Why Invest in Cambodia

Map of Cambodia (google)The economic development of Cambodia, officially known as Kingdom of Cambodia, in the past twenty years has been extraordinary. Economic growth has averaged around 7.6% a year since 1995, hitting an all time high of 13.4% in year 2005 and a record low of 0.1% in 2009 during the Global Financial Crisis. Nationwide poverty rate has also been cut by 50%. In the past, the economy depends mostly on agriculture. However in recent years, the importance of manufacturing is increasing with the garment/textile industry representing the largest portion of the manufacturing section, which accounts for approximately 80% of the country’s export.

Data from World Bank

Owing to the firm leadership of Hun Sen, the current and 34th Prime Minister since 1998, and also his government’s various foreign investor-friendly polices, others sectors such as services, tourism, retail and real estate have also thrive in recent years. Cambodia has experienced a dramatic change from a third world country to a largely urbanized kingdom witnessed in the capital city Phnom Penh. Presently, the biggest section in the economy is services, which accounted for 38% of the total GDP. However, with the high influx of foreign investment, the discovery of oil deposits beneath Cambodia’s territorial waters and the exploration of natural resources such as gems, gold, iron and bauxite, many economists believe that this will likely reshape Cambodia’s future economy.

Facts about Cambodia (柬埔寨)

  • Capital City: Phnom Penh (金边)
  • Area: 181,035 sqm
  • Population in 2015: 15.635 million
  • Population in Phnom Penh (2015, estimate): 2.2mil
  • GDP 2015 estimate: USD$18 billion
  • GDP Per Capita 2015 estimate: USD$1181
  • Currency: Riel (KHR), US Dollar (USD), USD$1 = $4000 KHR
  • Official language: Khmer
  • Membership: World Trade Organisation, International Monetary Fund, World Bank, United Nation, ASEAN

Top 10 Reasons Why Invest in Cambodia Real Estate (Property), Particulary Phnom Penh, the Capital of Cambodia?

1. Stability in Politics

Independence Monument phnom penh
Independence Monument, Phnom Penh

Hun Sen has served as Cambodia’s Prime Minister for more than 15 years, since 30 Nov 1998 to be exact, making him one of the longest serving leaders in the world. Under his strong leadership, Cambodia’s economy has grown an average of more than 7 percent for the last two decades, which outperforms most of the ASEAN countries.

2. Favorable Geographic Location

Situated in between Thailand and Vietnam, various sectors in Cambodia have benefited from the economic spill-over effects from her more developed neighbouring countries. In terms of maritime trade, Cambodia is the halfway point between India and China, and set to benefit greatly should the Thai Canal, also known as Kra Canal, which connects the Gulf of Thailand with the Andaman Sea across southern Thailand became a reality in future. This will greatly allows ships to shorten the travel time between the Indian Ocean and Gulf of Thailand and bypass the congested Straits of Malacca.

3. Foreigner-friendly Real Estate Investment and Business Environment

Since the passing of “Law on Providing Foreigners with Ownership Rights in Private Units of Co-Owned Building” in year 2010, Cambodia real estate market has opened up to foreigners. Foreigners are now allowed to own strata-title properties (except on the ground floor, which prevents foreigners from becoming a land owner) up to 70% of the whole development, subject to the development has applied for and successfully obtained strata-title, which generally only applies to new development. Incorporation of company is a straightforward process at the Ministry of Commerce (MOC). Most corporations can operate with a standard MOC issued company license. Companys are also entitled to hire up to 10% of foreigners of the total headcount. Both month-long business visas and employment permits are renewable annually.

4. Stable Monetary Policy & Dollarised Economy

Even though the Cambodia Riel (KHR) is the currency of Cambodia, US dollars are widely circulated and exchanged. In fact most of the trades are done in US denomination and Riel is mostly used as a small change in Cambodia, leading to a stable monetary policy and “dollarised” economy.

5. Increasing Trade Integration & Market Access

Cambodia’s Trade Integration and market access has advanced significantly in the last decades. As a member of WTO since 2004, plus the benefits from a number of Duty-Free Quota-Free (DFQF) programs, together with the implementation of free trade agreements (FTA) with ASEAN Partners, have trigger sharp increases in Cambodia’s export, especially its exports of garments. In conjunction with favorable business environment and low labor costs, this improved market access is one of the primary forces driving the significant expansion of investment in manufacturing.

6. Advantageous Labour Conditions – Young Population

Cambodia Population Pyramid 2015
Cambodia Population Pyramid 2015

The workforce in Cambodia is considered among the lowest cost in Asia. Due to better education environment in the capital and other major town, the adult literacy rate for those aged 15 years and above has surpass 75%. The youthful population, majority are range between 20 to 34 years old will generate a demographic dividend now and in the next few decades, with sufficient skills to enhance the nation productiving and competitiveness.

7. Tourism Hotspot

Cambodia has increasingly become a tourism hotspot in recent years and is the second source of “hard” currency after the garment industry. From the majestic Angkor Wat at Siem Reap to pristine beaches such as Southwestern beach, Long Set Beach and Lazy Beach at Sihanoukville Province and to the tranquil countryside, Cambodia has many to offers to tourist who loves exotic destination, earning a nickname as “a land of hidden treasures” in the tourism world. There are two international airports in Cambodia, Siem Reap Internation Airport and Phnom Penh International Airport, both are able to cater for high influx of inbound tourists to the country. Among the two, Siem Reap handles 80% of international tourist, owing to the popularity of Angkor, named UNESCO World Heritage Site many years back and its various serene countryside tour packages.

8. Unexplored Natural Resources and Land

Cambodia has vast abundant mineral resources, offshore oil and natural gas, fertile land for agriculture that are left largely unexplored. As a result, the Ministry of Industry, Mines and Energy (MIME) was formed in early 21st century. Their roles include taking charge of implementing the country’s mineral law and policy, setting up legal framework to work along with overseas private sectors from Australia, South Korea, Thailand, USA and China. Till date the identified commodities are gold, bauxite, natural gas, salt, silica, petroleum, natural gas, gemstones, manganese and zircon.

9. Growing Domestic Market

AEON Mall Phnom Penh
AEON Mall, Cambodia Phnom Penh

With the growth and rising economy, coupled with high literacy and youthful population, the spending power of the local, especially in the capital city Phnom Penh, has increased phenomenally. Luxury cars lining up the street is a common scene nowadays. Over every weekend, you will get to see a full capacity crowd gathered at the AEON Mall, which is the country’s first Mega Mall with cineplex by the Japanese retail giant. It has attracted 15 million visitors after one year of grand opening. There, familiar brands like Diaso, Fish & Co, Swensen, G2000, Adidas, KFC, Puma, L’Occitane, Mango and many other popular brands seen in Singapore line up the alley. Business is so brisk that AEON has decided to build the second mall at the north of the central area of Phnom Penh. There is also an increase demand for homes from the rising middle class household in recent years. Home prices had since increased 30% since 2008 but with plenty of upside, as prices are still a huge percentage lower than compare to neighouring country like Thailand and other more developed ASEAN countries.

10. Foreigner Investment-Friendly

There is an increasingly ease of doing business in Cambodia. The Tariff structure was changed in 2001 and maximum rate had dropped significantly from 120% to 35%. Goods such as medical and educational materials even get to enjoy full import duty exemption. With the recent Free Trade Agreement with ASEAN and other countries under the Common Effective Preferential Tariff (CEPT), the tariff will be further reduce to 0% in coming years. Singapore is one of the ASEAN who is enjoying full import duty exemption since 2013. In terms of foreign exchange control, there are no limitations on the remittance and repatriation of investment or profits into and out of the country, as long as they are being transferred through the registered financial institutions. The Amended Law on Investment guarantees the rights of foreign investors foreign currencies aboard. Remittances are subject only to the applicable withholding tax, for example, 10% rental tax on immovable properties.

Royal Palace Phnom Penh
Royal Palace Phnom Penh

If you have missed out the real estate boom of Singapore, London, Sydney, Melbourne, Bangkok property markets in various cycle or phrases of your life, exploit on the first mover advantage in Cambodia, Phnom Penh real estate (property), and ride on the property boom.

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