Phnom Penh Post
Buyers look at bags of milled rice at Golden Rice (Cambodia) Co in Phnom Penh in 2010. Photograph: Sovan Philong/Phnom Penh Post
For Thai Supachai Verapuchong, Cambodia was the right place for investment.
“To do business in a country, you need to understand the community,
beliefs and culture,” said the managing director of Sofitel Phnom Penh
Phokeethra Hotel, adding that it helps that Thailand and Cambodia have
much in common.
In Cambodia, building hotels also makes sense, he said, with Cambodia
having a rich culture and “the longest history in Indochina.”
With more tourist attractions than Laos, and flanked by long-popular
tourist destinations Thailand and Vietnam, Cambodia is an attractive
market to Thai investors like Supachai. Despite accounting for only a
small share of the Kingdom’s total foreign investment, Thai investment
in Cambodia increased last year.
Statistics from the Council for the Development of Cambodia (CDC)
show that Thai projects approved by the council in 2010 were valued at
$2.04 million. The CDC did not have any figures about approved Thai
projects for 2011.
Last year, Thai projects approved were worth $120.9 million.
Peter Brimble, deputy country director at the Asian Development Bank,
said according to the official foreign direct investment (FDI) inflow
statistics of the National Bank of Cambodia, Thai FDI in Cambodia has
only accounted for around 2.7 per cent of total inflows from 2009
through the first three quarters of 2012. But he said Thai FDI inflows
have increased from $12 million in 2010 to $36 million to the third
quarter of 2012.
“Compared to other lower-income ASEAN countries, Cambodia has a very
open trade and investment regime, macroeconomic stability, young and
lower cost of labour, and gradual improvement in infrastructure,” said
Sothea Oum, an economist at the Economic Research Institute for Asean
and East Asia.
Hiroshi Suzuki, CEO and chief economist at the Business Research
Institute for Cambodia, said the biggest advantage Cambodia offers Thai
investors is the low cost of labour. “The wage in Thailand is more than
three times higher than that of Cambodia,” he said.
In January, a new minimum wage went into effect in Thailand,
mandating that every worker receives a 300 baht ($10) daily wage. With
the cost of labour rising in Thailand, growing numbers of Thai garment
manufacturers are looking to Cambodia.
In December, the Bangkok Post reported that TK Garment, a leading
original equipment manufacturer for Thai fashion lines, is relocating
its largest production site to Cambodia to evade higher wage costs.
The company’s chairman, Thaveekij Jaturajaroenkhun, was reported to
have said that 10 other garment companies are also in the process of
relocating to neighbouring countries – especially Cambodia and Vietnam.
In addition to low labour costs, Cambodia’s location and ease of
connection between Phnom Penh and Bangkok is also attractive to Thai
investors – in contrast with Myanmar.
“From Phnom Penh to Bangkok, it is only 500 kilometres and well
connected by fair conditions on national roads. Yangon is in fact not
connected to Bangkok. They have to use the ship,” Suzuki said.
Oum added Cambodia is the centre of dynamic production networks and
consumption bases in Bangkok and Ho Chi Minh City along the Mekong-India
Economic Corridor, “which are well connected by the ASEAN highway
network and facilitated by cross-border transport agreements”.
Thai investors are also looking into other sectors such as agriculture.
“One hears mostly about agrobusiness – animal feed, sugar, cassava
processing, and more recently rice milling to escape the high minimum
paddy prices imposed by the Thai government,” Brimble said.
Thailand’s second- and third-largest rice exporters have relocated
parts of their businesses to Cambodia, Reuters reported. “It also
appears that a number of Thai-based Japanese firms are expanding their
activities to
Cambodia in autoparts and electronics,” Brimble said. “This is a
major driver behind the diversification of the Cambodian manufacturing
base beyond garments.”
Challenges ranging from infrastructure problems, high electricity
costs and a lack of skilled labour face Thai investors coming to the
Kingdom.“National road No 5 is the most important connection road. It is essential to improve National Road No5,” Suzuki said. “The power sector also needs good investment not only for the volume of electricity but also for decreasing the power tariff.”
According to Supachai, one potential barrier to Thai investment is the “fluctuating” political situation between Thailand and Cambodia. But he was optimistic that tensions – in Preah Vihear, for instance – will be “resolved for sure”.
Oum said high energy costs and a lack of skilled labour continue to be constraints not only for Thai investors but also for all capital and production investments. “Reducing costs in trade clearances and fast investment facilitation are critical to improve the overall business environment to attract more investments,” he said.
Remaining challenges will not deter Supachai from further investment.
Over the next two years, he plans to invest up to $20 million on a Phokeethra golf course, and another $30 million on a three- or four-star hotel, both in Phnom Penh.
To contact the reporter on this story: Anne Renzenbrink at anne.renzenbrink@phnompenhpost.com Low Wei Xiang at lowweixiang@live.com
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