Why Invest In Cambodia

Having emerged from its dark 1970s past, Cambodia is solidifying the remarkable progress it had made since its 1990s embrace of free market economics. The country’s 9.8% GDP growth rate over the 1998-2007 decade ranked sixth in the world and fastest in the Far East, after China.
Cambodia’s continued upward trajectory will be propelled by durable fundamental factors such as:

  • Political stability
    • Prime minister (still under 60) has held power since 1985
    • Other key ministers are also long serving and experienced
    • Ruling party’s mandate decisively renewed in 2008 election
  • Advantageous location
    • Sandwiched between two larger, more developed economies (Thailand and Vietnam) : inevitable economic spillover
    • Midway between China and India – the most important growth areas of the next century
    • Not landlocked so not dependent on any single country
  • Favorable investment climate
    • Foreigners can own 100% of most businesses; 99 year land leases
    • Attractive investment incentives
    • Open capital account; easy repatriation of profits
    • Government-Private Sector Forum helps reduce obstacles and inefficiencies
  • Largely “dollarized” economy
    • Minimal foreign exchange risks
    • Stable monetary policy and fiscal responsibility
  • Increasing trade integration
    • WTO member since 2004
    • ASEAN membership offers regional trade benefits
    • Duty free or preferential export access to most developed economies
  • Advantageous labor conditions
    • Among Asia’s lowest-cost workforces
    • Abundance of willing, trainable factory workers
    • Rising literacy rate now surpasses 75%
  • Improving transport connectivity
    • All key road and bridge links with neighboring countries have been or will soon be upgraded
    • Railroad system is being rehabilitated
    • Container sea port in Sihanoukville has been modernized and expanded
    • River port in Phnom Penh is being relocated and enlarged to better access Vietnam’s new deep sea ports
    • Three international airports have been opened
  • Lower costs in telecoms and internet; power next
    • Hyper-competition in mobile and internet sectors has cut user costs
    • New hydropower and coal-fired power plants underway will replace oil-based generation, cutting costs
  • Unused natural resources and land
    • Production and processing of agricultural commodities
    • Aquaculture and livestock farming and processing
    • Abundant mineral deposits await mining
    • Potentially significant off-shore oil and gas reserves
    • Virgin tourism sites (beaches, islands, history, culture, nature)
  • Underpenetrated, growing domestic consumer market
    • Exceptionally youthful demographics ensures rising domestic demand (61% of Cambodians under 25 years old; median age: 21)
    • Workforce participation, household formation, and urbanization will all show robust growth over the next decade
    • Per capita GDP and purchasing power has more than doubled over past decade and will continue to rise
    • Emerging import substitution opportunities in various industries
  • Unleveraged financial position
    • Relatively low levels of sovereign, corporate, and consumer debt
    • Well capitalized, conservative banking system
    • No tradition of government bailouts and subsidies (capitalism’s last bastion)
  • Future stock exchange
    • Cambodia Stock Exchange is expected to open in 2010
    • Listing criteria will not be onerous

The Role of Private Equity

Cambodia’s banks require debtors to pledge land titles as loan collateral, with the bank typically lending 30-50% of the land’s assessed value. While this strict approach has helped keeps the banking system solvent, it has excluded many businesses from securing project finance or working capital from banks. In the absence of equities or bond markets, or leasing or factoring companies, private equity stands out as one of the only visible and flexible financing solutions. Leopard Capital has gained prominence in Cambodia as the country’s first, largest, and most experienced private equity group. It is thus uniquely positioned to invest in many of Cambodia’s best businesses through transactions negotiated in a comparatively non-competitive environment.
For more information on investment opportunities in Cambodia, please see our Newsletter, Media Coverage, Documents and Links sections.