S. Korea ranked top investor in Cambodia

South Korea stood out as the largest foreign investor in Cambodia in 2013. Korea replaced the UK as the number one investor with $287 million injected, 12.5 per cent of the total foreign direct investment, The Phnom Penh Post reported by quoting data from the Council for the Development of Cambodia (CDC).

According to the data, Korea focused on the manufacturing of garment, toys and electronic parts, as well as on tapioca processing and a bio-ethanol plant.

The three main Asian economic powers, China, Japan and Korea, were the largest investors in Cambodia last year with total investment about $762.6 million, which represents 33 percent of the total $2.28 billion of foreign investment.

Korea was followed by the world’s second-largest economy, China, who invested $263.6 million, while Japan was third, with a total investment of about $212.3 million.

China, the second biggest investor, focused on garment and furniture manufacturing as well as rice mills.

“All investors are important to Cambodia, but Japan is the value investor with high commitment; always with very clear research done before putting in money. Wherever Japan comes, others will follow,” Dr. Vong Sam Ang, general manager of Soma Consulting Services said.

According to the Asia Business Outlook Survey (ABOS) 2013 from the Economist Corporate Network, “Cambodia is being seen by many companies as an extension to or replacement for the export manufacturing clusters of Thailand and Vietnam.”

Ly Tek Heng, operation manager of the Garment Manufacturing Association in Cambodia (GMAC) told that about 70 percent of the new GMAC members came from China and Taiwan. The number of registered members doubled from 60 in 2011 to 120 companies last year.

Japan, on the other hand, invested in shopping malls, garment manufacturing and electrical equipment. One example is the $205 million Aeon Mall in Phnom Penh that began construction last year.

Yoshiko Yamanaka, advisor on economic infrastructure development at the development agency Japan International Co-operation Agency Cambodia, said Japanese investors had to shift their operations from traditional sites like China to ASEAN countries.

Many of them will decide to locate their operation in Cambodia. “This shift will accelerate more and more in the future,” she said.

While Cambodia’s ability to attract foreign investors improved, and Japanese investment is flourishing, Dr. Vong warns that within five years Cambodia will need to work hard to keep attracting investors.

“We are in the wave of globalisation and each country is competing to attract foreign direct investment for their development,” he said. “Bangladesh and Myanmar are our competitors. We can’t let the chance slip away.”

However, the CDC‘s data includes registered investments in Cambodia that might never be carried out.

According to the Asia Business Outlook Survey 2013, only about 1.2 per cent of the survey’s respondents are investing heavily in Cambodia, while 15.3 percent of companies are investing moderately.

Most potential investors are observing the situation, ABOS stated. Nineteen per cent do business in Cambodia, but have not invested on the ground, and 28.2 percent are watching and assessing, but not doing business as of yet. For 36.2 percent of respondents, the Cambodian market holds no interest at present, the survey revealed.

The 2013 ABOS was completed by more than 200 senior executives with management responsibility for business throughout Asia.

The respondents mainly represented large companies – three quarters of those polled manage companies with more than $1 billion in global revenue, and 35 percent of respondents oversaw operations in firms with revenue of $10 billion or more.