CDC pitches ‘Plus One’ to Japan investors

CDC pitches ‘Plus One’ to Japan investors

Sok Chenda Sophea, secretary-general of the Council for the Development of Cambodia (CDC), the government’s highest decision-making body for large-scale investments, was speaking at the 25th meeting of the Cambodia-Japan Joint Committee on February 21, the CDC said in a statement that day.

The bilateral meetings, generally held biannually since 2009, are part of an investment maintenance mechanism under the umbrella of the Cambodia-Japan Agreement on the Liberalisation, Promotion and Protection of Investment, signed by Prime Minister Hun Sen and then-Japanese Prime Minister Shinzo Abe on June 14, 2007.

The “Plus One” strategy mentioned by Chenda Sophea refers to the business model of extending supply chain networks developed in one nation to nearby countries.

The statement noted that the February 21 meeting centred on energy, taxation, logistics and other key issues, and was attended by Japanese ambassador Atsushi Ueno, Cambodian officials and representatives of several organisations.

These included Tokyo’s overseas development arm Japan International Cooperation Agency (JICA), the government-linked Japan External Trade Organisation (JETRO), Japanese Business Association of Cambodia (JBAC), and Japanese companies with investment operations in the Kingdom.

Key driver

Chenda Sophea regarded Japanese investment activities collectively as a key driver of economic diversification and human resource development in Cambodia.

He called on Japanese companies to keep the Thai or Vietnam “Plus One” strategies firmly in mind, commenting that the government is committed to improving administrative procedures to further integrate Cambodia into regional and global supply chains.

For reference, a “supply chain” is an entire system of all the individuals, organisations, resources, technologies and processes involved in the creation, distribution and sale of a product or service, from the initial stage of sourcing or extracting raw materials to the final delivery to end-users.

Chenda Sophea acknowledged the consistently high degree of confidence expressed by certain Japanese investors in the Royal Government of Cambodia (RGC) to ensure peace, political and economic stability, and other favourable conditions for investment.

The government has promulgated the new Law on Investment – on October 15, 2021 – and unveiled the “Cambodia’s Automotive and Electronics Sectors Development Roadmap”, and will step up efforts to build a stronger and more resilient economy as well as create a more conducive investment environment, he assured.

The Japanese ambassador praised the meeting as a crucial channel for Japanese investors to share their challenges and for the government to provide solutions that benefit both public and private interests, according to the statement.

Ueno affirmed his commitment to keep working with the RGC to stimulate and attract Japanese direct investment, as well as to further strengthen economic ties between the two countries.

He brought up that this year marks the 70th anniversary of Cambodia-Japan relations – established on January 9, 1953 – along with an upgrade to a “Comprehensive Strategic Partnership” (CSP).

A CSP is generally a broad, detailed, dynamic, long-term, highly result-oriented agreement between signatories that affirms a high degree of maturity in relations as well as mutual trust and commitment. In 2010, Cambodia and China entered into such a partnership, and trade between the two countries has increased ever since, as has mutual support for international politics.

JBAC chairman Yogo Kanda spoke about transparency, predictability and political stability in Cambodia, remarking that AEON Mall (Cambodia) Co Ltd, MinebeaMitsumi and Sumi Wiring are among the many Japanese companies that have found success in the Kingdom, the statement noted.

The success of Japanese businesspeople and investors in Cambodia acts as a catalyst to bring in even more, he stressed, expressing delight to be representing a Japanese company actively doing business in the Kingdom.

Kanda is the general manager of Mitsubishi Corp Phnom Penh Representative Office.

Trade, investment growth

According to the CDC, it greenlit just one new Japanese investment project in the September-December period, bringing the total number of such ventures approved to 150 – with registered capital of about $2.9 billion – since the council’s establishment on August 5, 1994.

The retail, vehicle and components, small-motor, electric equipment, and hospital fields are notable constituents of this list of investment projects, the council said.

Of note, an earlier CDC report suggests that this figure may account only for ventures planned for locations outside of the Kingdom’s special economic zones (SEZ) – 145 of which it said had been given the nod as of July 31, 2021, worth $2.8 billion, in addition to 66 others valued at $340 million that were set to be inside the SEZs, for a total of 211 Japanese investment projects.

Generally seen as a type of commercial oasis, an SEZ is a specially-defined region within a jurisdiction’s borders that is subject to different – typically more liberal – legal, administrative and economic regulations than elsewhere in the same jurisdiction, and can include unique tax, logistical or one-stop service arrangements designed to attract business and investment.

According to Customs (GDCE), the bilateral merchandise trade volume between Cambodia and Japan totalled $1.948 billion in 2022, up 12.33 per cent over 2021, with the Kingdom’s exports accounting for a 60.22 per cent share, down by 2.85 percentage points on a yearly basis.

Cambodian exports to and imports from Japan amounted to $1.173 billion and $774.989 million, respectively, up 7.26 per cent and up 21.0 per cent year-on-year, narrowing the Kingdom’s trade surplus with the archipelago nation by 12.15 per cent to $398.041 million versus $453.116 million in 2021.

Japan was Cambodia’s number-six trading partner, fourth biggest export destination and eight largest source market for imports.

Last month, the bilateral merchandise trade totted up to $146.379 million, down 0.69 per cent from January 2022 and down 7.69 per cent from December 2022.

Cambodian exports were to the tune of $104.587 million, up 6.8 per cent year-on-year and up 0.89 per cent month-on-month, while imports stood at $41.793 million, down 15.58 per cent year-on-year and down 23.9 per cent month-on-month.

The trade deficit with Japan reached $62.794 million, expanding both 29.79 per cent year-on-year and 28.81 per cent month-on-month.

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