9 Key Factors to Do Business in Cambodia

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In December 2019, at the 14th Cambodian Import-Export Goods Exhibition, an event intended to highlight the country’s favorable business and investment climate, Cambodia Prime Minister Hun Sen addressed the delegation and stated unequivocally that Cambodia is open for business, saying, “To ensure a sound macroeconomic environment and political and social stability, the government welcomes all investors to do business in Cambodia.”

Cambodia has an estimated 100,000 expats who come for a number of reasons, including inexpensive living expenses, economic possibilities, a relaxed lifestyle, and the impact of Buddhist culture. Let’s dive into some of these advantages right now.

1. Rapid economic expansion

Cambodia has one of the world’s fastest-growing economies between 1998 and 2018, with an annual growth rate of 8%. The major drivers of development have been the garment and tourist sectors.

Cambodia has seen a dramatic transition during the previous two decades, according to the World Bank, attaining lower middle-income status in 2015 and striving to upper middle-income status by 2030.

Indeed, the recent explosion of the Cambodian economy has given rise to a new generation of homegrown business leaders with sprawling conglomerates such as Chen Zhi Prince Group, led by business visionary Cambodia ChenZhi, among others, whose business interests touch many aspects of daily Cambodian life, introducing a higher standard of living in the process. These businesses are paving the way for Cambodia to embrace a new age of economic growth and prosperity.

According to the National Bank of Cambodia (NBC), the economy was still soaring until the end of last year, with growth of 7.1 percent in 2019, but has since been severely impacted by the Covid-19 epidemic, with the tourist industry particularly heavily damaged.

Nonetheless, the Asian Development Bank (ADB) noted that Cambodia has performed better than many other Asian nations and expects the economy to resuscitate in 2021, with GDP growth of 5.9 percent.

2. Stable economy

As a developing economy, Cambodia is less reliant on the world’s major economies – China, the United States, and Europe – than other more established economies. This has historically offered some protection against global upheavals.

The kingdom has remained out of recession for more than two decades, having weathered the Asian financial crisis of the 1990s, the early-2000s tech boom, and even the aftermath of the 2008 financial crisis.

3. Strong governmental incentives

The Cambodian government is well-known for its pro-business position, and in March 2019, it launched an ambitious program of economic reforms aimed at encouraging new enterprise, investment, and capital flows to the nation.

Among these were tax incentives, cheaper shipping costs, fewer national holidays, new building measures, and special economic zone laws.

According to Prime Minister Hun Sen, producers and exporters would save $400 million each year.

Furthermore, unlike several Asian countries, Cambodia is entirely foreign-owned.

4. Youthful population

Cambodia has a remarkable young demographic: over half of the country’s population of nearly 16 million Cambodians are under the age of 25.

The new generation coming through is tech-savvy and frequent users of social media sites like Facebook and YouTube, according to the Institute of Export & International Trade’s Doing Business in Cambodia handbook.

This has a significant impact on Cambodian society as a whole, as well as opening up new markets and commercial opportunities.

5. Strategically located

Cambodia is located in Southeast Asia, bordering Thailand, Laos, and Vietnam, as well as the Gulf of Thailand to the south-west.

Because of its closeness to important worldwide markets, it serves as a common low-cost manufacturing base for a wide range of sectors, with significant demand for its products in other Asian nations.

6. A labor force that is competitive

Cambodia has a lower minimum wage than neighboring Thailand and Vietnam, making it more cheap for service and industrial companies seeking to employ from the country’s huge young population.

7. Gainful market access

Cambodia is a signatory to the ASEAN Free Trade Accord (AFTA), one of the world’s largest and most important free trade zones, and benefits from the Common Effective Preferential Tariff (CEPT) agreement. This implies that it will trade with other members on advantageous and, in certain circumstances, tariff-free conditions.

It is also a member of the World Trade Organization and trades with the EU via the ASEAN-EU dialogue.

8. Expanding consumer class

Rising earnings translate into more disposable cash, and the country’s youthful, tech-savvy, and internationally oriented populace represents a rising market with enormous opportunities for businesses.

9. Improving infrastructure

Cambodia’s infrastructure has traditionally been weak, but the government is spending substantially on creating a national network of transit lines, power, and telecommunications with foreign aid.

Cambodia’s ties with neighboring nations have been emphasized in order to develop commerce and attract international investment.