A blessing in disguise for Cambodia
01 June, 2015
Cambodia is on the list of the UN's 48th least developed countries in the world. Once an empire and one of the most beautiful countries in the world, Cambodia is firmly placed among the last countries for development in multiple areas; from infrastructure to income levels and gross domestic product. There is little political will in Cambodia to make any real change and improve the situation in the country, where GDP per person in 2011 was only equivalent to US$2,805 (147th out of 187th). However, Cambodia does have some commercial competitive advantages.
Being labelled as least developed country has its pluses, namely the free import trade reach to large markets, such as the European Union. Exports to the union are not taxed on arrival, which optimizes the costs for local produce (mainly garment industry).
Under the Generalized Scheme of Preferences, all Cambodian exports, except weaponry, are free from import taxation, stimulating the stagnant economy and contributing to the growth and expansion of Cambodian products and infrastructure. This program successfully operates in several nearby countries, including Laos and Bangladesh, as the EU is one of the largest trade partners in the region.
Investors in Cambodia will benefit further from its membership in ASEAN, as this free trade area subjects exports with low 0.5% between member countries, some of which boasts substantial markets like Indonesia.
Who is the biggest investor in Cambodia?
Surprising to many, the largest foreign investor in Cambodia is outside of ASEAN. South Korea is the leading investor in Cambodia with more than US$300 million in direct investments. Taking advantage of the cost-efficient production options and very cheap staff is a good enough reason for many industries to invest in a country, but the optimized trade under the Generalized Scheme of Preferences makes Cambodia a preferred place for many corporations.
"Cambodia is a new manufacturing base for Korean investors," said Kang Namshik, the chairman of the Korean Chamber of Commerce in Cambodia.
The World economy is globalising at booming rates and each country needs to keep up with its competition to attract direct investments. Cambodia has the ingredients to win the investment race and in the meantime fix its economy. A win-win situation!
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