Drivers of Foreign Investment in Cambodia

Introduction

Over the past decade, Cambodia has recorded an average real growth rate1 of 7.7%.2 Reaching lower middle-income status in 2015,3 Cambodia’s economy remains one of the fastest-growing economies globally. Foreign direct investment (“FDI”)4 is a key contributor to this.5 FDI declined in 2020 and 2021 compared to 2019, as a result of the pandemic.6 Regardless, analysts project economic growth in 2021.7

Building in Sihanoukville. Photo by Sim Kimhort via Unsplash.

I. Geopolitical Drivers and Relevant Sectors

Geopolitical drivers

Cambodia is downstream on the Mekong River, creating conflicts of interest regarding water resources. Major players in the region include Vietnam, Thailand, China and the US. According to the National Bank of Cambodia, in 2019, 42% of FDI came from China, followed by South Korea (11%), Vietnam (7%), Japan and Singapore (6% each), as shown in Graph 1.8 Approved FDI over time shows slightly different numbers (See Graph 2), in part due to the fact that approved FDI includes projects that may not come into fruition. See also Tables 1 and 2 in Annex 1, which show that reported amounts of FDI in Cambodia in 2019 vary between USD $3.5 billion and USD $3.7 billion.9

Graph 1: Percentage of FDI Inflow by Nation (2019) 

Graph 2: Approved FDI by Country (1994-2019) 

China has been Cambodia’s largest investor since 201310 and a key political ally. Since the beginning of China and Cambodia’s current economic relationship in 2006,11 it has become a “comprehensive strategic cooperation partnership” supported by mega-infrastructure projects that are part of the Belt and Road Initiative (BRI).12

In contrast to its global investment,13 China’s investment in Cambodia has increased steadily between 2015 and 2019.14 USD $860 million of Chinese FDI was approved in the first 11 months of 2020.15 China is Cambodia’s largest trade partner with total trade reaching USD $8.53 billion in 2019,16 with a committed bilateral trade volume of USD $10 billion by 2023.17 In addition, Chinese-aided projects are often required to be carried out by Chinese firms.18

Cambodia has not been an attractive destination for US FDI. Nevertheless, some American companies have maintained investments in-country, and the Mekong-US Partnership (2020) promises significant new investment.19 Further, the new US International Development Finance Corporation has promised loans in millions of USD to expand access to financial services.20

Relevant Sectors

FDI in Cambodia is concentrated in construction and real estate, non-garment manufacturing, garment manufacturing, and services. Tourism was previously second highest21, but was gravely affected by the pandemic22. The World Bank reports USD $1.75 billion in total approved investments in 202023, although the first 7 months saw approvals of only USD $25 million24.

The pandemic impacted investment in construction and real estate, but had a minimal impact on non-garment manufacturing.25 See Tables 3-6 in Annex 1 for examples of enterprises that have invested in Cambodia’s top sectors.

Workers on a building in Phnom Penh. Photo by Jeanne Crump via Unsplash.

II. Legal Framework, Regional, Bilateral Trade Agreements, and Loans

Legal Framework

Overall, Cambodia is an attractive environment for foreign investors. Most sectors are open to foreign ownership through FDI, and the country has a liberal investment regime. This has resulted in many trade agreements as well as foreign loans.

While legal frameworks supporting FDI exist, they remain ambiguous. Additionally, although commercial arbitration is legally available, in practice its availability is limited and there is little information in the public domain on arbitration decisions.26

There are reports that investors lack confidence in the judicial system,27 and so have preferred to resolve commercial disputes through negotiations facilitated by the Ministry of Commerce, the CDC, or the Cambodian Chamber of Commerce.28

1. The Law on Investment (1994, amended 2003); Draft Law on Investment (2021)

Cambodia’s Law on Investment regulates FDI approval and incentivizes “qualified investment projects”29 through tax relief and import duty exemptions.30 It grants all investors the right to freely purchase and remit foreign currencies abroad to discharge their investment-related financial obligations.31 Importantly, the Law guarantees that foreign investments will be generally treated like domestic investments, except that foreign-owned companies may not own land.32 Article 20 provides for dispute resolution.33

An office building in Phnom Penh. Photo by Vanna Phon via Unsplash.

On October 15, 2021 a new Law on Investment was promulgated.34 It obligates the RGC to protect investment in accordance with international law and is intended to attract investment and enhance economic diversification and competitiveness through both tax and non-tax preferences.35 It envisions simplified registration and monitoring procedures.36

2. International Commercial Arbitration (2006)

The 2006 Law on Commercial Arbitration is modeled on the United Nations Commission on International Trade Law Model Law.37 Since its launch in 2013, the National Arbitration Centre, now called the National Commercial Arbitration Centre (NCAC),38 has administered 27 proceedings worth approximately USD $80 million.39 New procedural rules were adopted on March 28, 2021 to align with international best practices.40

Trade Agreements

1.     Protections in Cambodia’s Bilateral Investment Treaties

Cambodia’s Bilateral Investment Treaties (BIT) include internationally understood clauses that are protective of foreign investors. These include fair and equitable treatment, non-discrimination, protection and security, expropriation, and most favoured nation clauses.41 See Table 7 in Annex 1 for a list of relevant clauses.

2.    Agreements with China

Cambodia is party to a variety of agreements with China, including the Joint Communique between the Kingdom of Cambodia and the People’s Republic of China (2018)42; the 2020 Cambodia-China FTA (CCFTA)43; and the Regional Comprehensive Economic Partnership (RCEP)44. The CCFTA45 and the RCEP have yet to be ratified by the RGC.

Once ratified, the CCFTA removes tariffs from almost all goods exported and imported between China and Cambodia.46 It also simplifies administrative procedures; introduces clear dispute resolution mechanisms; and fosters e-commerce.47 Cambodia will also reportedly open the services sector to China, including sea transport.48 These measures could increase trade between China and Cambodia by up to 25%,49 and make Cambodia a more attractive FDI destination relative to its neighbors.50

China has provided funding for Cambodia to restore the Angkor Wat complex. Photo by Peter Borter via Unsplash.

The RCEP is intended to support continuing economic integration,51 but experts note that multiple tariff schedules are to be determined, with implementation periods of potentially 20 years as agreed by Cambodia.52 Further, state-owned enterprises are not covered. 

3.   2012 ASEAN Comprehensive Investment Agreement (ACIA)

Cambodia is a party to the 2012 ACIA.53 It includes several substantive investment protections commonly found in bilateral investment treaties (BIT).54 It is distinguished from other multilateral investment treaties and FTAs as it is enforceable by an investor-state dispute settlement system or a regional arbitration center.55 Transparency and predictability requirements of the ACIA mean that countries, including Cambodia, may need to undertake sustained regulatory reform.56

Loans

One of the three components of FDI flows is intercompany loans (also known as “FDI debt”).57 FDI debt differs from concessional loans,58 and may only make up a small portion of investment, as is the case for China.59 Chinese financing for a project may be provided through multiple finance arrangements, complicating categorization.60 Table 9 in Annex 1 indicates the types of Chinese financial assistance for development.61

While Prime Minister Hun Sen refers to Chinese foreign assistance as “aid,” both parties include “loans” in “aid”.62 Occasional loan forgiveness, such as the USD $4 million that China forgave Cambodia in 2010, transforms loans into aid, potentially increasing the influence of China over Cambodia until loans are forgiven.63

Loans have financed the development of Cambodia’s infrastructure, including roads. Photo by Sanket Deorukhkar via Unsplash.

Two of China’s three “policy banks”, the China Development Bank and the Export-Import Bank of China (China Eximbank) are active in Cambodia. While most of China Eximbank’s lending is commercial, it has also provided concessional lending for infrastructure projects in Cambodia.64 During 2005-2018, the bank supported over 3,000 km of highways, 430,000 hectares of irrigation, and nearly 8,000 km of transmission lines.65 Recent loans from China Eximbank financed the Transmission Line 230 KV Project Phase II and the National Road No.3 Construction Project.66 Similarly, the China Development Bank loaned US$5.3 billion for 27 projects in Cambodia as of mid-2019.67 In addition, China’s state-owned commercial banks, namely the Industrial and Commercial Bank of China and Bank of China, have significant operations in Cambodia.68,69

III. Relevant Government Policies

1. The National Strategic Development Plan (NSDP) 2019-2023

The National Strategic Development Plan (NSDP) 2019-2023 is intended to help Cambodia to benefit from ASEAN Economic Integration and turn the nation into an Upper-Middle-Income Country by 2030.70 The most relevant for FDI is the provision on the development of the “(2) overarching environment for the implementation of the [Rectangular Strategy Phase IV]”.71 A favorable environment for business and investment will be developed by implementing macroeconomic policies and updating laws; developing mechanisms to deal with potential economic crises and risks; reforming the taxation system; facilitating start-ups; and decreasing administrative complexity.72

2. The 2015–25 Industrial Development Policy (IDP)

The RGC has adopted the Industrial Development Policy (IDP) to help maintain sustainable and inclusive high economic growth through economic diversification, strengthening competitiveness and promoting productivity.73 See Table 10 in Annex 1 for motivations and priority sectors.

3. Special Economic Zones (SEZ)

Cambodia initiated special economic zones (SEZ) in 2005 to facilitate export development, create employment, and promote diversification from traditional sectors.74 Streamlined administrative procedures and high-quality infrastructure and utilities are meant to attract investment.75 There is some uncertainty as to the actual number of SEZs. One report indicated 54 SEZs by 2019,76 but another identified 46 as of September, 2020.77

A special economic zone is located in Sihanoukville. Photo via Kim Simhort via Unsplash.

Although SEZs are open to both domestic and foreign firms, almost all firms located in the SEZs are foreign. Most Chinese SEZs are located within the corridor between Phnom Penh, Sihanoukville and Kampot, as well as areas bordering Vietnam in Svay Rieng.78 Between 2005 and 2018, SEZs attracted USD $1.89 billion in FDI,79 and in 2019 alone, exports from SEZs amounted to USD $2.69 billion.80

Cambodia’s SEZ policy has attracted a broader spectrum of foreign investors than outside of SEZs, as well as investors from new countries.81 Similarly, despite the reluctance of American companies to invest in Cambodia, several large American companies have invested more than USD $100 million in the Phnom Penh SEZ, including Coca-Cola.82

The regulatory environment has been cited as a barrier to investment.83 Additionally, while SEZs potentially have spillover benefits, the Cambodian environment needs to be further developed in order to reap these benefits. For example, domestic SMEs may not have the capacity or skill to meet certain international standards, which can deter foreign investors from engaging in business partnerships.84 Economists, environmentalists, and human rights advocates have documented other negative socioeconomic consequences.85

4. 2019–25 Agriculture Sector Development Strategy and (2020-25) Development Plan for Garment and Textiles

The government has developed two plans to develop the Agriculture86 and Garment and Textiles industries.87 Cambodia’s recent suspension from the EU’s Everything But Arms (EBA) initiative stripped the country of its preferential export rights to the EU.88 However, Prime Minister Hun Sen has noted that the COVID pandemic has had the effect of nullifying the impact of this action by the EU.89

A new Agriculture Development Policy 2021-2030 is being developed90 and will guide FDI, among other things.91

5. Roadmap for Tourism (2020-25)

The RGC has drafted a three-stage roadmap (2020–25) to restore and develop the tourism sector.92 However, it is expected that the necessary FDI is unlikely to be sufficiently available.93 Recent approved investment includes USD $150 million to develop 38 roads in Siem Reap, and USD $300 million to build 34 roads in the province of Sihanoukville.94

IV. Economic, Social, and Environmental Consequences

Increasing FDI inflows to Cambodia has driven an increase in GDP, wages, and foreign reserves, as well as a decrease in unemployment and trade deficit.95 However, this investment has also had negative impacts.

1. Illicit Activities

The Kingdom’s economic development has been undercut by illicit activities.96 A region that has been placed under international scrutiny is Sihanoukville.

One issue under close watch is illicit gambling operations.97 After China pledged billions of dollars for infrastructure in Sihanoukville, the gambling industry expanded rapidly. However not all operations were licensed, and this expansion has been observed to be proportional to a spike in criminal activities such as money laundering.98 In August 2019, Cambodia unexpectedly criminalized online gambling, widely seen as a result of Chinese pressure.99 This has decreased the crime rate in Sihanoukville, but has also impacted mostly Chinese FDI inflows.100 Construction projects were stalled or abandoned and reports show widespread failure to pay wages of laborers from both Cambodia and China.101 In addition, reports also reveal that some companies have ignored the online gambling ban.102

Cambodia’s great biodiversity is impacted by the illegal wildlife trade, but there are sanctuaries where animals like this monkey rescued from illegal trade are rehabilitated. Photo by Slavena Peneva via Unsplash.

The Sihanoukville SEZ is associated with black-market trades in wildlife products,103 including songbirds and reptiles.[Ref]Sarah Heinrich, Joshua V. Ross, Thomas N.E. Gray, Steven Delean, Nick Marx, and Phillip Cassey. 2020. “Plight of the commons: 17 years of wildlife trafficking in Cambodia” in Biological Conservation Volume 241. Accessed July 30, 2021.[/ref],104 This adds to a significant rise in bushmeat poaching in Cambodia, driven by Chinese clientele.105 A turn toward traditional medicine during the COVID-19 pandemic is also considered to have driven an increase in the activity.106,107

2. Environmental Degradation

Cambodian laws tend to prioritize economic development over environmental protection. A 2019 study confirmed that economic development has come at the expense of environmental degradation.108

3. Land Disputes

In its drive to attract foreign investment, Cambodia has awarded Economic Land Concessions (ELCs) to mainly Chinese, Vietnamese and South Korean companies.109 These are long-term leases permitting the development of industrial-scale agriculture.110 However, civic groups note a sharp rise in the number of forced evictions111 and evictions without negotiation or adequate compensation.112 There are ongoing conflicts between investors who hold formal land rights and community members who hold traditional land rights.113 Similarly, poorly monitored ELCs may fail to adhere to their approved plans.114,115 The RGC has suspended the granting of land concessions and is reportedly subjecting existing land concessions to reviews. For examples of disputed regions of Cambodia, see Open Development Cambodia’s land dispute tracker.116

4. Gender Inequality in the Labor Market

Although there is a large body of literature analyzing the effects of FDI on labor market outcomes, there is still little evidence regarding gender effects. Research conducted in 2020 by the Asian Development Bank Institute could not find evidence that FDI helps reduce the gender wage gap in either the garment sector or other manufacturing sectors.117 Nonetheless, a decomposing household survey conducted as part of the research demonstrated that the gender wage gap in formal manufacturing is reduced through FDI, while not in the garment industry, which is the foundation of the economy and employs mostly women.118

Women commonly work in the garment industry, whether in the factories or selling at markets. Photo by Chetan Hireholi.

V. Recommendations

While the RGC has entered into FDI agreements that have and are likely to continue to economically benefit Cambodia, the sustainability of these benefits, the implementation of some aspects of agreements, and the reach of the benefits across all sectors of society are areas that would benefit from further consideration. The following recommendations have this in mind.

1. Progress on policy development and agreement ratification and implementation should be tracked

Cambodia is undergoing a number of legal changes that have an impact on FDI, and a number of agreements have yet to be ratified. Arising from these as-yet to be implemented documents are legally binding responsibilities to determine tariff schedules such as in the RCEP, and streamline administrative procedures such as in the Draft Investment Law, among other things. Tracking ratification, then the development of the related documents and shifts in regulatory procedure, as well as whether changes are in accordance with international law as indicated by the relevant law or agreement, would support the development of a transparent, easily understandable investing environment.

Something of note is that Cambodia may face revenue loss under RCEP amounting to 1.24% of the country’s 2019 GDP, or USD $270 million.119,120 Tracking actual versus projected economic loss and benefit will support a clearer understanding of the impacts of such investment agreements, while also creating a stronger evidentiary base from which interested parties can draw upon when advocating for policy change and greater accountability.

Another related recommendation for tracking is of the implementation of already-agreed clauses in agreements as well as requirements in law. Some agreements, such as the ACIA, may require regulatory reform to meet the requirements of the agreement. Tracking the efforts of the RGC in implementation increases accountability and transparency.

2. Conduct research on the impact of FDI on gender

While there is an understanding that women’s participation in the labour market varies by sector, the impact of FDI involvement in particular sectors, and whether and how women benefit from the associated economic incentives and opportunities, remains an area to be studied. Without understanding such impacts on women, inclusive and sustainable development will remain unattainable. Thus, understanding the impacts of FDI on gender will help to promote Cambodia’s efforts in this regard.

3. Conduct study to identify barriers to positive spillover effects in Special Economic Zones

Special Economic Zones are well-established in Cambodia, but the oft-cited positive spillover effects have generally remained elusive due to gaps in capacity and education, as well as the difficulty for domestic small and medium enterprises (SMEs) to meet regulatory requirements, among other things. Action-oriented research to first understand the needs of and barriers experienced by both individuals and SMEs to take advantage of the benefits of SEZs, then identifying and implementing actions to meet these needs and bridge barriers would go a long way to encouraging the benefits of SEZs to come to fruition while also encouraging foreign investors to engage in business partnerships with domestic enterprises and individuals.

4. Corporate investor mapping to support advocacy in land and environmental issues

Advocacy in land and environment issues is strong in Cambodia. However, as it relates to FDI, advocacy is complicated, as corporate social responsibility remains optional, and reporting on ultimate corporate control of enterprises is not yet required. In this regard, ensuring the correct entity is responsible is difficult. Thus, corporate investor mapping, and opening this data, would be beneficial to support ongoing efforts in land and environment.

5. Illicit gambling – monitoring and documentation of activities

The rise of illicit gambling and associated illegal activities is an issue of concern in areas with high levels of FDI from China, such as Sihanoukville. Some documentation and investigation of these activities have occurred, but these activities continue and the depth of potential harm to both Chinese and Cambodian nationals is not yet understood. Continued independent monitoring of these activities, supported by systematic documentation, would be a strong first step in addressing the issue.

Annex 1

Table 1: Changes in FDI in Cambodia (2018-2019)121

Foreign Direct Investment

2018

2019

FDI Inflow (USD $ million) 

3,208

3,706

FDI Stock (USD $ million) 

30,369.9

34,030.3

Source: UNCTAD – Latest available data

 

Table 2: Changes in Approved FDI by Sectors (2017-2020, in USD $ Million)122

Year

Agriculture

Services

Tourism

Energy

Other Industries

2017

274.5

1,049.5

3,166.6

–

726.3

2018

444.2

2,869.9

1,577.8

–

984.0

2019

68.7

1,028.3

6,051.6

158.6

859.4

2020 (up to Q3)

94.2

790.2

3,850.5

321.9

809.3

Source: Council for the Development of Cambodia (National bank of Cambodia Economic & Monetary Statistics, Oct 2020)

 

Table 3: Examples of Foreign Companies Investing in Cambodia’s Construction Sector

Company

Origin

Year Established

Description

Sumitomo Electric Industries

Japan

2018

High-voltage underground cables for transmission and distribution of electricity

Hanshin Construction

Republic of Korea

2018

Repair and expansion of roads

Nokia

Finland

2018

High-speed broadband service

Guangdong Provincial Changda Highway Engineering

China

2019

Road maintenance and upgrade

Toshiba

Japan

2019

150 MW power station construction

TPSC Engineering

Malaysia

2019

Subsidiary of Toshiba for the power station construction

TPSC Engineering

Thailand

2019

Subsidiary of Toshiba for the power station construction

General Electric

United States

2019

Supply and equipment for a 35 MW coal-fired power plant

Toshiba Plant System & Services Corporation

Japan

2019

Supply and equipment for a 35 MW coal-fired power plant

Sinomach

China

2019

Operation of 28 engineering project, including a power station project

 

Table 4: Examples of Foreign Companies Investing in Cambodia’s Non-garment Sector

Company

Origin

Year Established

Description

Okato

Japan

2018

Manufacturing plant in Phnom Penh SEZ

Sumitronics

Japan

2018

Electronics

Denso

Japan

2018

Automotive parts

Toyota Tsusho Corporation

Japan

2018

Automotive parts, further business development and marketing

Kampot Cement

Thailand

2018

Constructed a third cement plant

Zuelig Pharma

Hong Kong

2018

Partnership with Fresenuius for expansion

Fresenuius Medical Care

Germany

2018

Partnership with Zuelig for expansion

DKSH Holding

Switzerland

2018

Acquired Europ Continents, medical equipment producer

Socfin

Luxembourg

2018

Rubber processing factory

Green Leader Holdings Group

Hong Kong

2018

Sassava processing facility

Conch International Holdings

China

2018

Cement factory

Walita Toys

China

2018

Toy factory

Winsun

Taiwan

2018

Manufacturing facility

Midori Techno Park Corporation

Japan

2018

Manufacturing space for eco-friendly clients

BASF

Germany

2019

Chemical manufacturer

Minebea

Japan

2019

Machinery components and electronic devices

Yamato Printing

Japan

2019

Stationary products

 

Table 5: Examples of Foreign Companies Investing in Cambodia’s Garment Sector

Company

Origin

Year Established

Description

Bagsac Hong Kong Co Ltd

Hong Kong

2018

Handbag, wallet factory

Sansho Clothing Co, Ltd

Japan

2018

Dress factory

JS Leather Collection Phnom Penh Co, Ltd

Republic of Korea

2018

Bagm handbag factory

Seo Rim Co, Ltd

Republic of Korea

2019

T-shirt, sweater, robe, pants factory

Qins Textile Co, Ltd

Republic of Korea

2019

T-shirt, skirt, pants factory

De Xiang Garment Co, Ltd

China

2019

Hat, blanket, laundry bag, cap, napkin factory

Eucloth International Garment Co, Ltd

China

2019

T-shirt factory

Qingdao Roy Ne Garment Co, Ltd

China

2019

T-shirt, underwear factory

Fashiontex Apparel Co, Ltd

China

2019

T-shirt, trouser factory

GG Fashion Co, Ltd

Singapore

2019

Jacket, pants, shirt factory

Shenzhou International Group Holdings

China

2019

Garment factory (to be completed in 2021)

 

Table 6: Examples of Foreign Companies Investing in Cambodia’s Services Sector

Company

Origin

Year Established

Description

Jacobs Douwe Egberts

Netherlands

2018

Acquired operations of Oldtown White Coffee (Malaysian)

Aeon

Japan

2018

Malls

Isuzu

Japan

2018

Showrooms for marketing and distribution business

Furla

Italy

2018

Luxury goods boutique in partnership with China Duty Free Group

Circle K

Canada

2018

Retail company

Decathlon Group

France

2018

Sportswear retail

Tokyo Hotel Apartments & Spa

Japan

2018

Hotel

TGG Takara Gaming Group

Hong Kong

2018

Gaming

Dai-ichi Life Holdings

Japan

2018

Life insurance

ABA Bank

Canada

2018

Bank

Shinhan Bank

Republic of Korea

2018

Bank

Taiwan Cooperative Bank

Taiwan

2018

Bank

Industrial Bank of Korea

Republic of Korea

2018

Bank

Unionpay

China

2018

Digital payment system

Alipay

China

2018

Fintech: mobile banking services

World Remit

United Kingdom

2019

Fintech: mobile banking services

Evergreen Marine Corporation

Taiwan

2019

Shipping and logistics

Nippon Express

Japan

2019

Shipping and logistics

Oji Group

Japan

2019

Packaging company

Marko

Germany

2019

Retail company (supermarket)

 

Table 7: Clauses in Cambodia’s Bilateral Investment Treaties

Clause

Description/Example

Fair and Equitable Treatment

“Investments of investors of either Contracting Party shall at all times be accorded fair and equitable treatment and shall enjoy adequate protection and security in the territory of the other Contracting Party.” (Cambodia-Indonesia BIT)

Non-Discrimination

“Each Contracting Party shall ensure fair and equitable treatment of the investments of investors of the other Contracting Party and shall not impair, by unreasonable or discriminatory measures, the operation, management, maintenance, use, enjoyment or disposal thereof by those investors.” (Cambodia-Indonesia BIT)

Protection and Security

●      “Full protection and security” (Cambodia- Croatia, Czech Republic, Germany, Japan, Korea, Malaysia, Pakistan, and Thailand BITs)

●      “Full physical security and protection” (Cambodia-Netherlands BIT)

●      “Adequate protection and security” or “Adequate physical security and protection” (Cambodia-Indonesia, Cuba, Vietnam and the Philippines BITs)

Expropriation

All publicly available Cambodian BITs prohibit the expropriation, nationalization and any other equivalent measure by the RGC, unless the measure taken by the host State: (1) serves a public purpose; (2) is taken under due process of law and/or in accordance with domestic legal procedure; (3) without discrimination; and (4) on payment of compensation.

Most Favored Nation

The treatment of investments from other Contracting States to be no less favorable than that granted to nationals of third states.

National Treatment

This obliges parties to provide treatment not less favorable than what it provides to domestic investors.

 

Table 8: Selected agreements from 2018 Joint Communique between Cambodia and PRC

The Chinese Side Will:

Both Sides Will:

●      Organize trade promotion activities and expand import from Cambodia

●      Welcome more Cambodian agricultural products that meet both Chinese inspection and quarantine standards and consumer needs

●      Continue to assist Cambodia in such development areas as transportation, water conservancy, demining, education and medical service

●      Continue to provide more scholarships and technical training

●      Continue to provide assistance to the conservation and restoration of ancient Angkor heritage, the Preah Vihear Temple and other cultural complexes in Cambodia

●      Advance the implementation of the Memorandum of Understanding on Strengthening Infrastructure Cooperation

●      Support companies with high capability and credibility in strengthening cooperation in key fields such as infrastructure, agriculture, water and energy resources, telecommunication, industry and tourism

●      Actively support counterpart friendship associations and institutions, think-tanks, media and NGOs to play a bigger role in promoting people-to-people exchanges

●      Forward agricultural cooperation

●      Promote the construction of Sihanoukville SEZ and projects such as the Phnom Penh-Sihanoukville Expressway and the new airport in Siem Reap

 

Table 9: Types of Chinese Financial Assistance for Development

Type of Assistance

Description

Grant or “Donation”

Mostly used to help the recipient country government construct social welfare projects such as hospitals, schools, and housing. They are also used to provide goods and materials and emergency humanitarian disaster relief aid, and to train personnel.

Interest-free Loan

Usually provided when recipient countries want to build a “turnkey” project. When China forgives debt, it is often for this type of loan. But these types of interest-free loans can also be provided for other types of projects.

Concessional Loan

Concessional loans carry interest, but at “low” rates. They usually have a grace period of at least two years, and repayments can stretch over 10 or even 20 years. These loans tend to be provided for big infrastructure projects, and they are provided directly by the Export–Import Bank of China (EximBank).

South-South Cooperation Assistance Fund

Fund created by China to assist technical cooperation among developing countries in the Global South.123

 

Table 10: The Industrial Development Policy (2015-25)124

Motivation

Priority Sectors

1)    To promote the favorable geopolitical spillovers by linking Cambodian economy within the ASEAN Economic Community and regional economic liberalization frameworks;

2)    Potential of industrial sector in accelerating growth and creating new jobs in an open economy;

3)    Industrial sector’s role as a policy tool to enhance the performance of core economic sectors (i.e. agriculture and services);

4)    To initiate structural and governance reforms of key national economic institutions, which will boost economic productivity and help avoid falling into the “middle income trap.”

 

1)    New industries with the capability of breaking into new markets with high value-added products;

2)    SMEs in all sectors;

3)    Agro-industrial production;

4)    Industries that support the agriculture, tourism and textile sectors and regional production chains; and

5)    Industries serving regional production lines that are of future strategic importance including information technology and telecommunication (ICT) and energy.

References