Investing in Cambodia

Cambodia has long been one of the fastest-growing economies in the world. When the 2020 COVID-19 pandemic recedes in the coming years, it is hoped Cambodia will continue to impress observers.

As many have found in recent years, there are robust fundamentals underpinning its growth trajectory. Not only is it quickly becoming an appealing investment destination for local and foreign investors, this decade could see the rise of Cambodian industry and technology benefitting a young and growing middle class.

Concern over the delta, and the Mu variant (among others), is naturally a damper on projects. Yet, the World Bank, the International Monetary Fund and Moody’s Investors Service all predict annual economic growth of 5-6% next year.

It means that the road to recovery will be a bumpy one but the country is moving in the right direction. Over the past two decades, such growth has lifted millions out of poverty – less than one in ten Cambodians were below the poverty line before the pandemic.

A rising middle class of garment workers, construction workers and knowledge professionals is emerging while there is even an expatriate community in select cities like Sihanoukville and Phnom Penh.

Cambodian society is largely patriarchal and quite young – people under the age of 30 represent two-thirds of its population, which continues to grow at around 1.6% per year. The young population is eager to work hard and offer their time and skills serving as the employment piston that will power overall economic growth.

The Cambodian economy is largely dependent on revenues from construction, real estate, garments manufacturing, tourism and hospitality. While the pandemic has naturally hit the economic prospects of the latter two industries due to a halt in international travel, a fast-paced vaccination program has all but ensured Cambodian adults will be vaccinated by the end of September.

All of that has been made possible by the Cambodian People’s Party (CPP) led by Prime Minister Hun Sen – the CPP has been in power for more than three decades and has ensured a stable foundation for financial and investment inflows.

A staunch ally of China and a supporter of the Association of Southeast Asian Nations (ASEAN), Hun Sen has repeatedly outlined that Cambodia is open for business.

Cambodia is worth investing in because it stands to benefit from the growing rise of China while it is a place where finance and investment companies can grab a foothold to similarly benefit from the broader growth of Southeast Asia and the developing world. In many ways, Phnom Penh could become an alternate financial hub in Singapore playing a similar role for the region.

A growing industrial base in Sihanoukville where a Special Economic Zone has seen the total number of companies increase exponentially means there will be opportunities for industrial and manufacturing firms as well.

Finally, Cambodia is becoming well-known as a popular investment, tourism and work destination for a growing number of globalized Chinese professionals that are looking to venture outside China to support the country’s growing international presence under the Belt and Road Initiative.

As such, companies have emerged that understand the importance of appealing to a diverse set of stakeholders – Cambodians, foreign and local investors, local and regional governments, Chinese consumers and businesses as well as expat residents.

The best types of companies will be local firms that seek to live up to international standards. Given how their operations span a number of different sectors, real estate development companies represent the best proxy for broader Cambodian economic growth.

In particular, there is an emerging trend of real estate developers building sustainable real estate projects that will surely attract a great deal of interest.

Canopy Sands Development, for example, has built Ream City, a 834-ha project that has the potential to house up to 130,000 residents in a mixed-use project along Ream Bay in Sihanoukville. The 50-ha project will be completed in 2025 but ultimately the developers have said they envisage a development that will promote non-motorized forms of transport, green buildings and even training centers to enhance the level of hospitality in Sihanoukville.

Canopy Sands Development is a member of Prince Holding Group, one of Cambodia’s top conglomerates that has a presence across real estate, banking, retail, hospitality and travel.

Having delivered on projects across Phnom Penh and Sihanoukville, they have acquired a reputation for delivering high-quality projects. Canopy Sands Development is also guided by a master plan devised by Surbana Jurong, a Singaporean urban consultancy, that will ensure a holistic and positive impact on Sihanoukville by 2050.

In the coming years, investors looking at opportunities in Phnom Penh and Sihanoukville will find a number of promising avenues. However, limiting risk will involve an understanding of a rapidly develop business landscape where new players who pursue both profit and broader development goals are likely to win over the support of Cambodian and international stakeholders.

Development projects by such that will appreciate in value and offer a reasonable return for astute, patient and development-focused investors.

In real estate, in particular, there will be a tantalizing opportunity due to rapid urbanization, rising incomes, rising home ownership, asset depreciation due to climate risk as well as a developing country’s growing requirements for comparable infrastructure like what can be found in other emerging markets like Thailand, Indonesia, Malaysia and India.

Finally, an investment in Cambodia will also help them establish networks with companies that will similarly play a leading role in other parts of the world.

As such, an investment in Cambodia could represent a vote in the world’s future.