12 July 2017
A Practical Guide to Doing Business in Cambodia
Political stabilisation and accession to ASEAN in the late 1990s ushered Cambodia into two decades of sustained economic growth, punctuated briefly by the Global Financial Crisis in 2008. Cambodia has rebounded strongly since 2010 with annual GDP growth of around 7%, driven by four main sectors: garment manufacturing, tourism, construction, and agriculture. Although Cambodia remains one of the Least Developed Countries (LDCs), the IMF’s World Economic Outlook, April 2017 projects strong GDP growth to continue over the next two years, as Cambodia capitalises on the preferential market access to the US and EU market for its garment and footwear products.
The Cambodian government is committed to encouraging foreign direct investment (FDI) through a liberal FDI regime, with investment incentives provided to many sectors including footwear, garments, automobiles, furniture, electrical products, and human capital investment. However, Cambodia is one of the challenging countries to do business in ASEAN, as it is ranked 89th out of 138 countries in the World Economic Forum’s Global Competitiveness Report 2016-17 and 131st out of 190 countries in the World Bank’s Doing Business 2017 report. Both reports highlight many challenges including:
- Starting a business – a large number of procedures need to be followed and this process is more time consuming in Cambodia compared to other countries in the East Asia and Pacific region.
- Workforce – Cambodia has one of the youngest populations in Asia with a median age of about 24 years, but secondary education enrolment is low with only about 50% of eligible youths attending secondary education.
- Infrastructure – national and regional infrastructure as well as logistics links are in dire need for upgrade and development.
- Corruption and bureaucracy – extensive red tape to complicate access to certain permits and licences. The Anti-Corruption Law, which is in line with international standards, is poorly enforced.
In the past year, the Cambodian government has adopted measures to prevent and crack down on corruptive practices. For example, meetings between government officials and prospective investors now face greater scrutiny, with the Council for the Development of Cambodia mandating that far stricter records be kept of meetings between the two parties. For import-export businesses, customs procedures have been streamlined with applicants now able to get online verification of the cost of any services prior to visiting the designated centres. Besides, companies are now able to register trademarks online to avoid direct engagement with government officials.
For Hong Kong companies, Cambodia’s liberal FDI regime allows them to gain wholly foreign-owned enterprise (WFOE) status in the country, and this business guide provides practical information for Hong Kong companies on investing and doing business in the country.
- Regulatory Environment
- Establishing a Presence
- Intellectual Property Protection
- Staff Recruitment
- Tax Considerations
- Import/Export Procedures
- Further information