Cambodia’s investment climate strengthens with growth and trade deals

Cambodia’s investment climate strengthens with growth and trade deals

With a youthful workforce, growing supply-chain links and a suite of investor-friendly policies, Cambodia is emerging as a regional hub for manufacturing, services and innovation.

Cambodia is moving to consolidate its reputation as one of Southeast Asia’s most open destinations for investment, with new data showing steady economic growth, a raft of trade agreements, and a wave of investor-friendly reforms.

The 2025 Investment Climate Statement for Cambodia, released by the US Department of State this month, reports that the Kingdom’s gross domestic product grew by 5.3 percent in 2024 and is projected to rise to 5.5 percent this year. Tourism, hospitality, and foreign direct investment (FDI) are cited as the main drivers of the expansion, while inflation remains moderate at a projected 2.6 percent for 2025.

Under the 2021 Law on Investment, the Royal Government of Cambodia offers full foreign ownership in most sectors, corporate tax holidays, duty-free imports of capital goods, and no restrictions on repatriating profits.

Prime Minister Hun Manet’s administration has stepped up consultations with the private sector, establishing a biannual US-Cambodia public-private dialogue to enhance transparency and predictability for investors.

Special economic zones (SEZs) remain central to the country’s export-led strategy. There are now 32 operational SEZs in nine provinces, providing land, infrastructure and one-stop services to facilitate business operations. Companies based in these zones benefit from tax holidays, zero-rated VAT and duty exemptions on raw materials and equipment.

The largest SEZ is in Sihanoukville, where Chinese firms predominate, and Japan has recently developed its own SEZ near the port, illustrating the diversity of investors choosing Cambodia.

Cambodia’s external trade network is expanding as well. As of April 2025, the Kingdom has four bilateral and regional free trade agreements in force – with China, Korea, the United Arab Emirates and under the Regional Comprehensive Economic Partnership (RCEP) – and is studying the feasibility of a deal with the Eurasian Economic Union. These agreements give producers and exporters based in Cambodia preferential access to some of the world’s largest markets.

The banking and finance sector is also deepening. Total assets reached $91.1 billion in 2024, according to the statement. The National Bank of Cambodia’s Bakong digital payments platform, built on blockchain technology, is gaining international attention as a model for low-cost, secure transactions that can be made without a traditional bank account.

Intellectual property registration and innovation policies are being modernised. The Ministry of Industry, Science, Technology and Innovation launched a new online filing system for patents and designs in January 2025, aligning the IP framework with international standards. A national AI strategy, drafted with UN technical support, is due for completion by May 2025, signalling the government’s intention to position Cambodia in emerging technologies.

Business registration has also been streamlined. A single online portal now speeds up company registration and allows Qualified Investment Project (QIP) status to be approved within 20 working days. Outward investment is encouraged too, with the Cambodia Chamber of Commerce opening a representative office in California to promote business ties with the United States.

The statement notes that Cambodia’s removal from the Financial Action Task Force’s “grey list” in February 2023 reflected tangible improvements in anti-money-laundering and counter-terrorism financing controls. While legal enforcement and corruption remain areas for reform, the US State Department’s assessment points to a business environment that is becoming more open and competitive.

With a youthful workforce, growing supply-chain links and a suite of investor-friendly policies, Cambodia is emerging as a regional hub for manufacturing, services and innovation. The 2025 statement suggests the Kingdom’s investment environment is evolving towards greater openness and opportunity, reinforcing its attractiveness to both established and new market entrants.

Speaking to Khmer Times, Anthony Galliano, Group CEO of Cambodian Investment Management Holdings and Vice-President of the American Chamber of Commerce in Cambodia (AmCham Cambodia), highlighted Cambodia’s growing appeal to US investors under current reforms and investment policies.

Galliano said there is a “growing perception that investors are increasingly treating Cambodia as an ASEAN rising star and not just a fringe frontier market.” Key sectors drawing interest include low-skilled manufacturing and assembly, light industry, garments and textiles, education and training, agribusiness, and clean energy and renewables.

“The US remains one of the largest sources of foreign direct investment (FDI) into ASEAN, with a historical bias towards manufacturing and finance,” he noted. “More recent flows are showing growth into semiconductors, electronics, digital economy, cloud, digital services, data centres, pharmaceuticals, biomedical, critical minerals, and supply chain segments.”

Galliano added that while there is a global shift from traditional manufacturing and finance towards technology-intensive, high-value, and strategic sectors, Cambodia is “not structurally prepared for these evolving high-tech sectors and still needs to upgrade its human resource capabilities and capacity to attract them.”

He also highlighted the benefits of Cambodia’s trade agreements and growing ties with the US, noting that the country has gained “greater visibility and prominence with the current administration as a result of the intervention by the President, contributing to the ceasefire. This is a short-term advantage that the Royal Government can leverage.”

“The timing is right to solidify a trade deal that will be sustainable and advantageous to both parties, as the current arrangements are fragmented,” Galliano added.

Regarding Cambodia’s digital economy and innovation initiatives, such as Bakong and the national AI strategy, Galliano said that “until the financial and capital markets are developed, I see very little opportunity in this sector. Frankly, there is not one US bank, insurance company, or investment manager in the country.”

He added that capital markets represent “one of the greatest short-term opportunities the country has” and praised the work of the Securities and Exchange Regulator of Cambodia (SERC) and the exchange. “However, more top-down support will be needed to gain traction,” he said.

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