Attracting investments to Phnom Penh

Attracting investments to Phnom Penh

The ease of doing business is a critical consideration for a company to invest in a country. According to the World Bank, Cambodia is ranked at 131st place in terms of the ease of doing business, compared to 1st and 3rd for Singapore and Hong Kong, respectively. Singapore has been ranked the easiest place to conduct business in Asia as English is the official language. 

Over the years, government reforms have made doing businesses in Cambodia easier. The Ease of Doing Business report ranks Cambodia behind most of its ASEAN member states, including Laos and Myanmar even though the country has drastically reduced time and procedures for investors to set up a business. It has made progression in simplifying company name checks, streamlining tax registration (there are considerations beyond taxation which Cambodia must address) and eliminating the requirement to publish information on the new company’s incorporation etc. “Cambodia is an emerging market with a stable economy. The government is pro-business and is seen to be trying to improve the systems,” said Chhayleang Ngoun from Ratanaka Realty.

From low office rents, a strategic location within ASEAN to engage in cross-border trades and a low cost of living, Cambodia is an ideal place to set up a business. The key area of weakness for Cambodia is skilled human resources. These problems must be properly addressed if Cambodia wants to take advantage of regional integration and remain internationally competitive. Infrastructure-wise, Phnom Penh International Airport, the main entry point into Cambodia, has undergone an upgrade with an increase in capacity. However, the overall infrastructure is still poorly maintained, especially the road network and city planning that hinder overall real estate developments in Phnom Penh. “Right now there should be more investment into infrastructure,” said Chan Mlop Sokha from Sokha Law Firm.

Although the Ministry of Commerce claims to have decreased the number of procedures required to start a company in Cambodia, it still takes almost three months on average to establish a company. Besides that, unnecessary bureaucracy in establishing and operating a company, inefficient procedures for obtaining work permits and visas, and other uncertainties about the interpretation of laws and regulations all hinder the ease of operations.

Whilst Cambodian people are pleasant and welcoming, the nation faces the challenge of a workforce hard pressed to efficiently deliver the same level of productivity compared to other major commercial hubs in the region. Language skill is another drawback. Malaysia, the Philippines and Singapore remain ahead in the integration of the English language in the state education system. 

The ease of doing business must be monitored in order to attract more private investment. Cambodia should also identify a target group of countries and focus on industries where its strengths lie, such as services. In the end, Cambodia has the potential to position itself as a hub and to serve businesses catering to the ASEAN economy.

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