26.26 per cent year-on-year, and imports $21.764 billion, increasing by 18.26 per cent. The Kingdom’s trade deficit for the January-August period expanded by 1.78 per cent on a yearly basis to $6.122 billion.
Speaking to The Post on September 20, Cambodia Chamber of Commerce (CCC) vice-president Lim Heng credited the “gainful new opportunities” created by the developments for Cambodia and her people to “the region’s fastest economic reopening” – set in motion in mid-November – as well as the extent of the Kingdom’s access to large international markets as crucial trading partners, such as the US, Canada, China, Japan and South Korea.
In addition, the bilateral Cambodia-China Free Trade Agreement (CCFTA) and Regional Comprehensive Economic Partnership (RCEP), along with the more favourable environment created by the new Law on Investment are key to bringing in investors into the production or processing of goods for export, he said.
With improved and greater access to export markets and other favourable conditions, Heng is optimistic that the rate of new investments in the Kingdom will accelerate further.
He explained that non-SEZ developments typically demand large areas, such as for agricultural or industrial use, and often need locations near available raw materials required for production.
Regardless of location however, quality investments can provide major tailwinds for the Kingdom’s economic condition, he said, adding: “Increased investment will help create employment and strengthen Cambodia’s economic growth.”
Hong Vanak, director of International Economics at the Royal Academy of Cambodia, commented that steady growth in investment inflows correlates with a country’s political stability and signals profitability for potential investors.
He underscored that for a product to be profitable, it must be marketable and have a reasonable and competitive price.
With protracted Covid-19 conditions, geopolitical conflicts and heightened fuel prices currently dragging down global economic recovery, the uptick in investment is crucial for Cambodia, Vanak said.
“Increased investment will help lift up Cambodia’s exports, and also improve the international trade balance.”