Investment down by $1B

Workers prepare to pour concrete at a high-rise construction site in the Kingdom’s capital. Pha Lina

Wed, 26 April 2017

Cheng Sokhorng

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Local and foreign investment in the Kingdom declined by nearly $1 billion last year, with the bulk of losses coming from fewer infrastructure and agriculture projects, while the manufacturing and tourism sectors continued to post massive gains, according to the Council for the Development of Cambodia’s (CDC) annual report published yesterday.

According to the report, total investment last year in 171 projects across all sectors decreased by 22 percent and was valued at $3.6 billion, compared to $4.6 billion in 2015. The report did not include the construction sector.

Mey Kalyan, senior adviser to the Supreme National Economic Council, said the decrease was a worrying sign that investor confidence may be stretching thin and that Cambodia was underperforming in terms of drawing investment compared to neighbouring countries.

“In general, the growth of investment in Cambodia is not high enough for continued development and this decline should be a concern for overall economic growth,” he said. “We need to pay attention and take action to restore levels of investment and the government needs to understand the reasons for the decline.”

Kalyan could not pinpoint a reason for why investment had declined but he said it was possible that investors were running short on capital or that Cambodia was not currently an attractive investment.

However, Ngoun Meng Tech, director general for the Cambodia Chamber of Commerce, said the decline was not a huge concern because investments to the country ran in cycles and fluctuated according to factors beyond the Kingdom’s control.

“It is normal for the fluctuation of investment flows,” he said. “But we expect the level to increase this year as projects get accepted by the CDC and we attract more investors from abroad.”

The country’s special economic zones (SEZs) showed positive signs of growth last year with 42 new projects receiving $283 million, a 147 percent increase from 2015. Investment figures from outside the SEZs were less promising, recording a growth of 26.5 percent with 129 projects valued at $3.3 billion, compared to $4.5 billion in 2015.

According to the report, the agricultural sector reported a decline in investment of 1 percent, while the tourism sector grew by 12.5 times. It showed that the bulk of the $1 billion loss of investment was in the infrastructure sector, as investment declined by nearly $2.6 billion, from $3.12 billion in 2015 to $544 million last year.

Meng Tech said that Cambodia had sufficient laws and regulations for attracting foreign direct investment, but explained that local investment, particularly in agriculture, was falling behind due to the overall weakness of the sector and concerns over export potential.

“Investors are confident in investing into industry and manufacturing, but when it comes to agriculture it is complicated because it is becoming more difficult to control and predict our export potential,” he said. “We need to balance our regulations with international export requirements.”

He added that if agriculture and infrastructure investment continued to decline, it would drag down Cambodia’s economic growth, as those are vital sectors for a developing country.