The value of foreign investments approved by the government in the first half of this year has dropped more than 43 percent, according to the Council for the Development of Cambodia (CDC), with experts laying the blame on global and regional economic slowdowns.
The latest report from the CDC, released yesterday, shows that the government approved $1.782 billion in investments, a large drop from the $3.128 billion approved during the same time last year.
The report does not offer explanations for this drop, but simply notes that the investment figures went to 70 projects ‒ 48 in manufacturing, three in agriculture, two in the service sector and seven to tourism projects.
David Van, the managing director for Cambodia at Bower Group Asia, stressed that a reduction in foreign direct investment could be due to a global economic slowdown caused by China’s reduced GDP growth.
In addition, he said, regional competitors like Myanmar and Vietnam have negotiated similar market access privileges.
“Cambodia must be lot more proactive as our competitive edge is fast eroding and our Everything but Arms [arrangement] with the EU does not help much since Myanmar also has access to the same benefits,” said Mr. Van.
“The World Bank/International Monetary Fund can predict any so-called solid growth for Cambodia between 2016 and 2017 but it’s still all subjective to external conditions such as the expected global financial crisis which is very likely to occur again by the end of October or early November 2016 that would impact upon every country,” he added.
Mey Kalyan, senior adviser to the Supreme National Economic Council said that the CDC’s data raises the concern that falling investment was indeed the beginning of a larger, concerning trend.
“Of course, it will make us concerned. Due to this, we have to carefully monitor the declining trend in order to know exactly what’s happening. From the look of things, it’s not good.”
Mr. Kalyan said that ongoing CDC efforts to update the country’s investment law to increase flexibility, and therefore make it more competitive, was important. However, he added, it needed to speed up, citing Myanmar’s updating of their own investment law two weeks ago.
“We started working on a new draft investment law over the last few years and we hope that the draft will be finished soon. Of course, although we have the new updated investment law, we still need to make even more improvements to the investment climate,” he added, noting that foreign companies and investors are some of the country’s largest employers.
Late last month, the CDC reported that the pipeline for foreign direct investment from Vietnam to Cambodia had almost run dry, with the Kingdom seeing almost zero inflow of Vietnamese funds into projects in the first half of the year.
Chea Vuthy, deputy secretary-general of the CDC, said the Cambodia-Vietnam business forum that Vietnam’s investment from 1994 to 2015 reached $1.76 billion, while there was no Vietnamese investment inflow in the first six months of this year.
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