September 16, 2011

Cambodia eyes Chinese investment to boost economy


BEIJING, Sept. 16 -- Relations between China and Cambodia have grown closer in recent years, with China investing billions of dollars in the southeast Asian nation to help boost its economy, an official said Friday.

China has become Cambodia's biggest source of foreign direct investment, said Mao Tianyu, division chief of the International Department of the Ministry of Commerce.

Chinese companies invested 395 million U.S. dollars in non-financial sectors in Cambodia last year, an increase of 83 percent year-on-year. By the end of July 2011, China's outbound direct investment in non-financial sectors in Cambodia amounted to 1.2 billion U.S. dollars, Mao said.

Cambodia's economy has been growing rapidly but is still weak compared with other countries in the region.

The country's gross domestic product (GDP) rose 5.9 percent year-on-year to reach 11.44 billion U.S. dollars in 2010, a growth rate slower than Thailand's 7.8-percent increase and also below the 6.8-percent rise seen in Vietnam, said Xu Ningning, executive vice secretary-general of the China-ASEAN Business Council.

Cambodia's per capita GDP stood at 792 U.S. dollars last year with an annual inflation rate of 3.1 percent.

Most rural households in Cambodia depend on agriculture and related sub-sectors. Agriculture, apparel, real estate and tourism are the country's four pillar industries.

As a country endeavoring to integrate itself into the global economy, Cambodia has shown great enthusiasm for foreign investment.

The country approved 5.5 billion U.S. dollars in foreign investment during the first seven months of this year, up 301 percent from last year, Xu said.

The Asian Development Bank on Wednesday raised Cambodia's growth forecast to 6.8 percent for the year, up from its April projection of 6.5 percent, due to rising agricultural production.

Khek Caimealy Sysoda, Cambodia's ambassador to China, said she hopes to see more Chinese investment in her home country.

"Cambodia enjoys political and macro-economic stability as well as a transparent legal framework. It has a lot of potential for investment," she said.

For many Chinese entrepreneurs, Cambodia is attractive due to low labor costs and its status as a least-developed country (LDC).

Cambodia's LDC status entitles it to preferential trade policies. For example, Japan has reduced its tariffs on imports of 4,800 items from Cambodia, including apparel and footwear.

Cambodia has also signed free-trade agreements (FTAs) with other Asian countries, including India and the Republic of Korea (ROK), under which export duties on many of its manufactured goods are cut. China has not signed FTAs with India or the ROK.

"Cambodia provides Chinese investors with access to key international markets through preferential trade policies," said Khek Caimealy Sysoda.

Cambodia's natural resources are still relatively untouched, offering numerous investment opportunities. The country has two billion barrels of offshore oil ready to be tapped; however, a lack of funds and technology has prevented the country from exploring its own oil resources. The country imports virtually all of its oil-derived products.

Cambodia has ambitions to become one of the world's major rice suppliers, aiming to export 1 million metric tons of rice in 2015. However, its rice exports hit just 45,000 metric tons last year due to low processing capacity.

"This gap presents opportunities for Chinese companies," Xu said.

Cambodia will continue to give equal treatment to both local and foreign investors, improve its methods of governance and reduce the cost of doing business in order to attract more investment, Khek Caimealy Sysoda noted.

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