Cambodia is emerging as an attractive trade and investment destination. Foreign direct investment FDI into Cambodia in 2019 at US$ 3.6BN, up by 12% from the previous year. FDI inflows from China reached US$860 million in the first 11 months of 2020, up a whopping 70 percent year-on-year. Given the strong indications that China is set to grow in 2021, Cambodia will also be poised to gain. The largest share of FDI inflows to Cambodia comes from China, with the bulk of investment going to key sectors such as garments, construction (especially large infrastructure projects), electric and electronic components, agriculture, mining and energy, coal and tourism. Other major sources of FDI include Korea, the UK, Malaysia, Japan and Hong Kong.
China and Cambodia signed a bilateral free-trade agreement (FTA) in October 2020, signalling an enhancement of geopolitical and economic relations. The ASEAN Economic Community and the Regional Comprehensive Economic Partnership (RCEP), which is likely to be ratified by Cambodia in 2021, will facilitate increased intra-regional trade and investment
Both industry and service sectors play an important role in Cambodia’s economy. Almost half of its total inflow of FDI enters the service sector due to the high investment in tourism, construction and real estate related activities. Its tourism industry is particularly noteworthy, with the renowned world heritage site of the Angkor Wat in Siem Reap, beach destination in Sihanoukville and economic centre in the capital city Phnom Penh. The government of Cambodia has provided an open business environment to foreign investors and Cambodia also receives trade privileges from many major economies. Light industry such as manufacturing of apparel and electrical & electronics parts are key activities that foreign investors have invested in.
Cambodia is one of the beneficiaries of the Generalized System of Preferences (GSP) schemes operated by developed countries. Under these schemes, import tariffs on many products from the beneficiaries are exempted or reduced if requirements such as rules of origin are fulfilled. Since Cambodia is categorised as a least developed country (LDC), it is entitled to additional preferences, under which more of its products are subject to duty-free or tariff reductions.
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