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Observations about market opportunities in Cambodia for Danish companies

31.03.2017  10:06

Based on a visit to Phnom Penh by Ambassador Uffe Wolffhechel in February-March 2017

Summary

  • Over the past 20+ years Cambodia has seen one of the highest growth rates in the world, albeit from a very low point of departure. The economy is generally very open and market oriented.
  • Potential commercial opportunities in the field of energy and agriculture/food processing.
  • Outsourcing of production to Cambodia mostly carried out by Asian countries. Conditions may suffer from lack of transparency.
  • Young generation of entrepreneurs with foreign training represent a healthy modernisation of the business landscape.
  • The Trade Council Team at the Embassy in Bangkok stands ready to assist Danish companies who are considering doing business with Cambodia.

Macroeconomic situation
From a very low point of departure, Cambodia has enjoyed strong growth for many years with a significant average annual expansion of 7.7% in the years 1994-2014, putting Cambodia in the top three in the world. This growth is seen in an economy which is characterized by being highly open and market oriented with a goods trade of 146% of the total GDP ranking it 8th in the world.

Energy sector
The Government considers high electricity costs a competitive challenge for attracting foreign investment in industrial production in Cambodia. A meeting with the Minister for Mining and Energy showed an interest in feasibility studies regarding Wind Energy and Bio Mass. However, electricity production costs should allow for competitive tariffs as subsidies cannot be expected. Cambodia does not have a regime for connecting renewable energy production to the state controlled national electricity grid, but would be interested in learning about Danish experience in this field. Equipment to increase energy efficiency i.e. in the cooling sector would be welcomed by the Government, but decision making will take place in the liberated open market.

Agriculture
Transfer of Danish knowhow in the agricultural sector might be a point of interest given the current state of affairs. Cambodia’s agricultural system suffers from high production costs, an inefficient market and lack of modern farming technology. Based on Denmark’s advanced position regarding agricultural innovation, efficiency and sustainability, Danish companies can help Cambodia develop a modern agricultural sector with better farming technologies, lower production costs and lower resource consumption. In addition, there is a desire to provide added value through developing the food processing industry.

Outsourcing of production
Most foreign owned production facilities are found in low technology production of garments etc., mostly based on Chinese and Korean investment with limited focus on labour welfare – and hence frequent conflicts. More technologically advanced production exists in the shape of sub suppliers of selected components to car production in neighbouring Thailand with Japanese companies in a leading position, i.e. Toyota.

Several Special Economic Zones have been established to cater for foreign investors. Package solutions involving logistics and taxes are offered to companies by the zone administrations. However, it is not necessarily transparent what package fees are covering – bearing in mind the country’s widespread corruption. Modern production facilities offering fair labour conditions do not seem to be facing serious problems with labour unrest.

Potential local partners
A young generation of entrepreneurs with foreign higher education constitute a new layer of promising enterprises which could be a healthier choice for partnerships compared to older companies and oligarchs embedded in the less transparent establishment.

Chambers of Commerce
EuroCham,
www.eurocham-cambodia.org, is a well-established and strong advocacy organisation. A new Nordic Chamber of Commerce is being established and will form a chapter of EuroCham.

Embassy services
The Trade Council Team at the Embassy in Bangkok stands ready to assist Danish companies who are considering doing business with Cambodia.

The services provided by the Trade Council can be divided into two categories: 'Global growth' and 'Global public affairs'. Global growth is encompassing traditional export and investment promotion, while Global public affairs is assistance regarding politically related problems. Read more at http://thailand.um.dk/en/the-trade-council/products-and-services/.



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