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The State of American Business in the Kingdom

Allen Dodgson Tan / Share:
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The American Chamber of Commerce Cambodia (AmCham) has just concluded its Annual General Meeting, where we elected our next Board of Governors. It is a time when we reflect on the state of our community, our strengths, and our challenges. Our honest reflection reveals a reality that stands in contrast to the perceptions of some.

As the President of AmCham for the past two terms, I have consulted with numerous American businesspeople considering an investment in Cambodia. The same concerns permeate many of these conversations. At the top of the list are questions about corruption, unfair business practices, and Cambodia’s low rankings in the many global indexes purportedly related to business.

As entrepreneurs and business people, we understand that there is often a difference between rhetoric and ground truth. Often it is not a matter of true or untrue, but rather an issue of magnitude, particularly in emerging markets. This is why intelligent emerging market investors will spend considerable time on the ground investigating themselves.

An American businessperson will notice upon arriving in Cambodia for the first time, the prevalence of American brands. They will be surprised to see many American cars on the road and American restaurant brands and consumer goods throughout the market. They might also notice the high English language competency levels and its use throughout the business and entertainment sectors.

On balance, we see that in September, the United States purchased 22% more from Cambodia than it did in September 2019. This is remarkable and has been an essential contribution to the Cambodian economy during this COVID period when the tourism and services sectors suffered. Manufacturing jobs are a cornerstone of the Cambodian economy and overwhelmingly benefit ordinary Cambodians. As American’s, we are proud of this contribution.

The success of American firms, both in servicing the domestic Cambodian market and sourcing goods for the American market from Cambodian manufactures, contrasts some with narratives about Chinese business dominance in the Kingdom. From my experience and observation, the question of Foreign Direct Investment (FDI) is more complicated than merely comparing bottom-line numbers. Different investments contribute differently in terms of employment, sustainable tax revenues, and other important long-term economic factors.

The argument that the bottom-line FDI number alone reveals the respective countries’ future economic importance is crude. These figures are often wheeled out by those who seek to dimmish the importance of our commercial relationship. The narrative that America, and by extension, American Business, has no place in the Cambodian market is untrue, irresponsible, and counter to both nations’ interests.

When we think about the future of American business in the Kingdom, the central question remains, “Is Cambodia a friendly and fertile environment for US business?” The simple answer to this question is an undeniable yes. The brand of America is strong in Cambodia across all socioeconomic classes. The quality and value of American goods and services are universally recognised and preferred by most consumers and businesses. While American firms are often less competitive on price, the value proposition is usually superior. How else could John Deere tractors be competitive in a market flush with less expensive substitutes?

The primary reason we have not seen more large US firms enter Cambodia is market size. Historically, Cambodia has been less commercially important than its large neighbors. This thinking was driven by total population size, but also by relative economic development.

As we find ourselves in the middle of Cambodia’s economic transformation, we see increasing activity by American firms seeking to establish footholds. They recognise the potential of Cambodia’s growing middle-class and the youth bubble, who overwhelmingly favour a closer relationship between our nations. Many of our AmCham member businesses have interacted with these firms as they seek partnerships and consultation with those already successful in the market.

Of course, there remain challenges that require significant and continual improvement for Cambodia to reach upper-middle-income status. Issues around workforce development, contract enforcement, industrial infrastructure, uniform statutory enforcement, and bureaucracy remain concerns for all business community members. Pragmatic consideration of these challenges for emerging market investors should center around how workable the current environment is and the current trends towards improvement.

If these issues were all settled, this would not be an emerging market. We can also acknowledge that several of these issues remain problematic in our developed Western economies as well. The bottom line is that the current environment is workable, as evinced by the US firms already present and thriving.

Regarding the regulatory trends on critical business issues, we see it moving in the right direction in most cases. The Royal Government has recognised shortcomings in these areas and has looked to engage the private sector for solutions in many cases. Through AmCham and our member companies’ efforts, we continue to have input and access, and the working relationship is on a whole friendly. These issues will continue to take time, effort, and engagement to solve.

As we settled into our Annual General Meeting this month, I surveyed a room and found a membership as diverse and vibrant as America itself. A reflection of American businesspeople’s success across the spectrum of investment size and industry. It has not been an easy journey for many, but entrepreneurship rarely is.

Remarkably, bilateral commercial activity has increased between our nations despite the global crisis. We see this through the level of business activity and community engagement. Using AmCham as a barometer, we see a future where American business remains a significant and growing presence in the Kingdom’s economy.

 

Allen Dodgson Tan. Supplied

Allen Dodgson Tan is the outgoing two-term President of the AmCham Cambodia and author of the upcoming book Unlocking Cambodia: The Essential Guide for Foreign Entrepreneurs, Managers & Investors in the Kingdom.

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