Cambodia, despite being one of the poorest nations in Southeast Asia, is undergoing a transformative phase under its new administration, heralding a promising era for foreign direct investment (FDI) and economic growth.
Lawrence Lennon, managing director for Cambodia at CBRE, emphasised the profound shift brought about by the new government, stating, “We’re observing an administration actively working to enhance the FDI landscape.”
In August 2023, Hun Manet, the eldest son of outgoing premier Hun Sen, ascended to the role of Cambodia’s new prime minister, succeeding his father’s Cambodian People’s Party’s landslide victory in the polls. The young, Western-educated prime minister, aged 46, symbolises a generational shift and a potential reset in trade relations.
The new administration inherits a robust economic growth trajectory, with Cambodia experiencing consistent FDI inflows over the past decade. According to the Asean+3 Macroeconomic Research Office, the average annual FDI value reached 12.1% of GDP from 2013 to 2022, rising to 13.1% in the first three quarters of 2023. Key sectors attracting FDI include garment and electronics manufacturing.
Jyotsana Varma, Cambodia country director at the Asian Development Bank, remarked, “Cambodia stands in an excellent position to attract substantial FDI thanks to forward-looking policy reforms.”
To further bolster Cambodia’s growth momentum, the new administration unveiled a ‘Pentagonal Strategy’ in August 2023, focusing on human capacity development, the digital economy, economic diversification, resilience, and private sector employment over the next 25 years.
Phebe Len, co-founder of Sir Stamford Raffles Group, noted the prime minister’s emphasis on prioritising education and improving the skill sets of the labour force. Additionally, efforts are underway to enhance policies related to LGBT+ rights, addressing previous criticisms from the EU regarding human rights.
Despite these advancements, challenges persist, including high energy costs and inadequate infrastructure. Chunyu Yang, an economist at Amro, highlights the need for further development in transportation, logistics, and utilities to support expanding industries.
Plans are underway to construct a $1.5 billion international airport near Phnom Penh, aiming to bolster infrastructure development. However, Cambodia continues to grapple with high energy costs, posing a significant challenge for potential investors.
Jason Chumtong, country director of Konrad-Adenauer-Stiftung Cambodia, emphasised the importance of lowering energy costs to attract investors interested in manufacturing or agriculture.
Despite the challenges, optimism prevails among investors, buoyed by the new government’s proactive approach to reforms and growth.
