Exploring Cambodia’s Potential As A Strategic Gateway To ASEAN
The 2024 Cambodia-ASEAN Business Summit, held on April 2, 2024, was organised by the Cambodia Chamber of Commerce and the ASEAN Business Advisory Council in Cambodia. Held under the broad theme, ‘Unleashing ASEAN’s Potential: Connectivity, Technology, and Inclusive Growth’, one of the main subjects explored during the summit was Cambodia’s position as a strategic ‘gateway’ to ASEAN.
This topic was explored in depth in a speech delivered by H.E. Sun Chanthol, Deputy Prime Minister and First Vice-Chairman of the Council for the Development of Cambodia (CDC), and a subsequent panel discussion featuring representatives of the General Department of Taxation (GDT), General Department of Customs and Excise (GDCE) and Securities and Exchange Regulator of Cambodia (SERC). Chanthol outlined a number of points which make Cambodia ideal for investors, including:
- A strategic geographic location;
- Pro-business policies;
- Rapid infrastructure development;
- Low debt-to-GDP ratio;
- Free trade agreements with various countries in the ASEAN region and across the world.
He claimed Cambodia's status as “the most liberal business environment in the ASEAN region”, noting that investors can own up to 100 per cent of their investment in the Kingdom.
How Is Cambodia Considered A Gateway To ASEAN?
Chanthol presented Cambodia's vision to become a sub-regional trade and investment hub, purporting that investment in Cambodia can allow businesses to extend their reach past the country’s 17 million consumers to those in other countries in the region as well. Cambodia is also a part of several regional trade pacts and associations, including:
- ASEAN (the Association of Southeast Asian Nations), has 670 million consumers (including ASEAN Plus countries such as Korea, Japan, China, New Zealand, and Australia).
- The Regional Comprehensive Economic Partnership (RCEP) with a combined consumer base of 2.3 billion people.
- Cambodia is also part of the Greater Mekong Sub-Region, encompassing Cambodia, Laos, Vietnam, Myanmar, and the southern part of China's Yunnan province, with a total of 250 million consumers.
Why Invest In Cambodia?
The First Vice-Chairman of the CDC highlighted Cambodia’s political stability and steady economic growth as two major factors that contribute to the country’s favourable investment climate.
With peace and stability, Cambodia has been growing at an average of 7 per cent per annum for the past two decades before the pandemic. The GDP grew at 5.6 per cent in 2023, and is expected to grow at 6.6 per cent in 2024.
Other factors he highlighted were:
- Stable macroeconomic conditions such as low inflation and a stable exchange rate;
- Cambodia’s young population, with 60 per cent below the age of 25;
- The country’s robust infrastructure development initiatives;
- The government's plan to train 1.5 million skilled workers to prepare for foreign direct investment (FDI) inflows.
Responding to questions about Cambodia’s debt-to-GDP ratio, Chanthol defaulted to saying that the Kingdom’s public debt still remains low compared to many developed countries in the world, hence, he proposed that it is not a major matter of concern.
“Our debt-to-GDP ratio is below 40 per cent, so we have the ability to borrow more to invest in conducive projects, such as infrastructure projects, and not to borrow for consumption,” he affirmed.
Infrastructure Development In Cambodia
In terms of infrastructure development, Chanthol said the Cambodian government’s Logistics Master Plan (2023-2033) comprises 174 projects with an estimated investment of nearly USD $40 billion. The main goal of this plan is to modernise and upgrade the country’s infrastructure and logistics systems, presenting a significant opportunity for private sector investment in the country.
Watch a short clip from H.E. Sun Chanthol's speech:
He highlighted some of the main road networks being expanded in Cambodia as part of the Asian Highway Network:
- National Road 5 (Phnom Penh-Poipet bordering Thailand)
- National Road 48 (Connecting from NR4 to Koh Kong to Thailand’s Trat province)
- National Road 7 (Linking Cambodia to Laos)
He also outlined how Cambodia is in the process of planning new expressways after completing and launching the Phnom Penh-Sihanoukville Expressway in 2023. For example, there is a USD $1.6 billion expressway project connecting Phnom Penh to the Vietnam border slated for completion by 2026 or 2027. Additionally, the new Siem Reap–Angkor International Airport was launched in 2023, and Phnom Penh’s new Techo International Airport is expected to follow suit with its launch set for 2025. Other infrastructure projects under study include:
- Phnom Penh-Siem Reap-Poipet Expressway (the study will complete in June 2024 and the groundbreaking will be held the following year)
- Metro train system from Phnom Penh to the new Techo International Airport
- Light rail project connecting Siem Reap city to the Siem Reap–Angkor International Airport
Sihanoukville Autonomous Port To Be Transformed Into A Hub Port By 2029
Chanthol gave mention to the work being done to expand the Sihanoukville Autonomous Port, noting that once all three expansion phases are completed by 2029, the new 17.5-meter depth container terminal will allow large cargo ships from the United States and European Union to dock directly in Cambodia without transit elsewhere. The three phases of the port’s development are laid out as follows:
- First Phase – 14.5 metre depth (expected to complete by 2026)
- Second Phase – 16.5 metre depth (will be executed from 2025-2028)
- Third Phase – 17.5 metre depth (will be executed from 2026-2029)
The Funan Techo Canal Project
The government announced the USD $1.7 billion Funan Techno Canal Project in 2023, which will link Phnom Penh to the coastal port of Kep province. Chanthol said this project is expected to help streamline logistics, reduce costs, and minimise administrative procedures.
Making Cambodia’s Coastal Provinces Special Economic Zones
Cambodia’s Industrial Development Plan (2015–2025) has shifted the country's industrial landscape towards a semi-skilled labour force in electronic, electrical, and automotive industries, said Chanthol. To make this plan successful, however, he added that Cambodia must find ways to reduce electricity costs, boost labour force capacity, and reduce logistics costs. “We must make Sihanoukville province a special economic zone, not only the city itself, but the whole province a Special Economic Zone, [which we should also do with] coastal provinces like Kep, Kampot, and Koh Kong,” said Chanthol.
Cambodia’s Favourable Taxation, Customs And Developing Securities Market
A panel discussion featuring Chanthol along with H.E. Kong Vibol, Director General of the GDT; H.E. Kun Nhim, Director General of the GDCE; and H.E. Sou Socheat, Director General of the SERC, further explored Cambodia’s potential as a gateway to the rest of the ASEAN region by outlining the latest developments in tax, customs and securities that make the Kingdom a more favourable environment for investment.
Regarding the work of the GDT, Vibol mentioned the establishment of a private working group (Group D) to address tax-related issues in collaboration with the private sector as an example of how the government is open to collaboration while developing taxation laws and addressing ongoing challenges. The GDT regularly meets with private sector representatives through this forum to discuss various topics.
"We engage openly with the private sector, addressing any difficulties they encounter and providing them with the necessary information and predictability," he said.
Furthermore, Vibol shared some examples of recent modernisations made to the GDT’s systems, such as the introduction of an online registration portal, e-filing and e-payment services, and the establishment of a call centre to immediately address pressing questions from taxpayers.
In terms of recent modernisation efforts at the GDCE, Nhim pointed to the adoption of new modern electronic systems, such as payment systems, and the ongoing implementation of the National Single Window Service for the GDCE.
With regard to the Cambodian securities sector, Socheat mentioned that despite Cambodia having the youngest securities market in the region, top 10 global audit companies are already present in the country. In addition, he shared that in 2024, the SERC granted Royal Group Exchange (RGX) a licence to operate the country’s first digital asset exchange under the SERC’s FinTech Regulatory Sandbox.
Market Access To Europe And The United States Through Cambodia’s Preferential Trade Schemes
A final point highlighted by Chanthol was the ability for investors in Cambodia to benefit from preferential trade agreements, such as the Everything But Arms (EBA) scheme with Europe, and the Generalised System of Preferences (GSP) with the United States, under which certain tariffs, duties and quotas on trade can be avoided.
Since more foreign direct investment (FDI) is anticipated to flow into Cambodia and provide new ventures that require a stable and skilled workforce, the government has developed plans to give technical and vocational education and training (TVET) to at least 1.5 million youth from impoverished and vulnerable backgrounds, so that they can also be a part of the country’s latest investment opportunities.