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11 Mar 2013

International Economy

[AEC Plus] Cambodian Economy, 2013: Expanding 7% on Steady FDI and Export Growth (Current Issue No. 2332 Full Ed.)

We at KResearch expect that the Cambodian economy will grow perhaps 7% in 2013, thanks to several factors:
  • Steady foreign direct investment (FDI) inflows are expected because Cambodia has opened their doors to investment amid liberalization toward AEC integration. In addition, investor confidence toward Cambodia has increased as the government has reformed investment laws to make them more transparent and foreign-investor friendly.
  • High export growth should be seen as a result of increased FDI into export-oriented industries given improving international trade relations. Despite a USD2.65 billion trade deficit in 2012, most imports, e.g., garment/textile intermediaries, heavy machinery, crude oil, construction materials, pharmaceuticals, automobiles and motorcycles are needed to facilitate their own manufacturing sector, which helps spur domestic investment and employment. Thailand has seen increased border trade with Cambodia recently to meet growing demand there.
Thai businesses seeking to expand into Cambodia should take advantage of their abundant natural resources, low wages and GSP privileges. There are also opportunities to relocate or expand investment into a number of promising business sectors there, including agro-processing, garments and rice milling. As for their service sector, established Thai companies may consider investing into Cambodian travel-related, beauty and cosmetic, or floristry industries.

However, those looking to take advantage of low wages in Cambodia are being urged to heed extra caution toward disguised costs associated with unskilled workers. In addition, they should set up plants in areas designated as investment promotion zones, e.g., industrial estates, to avoid bureaucratic complications or inadequate infrastructure. Thai investors also need to thoroughly study local consumer behavior since most Cambodians tend to be price sensitive. As a result, Thai entrepreneurs doing business there will have to ensure that their product and service prices match local purchasing power.

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International Economy