Cambodia
In-depth country-focused analysis on Cambodia's economic, political and operational risk environment, complemented by detailed sector insight

Our comprehensive assessment of Cambodia's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Cambodia, as well as the latest industry developments that could impact Cambodia's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Cambodia before your competitors.

Country Risk

Cambodia Country Risk

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While political reforms in Myanmar have not been particularly impressive over recent months, economic reforms have maintained a steady pace. Specifically, the Central Bank of Myanmar (CBM) announced in July that it would allow as many as ten foreign banks to begin operations in the country before the end of September, marking the first time in decades that foreign financial institutions would be allowed to operate in the former pariah state. This is a major step forward, not only in terms of the government's economic reform credentials, but also in terms of the economy's near-to-medium term growth prospects. Foreign banks will increase the local availability of capital considerably, and will for this reason be a boon to foreign firms looking to do business in the frontier market. Additionally, foreign banks will bring a new level of expertise to the market, acting as a positive market force for local banks in terms of competition. While we remain cautious on...

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Cambodia Operational Risk Coverage (9)

Cambodia Operational Risk

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Cambodia's low labour costs, minimal trade barriers and growing market size should mark it out as one of the most attractive investment destinations regionally. However, a number of key risks limit the market's overall appeal, not least the country's inadequate logistics infrastructure that drives up the cost of doing business in Cambodia, its poorly educated and under-skilled workforce that leaves investors reliant on foreign workers and expatriates, and diverse legal risks that undermine property rights. Furthermore, corruption is a theme that is consistent throughout this report, increasing risks to investors in the form of high lead times, expensive transport costs and delays in conducting simple operational procedures, such as opening and closing a business.  

BMI considers the foremost advantage for businesses in Cambodia to be the country's low risk of crime and terrorist threat. Cambodia...

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Cambodia Crime & Security

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BMI View: Cambodia poses modest security risks to foreign business travellers and tourists. For the most part, the greatest risks to these groups are petty crime s, such as pick-pocketing and theft, rather than violent crimes. Although there is considerable organised crime in Cambodia, stemming from the country's role in the regional drug trade, fraud , and human trafficking, this is unlikely to affect foreigners.   Cambodia's police tends to be underfunded and underequipped, meaning that their effectiveness is limited, especially outside the major cities. Corruption is also a major problem in Cambodia, and erodes the integrity of the country's law enforcement agencies.

The risk of a terrorist attack in Cambodia is low, as there are few domestic terrorist...

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Cambodia Labour Market

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BMI View: Although the Kingdom of Cambodia is rich in natural resources, decades of war and internal conflict have left it one of the world's poorest countries. The legacy of strife includes social and economic scars, such as poor rates of urbanisation, widespread poverty and low levels of education. Although 81.2% of the working age population is in employment, investors in Cambodia will struggle to source skilled workers from a labour pool that is largely characterised by very poor levels of literacy and basic education. Furthermore, despite an impressive female participation rate in the workforce, unequal access to education means that women are more likely to be educated than men, suggesting that female workers will be less skilled than ma le workers. Cambodia scores 43. 6 out of 100 for Labour Market...

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Cambodia Logistics

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BMI View: Cambodia's logistics network faces challenges as a result of decades of armed conflict. There are s tructural issues in terms of roads, railways and ports, which have not kept pace with the country's rapid economic development in recent years . A booming garment and construction industry have meant that Cambodia's infrastructure has required significant development over the past decade. However, instead of upgrading the existing infrastructure, the government has poured money into new projects, leaving many of roads and railway s in disrepair. Corruption also poses a threat to investors, delaying the speed at which goods are...

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Cambodia Trade & Investment

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Cambodia's reputation as one of the most corrupt countries in the world severely hampers its attractiveness as an investment location to businesses. A lack of observance for the rule of law, significant government intervention and high levels of red tape mean that doing business in Cambodia is lengthy and costly ordeal. In addition, the country's underdeveloped financial services means that businesses are often reliant on microfinance institutions to finance business ventures. High levels of corporate tax also make Cambodia less competitive than its regional neighbours. That being said, Cambodia has seen a significant increase in foreign direct investment in the past decade in response to its open attitude to foreign businesses and integration into the international economy through regional and international partnerships. Overall, we score Cambodia 34.0 out of 100 for Trade And Investment Risk, ranking it 21st out of 29 countries in Asia.

The...

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Cambodia Industry Coverage (5)

Autos

Cambodia Autos

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The common theme in among Cambodia, Myanmar and Laos is that used vehicles make up the overwhelming majority of their auto markets. The low GDP per capita of these economies makes it difficult for consumers to afford new cars. However, as long as carmakers maintain their expectations, we do see an advantage for firms to develop a toehold in these frontier markets.

Over our 2014-2020 period, we forecast GDP per capita to exceed 6.0% annual growth in all these economies, aided by their young demographics. As incomes rise, new vehicle sales will inevitably increase when motorisation finally takes off. Firms which have built up their brand awareness and loyalty will then be able to reap the benefits of the motorisation boom.

We also see tremendous opportunities for parts makers and after-sales service providers in these markets due to their large used vehicle fleets. In order to keep their vehicles in a roadworthy...

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Infrastructure

Cambodia Infrastructure

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  • BMI View:   Despite a relatively strong performance in 2013, several risks continue to dampen the near-term growth potential of Cambodia's infrastructure sector - namely growing competition from Myanmar, limited upside to foreign investment, and the resolution of land disputes in the favour of local residents. That said, the recent reconciliation between the ruling Cambodia People's Party (CPP) and opposition Cambodia National Rescue Party (CNRP) is a positive development.   Nevertheless, we envisage only a moderate pick-up in activity for 2014, with the industry's real growth forecasted at 8.2%.

Key Trends And Developments

  • Following a lengthy political deadlock between the...

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Pharmaceuticals & Healthcare

Cambodia Pharmaceuticals & Healthcare

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BMI View: The current lack of investment in healthcare in Cambodia will continue to deter foreign pharmaceutical firms from entering the country .   Consequently, we highlight that Cambodia will remain one of the least attractive markets in South East Asia.  

Headline Expenditure Projections

  • Pharmaceuticals: KHR821.7bn (USD204mn) in 2013 to KHR908.9bn (USD227mn) in 2014; +10.6% in local currency terms and +11.2% in US dollar terms. Forecast slightly downgraded from previous quarter.

  • Healthcare: KHR3,260.6bn (USD810mn) in...

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Power

Cambodia Power

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BMI View:   The major players in Asian power supply are clamouring to invest in Cambodia, with the result that huge capacity expansion can be expected from around 2015, as hydro - , gas - and coal-based schemes are introduced. This should leave the country with plentiful spare generation. Neighbouring Vietnam, which will finance a number of power projects, plans to make good use of Cambodia's potential export capability, as does Thailand if a major coal-fired scheme comes to fruition.

Hydropower expansion is already under way in Cambodia, and there is a long queue of potential projects with strong regional backing. Several are set to proceed, with a surge in hydro-based supply due from around 2016. Domestic gas resources could contribute additional capacity, while the use of renewables is set to rise...

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Telecommunications

Cambodia Telecommunications

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BMI View : Myanmar took a major step forward this quarter as the market witnessed the launch of the first commercial mobile service from a private operator, introducing competition into the mobile sector. Ooredo o's launch was reportedly met with huge demand with the network struggling to cope with the traffic, having sold the entirety of its allocation of SIM cards within days . Telenor is expected to follow with its own launch in September and we have upgraded our forecasts for the mob ile market as a result of this, with Myanmar set to become the fastest growing market in the world. The influx of foreign capital into the telecoms...

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