South Korea leads Asia’s big three as Cambodia’s leading investor

Last Updated on 31 January 2013 
Phnom Penh Post

By Hor Kimsay

A view of the South Korean KB Kookmin Bank Cambodia in Phnom Penh yesterday. The country invested $287 million in 2012 in projects in Cambodia. Photograph: Sreng Meng Srun/Phnom Penh Post

South Korea replaced the UK as the largest investor in Cambodia last year, with about $287 million injected, 12.5 per cent of the total foreign direct investment, according to data from the Council for the Development of Cambodia (CDC).

The three main Asian economic powers, China, Japan and Korea, were the largest investors in Cambodia during the country’s chairmanship of ASEAN, with total investment about $762.6 million, the CDC said yesterday.

This represents 33 per cent of the total $2.28 billion of foreign investment in the Kingdom last year.

Korea was followed by the world’s second-largest economy, China, who invested $263.6 million, while Japan was third, with a total investment of about $212.3 million.

While China and Korea are usually top investors in Cambodia, Dr Vong Sam Ang, general manager of Soma Consulting Services, welcomed the jump in Japan’s position as positive for the Kingdom’s image on Japan’s investment map.

“All [investors] are important, but Japan is the value investor with high commitment; always with very clear research done before putting in money,” Dr Vong said. “Wherever Japan comes, others will follow.”

According to the data, South Korea focused on the manufacturing of garment, toys and electronic parts, as well as on tapioca processing and a bio-ethanol plant.

Kang Namshik, chairman of the Korean Chamber of Commerce in Cambodia (KCCC), said that many Korean investors are looking to the Kingdom as an investment destination, especially in the garment industry, a result of rising labour costs in China and other ASEAN countries.

“Cambodia is a new manufacturing base for Korean investors,” Kang Namshik of the KCCC told the Post.  

According to the Asia Business Outlook Survey (ABOS) 2013 from the Economist Corporate Network, “Cambodia is being seen by many [companies] as an extension to [or replacement for] the export manufacturing clusters of Thailand and Vietnam.”

China, the second biggest investor, focused on garment and furniture manufacturing as well as rice mills.

According to Ly Tek Heng, operation manager of the Garment Manufacturing Association in Cambodia (GMAC), about 70 per cent of the new GMAC members come from China and Taiwan. The number of registered members doubled from 60 in 2011 to 120 companies last year.

Japan, on the other hand, invested in shopping malls, garment manufacturing and electrical equipment. One example is the $205 million Aeon Mall in Phnom Penh that began construction last year.

Yoshiko Yamanaka, advisor on economic infrastructure development at the development agency Japan International Co-operation Agency Cambodia, said Japanese investors had to shift their operations from traditional sites like China to ASEAN countries.

Many of them will decide to locate their operation in Cambodia. “This shift will accelerate more and more in the future,” she said.

Hiroshi Suzuki, chief economist at the Business Research Institute for Cambodia, said yesterday: “I am very happy to see the good ranking of Japan in [foreign investment in] Cambodia. The service sector, such as cafés and restaurants, medical, health and beauty, is also popular and will come to Cambodia,” he said.

While Cambodia’s ability to attract investors improved, and Japanese investment is flourishing, Dr Vong warns that within five years Cambodia will need to work hard to keep attracting investors.

“We are in the wave of globalisation and each country is competing to attract [foreign direct investment] for their development,” he said. “Bangladesh and Myanmar are our competitors. We can’t let the chance slip away.”

However, the CDC‘s data includes registered investments in Cambodia that might never be carried out.

According to the Asia Business Outlook Survey 2013, only about 1.2 per cent of the survey’s respondents are investing heavily in Cambodia, while 15.3 per cent of companies are investing moderately.

Most potential investors are observing the situation, ABOS stated. Nineteen per cent do business in Cambodia, but have not invested on the ground, and 28.2 per cent are watching and assessing, but not doing business as of yet.

For 36.2 per cent of respondents, the Cambodian market holds no interest at present, the survey revealed.

The 2013 ABOS was completed by more than 200 senior executives with management responsibility for business throughout Asia.

The respondents mainly represented large companies – three quarters of those polled manage companies with more than $1 billion in global revenue, and 35 per cent of respondents oversaw operations in firms with revenue of $10 billion or more.

---

With assistance from Sarah Thust