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Investment law sub-decree opens economic doors

An aerial view of Phnom Penh capital city.
An aerial view of Phnom Penh capital city. SPM

Investment law sub-decree opens economic doors

The freshly-inked sub-decree implementing Cambodia’s new investment law brightens the Kingdom’s lustre for investors and opens the way for its ambitions to become an “upper-middle income” economy by 2030 and join the “high-income” group by 2050.

On June 26, Prime Minister Hun Sen signed Sub-Decree No 139 on the Implementation of the Investment Law of the Kingdom of Cambodia, which was promulgated by Royal Code No NS/RKM/1021/014, dated October 15, 2021, according to an announcement from the Council for the Development of Cambodia (CDC).

With the sub-decree signed, Tan Monivann, vice-president of agro-industrial giant Mong Reththy Group Co Ltd, expects to be able to convince even more players to invest in agricultural and other processing industries to reduce imports and boost exports.

Coming into force in the midst of the Covid-19 crisis, geopolitical squabbles among developed countries and global economic uncertainty, the new investment law was painstakingly crafted based on socio-economic and Fourth Industrial Revolution trends as well as feedback from all sorts of stakeholders, according to him.

“Several of the new law’s features will aid in luring more investors to Cambodia, including those concerning incentives, simplified registration processes, technology usage and human resource capacity,” he said, expressing optimism for an economic boost towards the Kingdom’s upper-middle- and high-income targets for 2030 and 2050.

Federation of Associations for Small and Medium Enterprises of Cambodia (FASMEC) president Te Taingpor suggested that the law is flexible in the current economic setting and significantly encourages investment in SME (small- and medium-sized enterprise) production by streamlining associated processes.

Still, lower electricity tariffs would better entice investors to Cambodia, he remarked.

Cambodia Chamber of Commerce vice-president Lim Heng pointed out that the investment law simplifies goods import-export tax and related procedures, and is adaptable to changing global economic circumstances.

“Following this sub-decree, I hope to be able to attract more investment in Cambodia,” he said.

According to a report jointly published by the CDC and the National Bank of Cambodia (NBC), foreign direct investment (FDI) inflows in the Kingdom between August 5, 1994 – when the old investment law was promulgated – and December 31, 2021 totalled 168.8 trillion riel or $41.0 billion, up 11.2 per cent from nearly 152 trillion riel at end-2020.

Broken down by sector, finance accounted for the lion’s share at $9.4 billion or 22.9 per cent, followed by manufacturing ($8.5B; 20.8%), real estate ($4.9B; 12%), hotels and restaurants ($4.4B; 10.7%), agriculture ($4.2B; 10.3%), electricity ($2.6B; 6.2%) and construction ($1.6B; 4.1%), while other sectors comprised $5.3 billion, or 13 per cent.

For reference, the World Bank (WB) recognises Cambodia as a “lower-middle income” country – one rank below the “upper-middle income” designation – with gross national income (GNI) per capita of $1,551 for fiscal year 2021 (FY21) – the 12-month period ended June 30, 2021 – in nominal terms as calculated by the bank’s Atlas method.

In the current fiscal year 2023, group classifications are based on these calculations of FY21 GNI per capita, as follows: “low income” $1,085 or less; “lower-middle income” $1,086-4,255; “upper-middle income” $4,256-13,205; and “high income” $13,206 or more. The WB updates these thresholds each year on July 1.


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