(Newswire.net — August 6, 2021) —
Nearly a year after the outbreak began, aspiring entrepreneurs and businesses wishing to break into new markets should consider Cambodia.
Cambodia is bearing the burden of a new wave of illnesses caused by the delta version of the COVID-19 virus. According to the US credit rating firm Moody’s Investors Service, the GDP will rise by 2.5 percent this year.
Despite a 99 percent vaccination record in the capital, the government ordered a border closure in August and a late-night curfew in Phnom Penh. Cambodia is in a perilous position since it is sandwiched between Vietnam and Thailand, both of which are dealing with much more serious epidemics.
Despite this, a large number of foreigners and businesspeople are moving to Cambodia. A variety of factors contribute to this, and discerning investors, businesspeople, entrepreneurs, and foreign firms should take note.
Assimilation into the regional and global economies
Cambodia has inked a bilateral free trade agreement with China, its most important economic partner and foreign investor, and the China-Cambodia FTA is due to take effect this year. It will cover around 300 products and will contribute to the rise in Cambodian goods and services that will result from Cambodia’s involvement in the Regional Comprehensive Economic Partnership (RCEP).
According to Heimkhemra Suy, a Phnom Penh-based development advisor, the long-term benefits are clear because Cambodian companies will avoid non-tariff barriers within Asia and attract foreign direct investment because production will be shared among member states, reducing production costs and time for companies. Japanese agro-processing and manufacturing enterprises, for example, would be more eager to establish themselves in Cambodia because exports would be classed under a Single Rule of Origin (‘Made in ASEAN’) even if they were manufactured in Cambodia.
“Compared to existing preferential trade agreements Cambodia is involved in, notably the Everything but Arms (EBA) [with the European Union] and [the US’] Generalized System of Preferences (GSP) agreements,” he wrote in the East Asia Forum.
“As Cambodia develops, the EBA and GSP will be phased out at some point.” The last two treaties, aimed at the US and Europe, currently provide duty-free exports to Western markets.
Cambodia is remarkably well-connected to the outside world due to its dollarized economy, which allows firms to easily move money in and out of the nation. The government imposes no foreign exchange controls, no pricing limits, and permits full profit repatriation because it uses the stable US dollar as its common trading currency.
A business-friendly government
Over the last three decades, the Cambodian government has shepherded a remarkable set of reforms and provided pro-business governance. It has invested more than $1 billion to support diverse industries affected by the pandemic and has provided a strong safety net to Cambodia’s poorest citizens.
It initiated a series of economic changes two years ago in order to attract new companies, investment, and capital flows into the country. Aside from tax breaks, shipping costs have been cut, and a variety of investment initiatives and rules for an increasing number of special economic zones have been announced. According to Prime Minister Hun Sen, manufacturers and exporters might save up to $400 million per year.
The government also provides a straightforward tax system with a variety of incentives, particularly for select businesses and those operating in a Special Economic Zone.
The decision makers, made up of elected members of the Cambodian People’s Party, presided over an era of stability and reform, ensuring that the country did not experience a recession in the 20 years preceding the pandemic – this included turbulent episodes such as the Asian financial crisis of the 1990s, the dot com bust in the early 2000s, and the financial crisis in 2008.
Easier to own, invest in, or purchase real estate.
Cambodia is also one of the few countries in developing Asia, a prosperous region, where businesses can be 100 percent foreign-owned. This is making the country more enticing for entrepreneurs to set up shop, especially given the availability of a big and inexpensive labor that can be reinforced by brilliant individuals from the Association of Southeast Asian Nations (ASEAN) region.
It is less reliant on the world’s largest markets — China, the United States, and Europe – as a frontier market than other developing economies. As a result, many sectors have yet to see the entry of well-known international corporations, resulting in increased rivalry for emerging enterprises. H&M, the Swedish retailer, for example, intends to open its first store in Cambodia in 2022.
Cambodia also allows 100 percent foreign-owned firms for people wishing to start a new business. This eliminates the need to find a local partner and deal with potential conflicts of interest.
Cambodia also unveiled Registration Services last year, a new online business registration system that promises to reduce the time it takes to register a company from three months to eight days.
While Cambodia does not rank highly in the World Bank’s annual Doing Business report, it has made significant progress. Since 2003, the cost of launching a business has decreased tenfold – it currently costs 53.4 percent of the average Cambodian’s annual salary, or roughly $743, to establish a new endeavor. That is likely to be a reasonable sum for foreigners.
Inspiring stories of success
Cambodia has also seen the creation of a number of new enterprises, demonstrating that new entrants to the commercial scene are conceivable.
Many entrepreneurs have developed in recent years in a country where more than a third of the population is under the age of 15 and the minimum salary is lower than in neighboring countries such as Thailand and Vietnam.
One such example is Prince Holding Group, one of Cambodia’s largest and fastest expanding corporate conglomerates. Prince Real Estate Group, Prince Bank, Cambodia Airways, Canopy Sands Development, and Belt Road Capital Management are among its primary business operations in Cambodia. It has about 80 companies in Cambodia that operate in real estate development, banking, finance, aviation, tourism, logistics, technology, food and drinks, and lifestyle sectors, among others.
All of this was founded barely over a decade ago by Neak Okhna Chen Zhi, a naturalized Cambodian entrepreneur and businessman with Chinese ancestors. During that time, Chen Zhi of Prince Group has raised more than $2 billion in pledged money, which has resulted in the employment of thousands of Cambodians.
The Cambodian enterprise has also received international recognition, as it was the only company from the Kingdom to receive a Stevie Award for its corporate response to the COVID-19 pandemic – it has worked hard to protect thousands of employees, with over 90 percent of its employees vaccinated so far through internal and public vaccination drives. Meanwhile, the Group claims that no employees have become ill as a result of COVID-19.
Is this the next Asian Tiger? A destination for visitors, expats, and retirees
All of these elements point to Cambodia becoming the next Asian Tiger.
A number of Asian economies are vying for the title of ‘Asian Tiger,’ which has been bestowed upon the Northeast Asian economies of South Korea, Taiwan, Hong Kong, and Japan, which have risen from abject poverty to become models of export-led growth with gleaming metropolises that are now the envy of the rest of the world.
Cambodia, strategically placed in the center of Southeast Asia and sharing borders with Thailand, Laos, and Vietnam, as well as the Gulf of Thailand to the south-west, can follow in their footsteps. It, like its northern neighbors, serves as an important conduit for Chinese and international money seeking returns. Following the end of the pandemic, the country’s access to key global markets is expected to help it diversify its economy as it aspires to become a popular low-cost manufacturing base for companies seeking to meet demand from customers in other rapidly rising Asian economies.
With the help of international aid and cash, the government has invested substantially in developing a statewide network of transit lines, power, and telecommunications. There has also been a focus on strengthening Cambodia’s ties with neighboring nations in order to improve commerce and attract foreign investment.
Cambodia understands the importance of shifting away from garment and footwear manufacturing and toward higher-value-added, capital-intensive industries such as construction, telecommunications, and financial services, and it is working hard to make that happen. Companies such as the Prince Group will play an important role.
Meanwhile, the country continues to be popular among travelers. With Southeast Asian countries only a short plane journey away, it is one of the cheapest places in the world to visit and one of the cheapest places to retire.
Cambodia has altered during the last two decades, and in 2015 it achieved lower middle-income status. It could very well be on pace to become an upper middle-income country like South Korea by the end of this decade.
Now could be one of the best periods in Cambodia to start a business.
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