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Prospects of foreign entrepreneur in cambodia


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Prospects of foreign entrepreneur in cambodia

  1. 1. 3- Prospects of Foreign Entrepreneurs in Cambodia Prospect (n.) the possibility that something good might happen in the future (Cambridge Advanced Learner’s Dictionary, Third Edition) 3-1-Country’s Resources Infrastructure: I f t t NNatural R l Resources: Two international airports  Metals & mineral (Phnom Penh & Siem Reap) (Ph P h Si R )  Hydroelectric Power Roadway (12,323km)  Petroleum Railway (602km)  Forestry Waterway (2,400km)  Timber and firewood 24/12/2010 18 3- Prospects of Foreign Entrepreneurs in Cambodia (Cont.) 3 2 REASONS 3-2-REASONS TO INVEST IN CAMBODIA 3-2.1 Location: Cambodia is located in the heart of Southeast Asia. It is surrounded by Thailand to the west y and northwest, Laos to the northeast, Vietnam to the east and southeast, and the Gulf of Thailand to the south. The country has easy access to seaports and airports, and is rich in natural resources and world wonders. Cambodia is strategically located for a world-connected business operation operation. 3-2.2 Membership in International and Regional Organizations: Cambodia is a member of various international and regional organizations that facilitate trade. Among these are the World Trade Organization (WTO), Association of Southeast Asian Nations ( f h (ASEAN) and ) d ASEAN-China Free Trade Area (ACFTA), in which Cambodia enjoys duty-free privileges for exports and Most Favored Nation (MFN) treatment. 24/12/2010 19
  2. 2. 3- Prospects of Foreign Entrepreneurs in Cambodia (Cont.) 3-2-REASONS TO INVEST IN CAMBODIA (Cont.) Cambodia also accedes to the ASEAN Free Trade Area, ASEAN-China Comprehensive Economic Cooperation Agreement, ASEAN-Japan Comprehensive Economic Partnership, ASEAN-Korea Comprehensive Economic Cooperation Agreement and a dozen other multilateral agreements. Through this regional integration, there is the potential for investors to reach billions of customers; the population of ASEAN alone is roughly 560 million, while the population of ACFTA consists of approximately 1.7 p p pp y billion people. 3.2.3 Investment Incentives: Cambodia has adopted a variety of legislation to create an open economy and encourage foreign investment. Consequently, Cambodia offers investors one of the most liberal incentive schemes in Southeast Asia. Tax incentives, a “one-stop service” for the swift process of investment applications, and the ability to develop within Special Economic Zones, all offer extra reasons to invest in Cambodia. 24/12/2010 20 3- Prospects of Foreign Entrepreneurs in Cambodia (Cont.) 3-2-REASONS TO INVEST IN CAMBODIA (Cont.) 3.2.4 "Fast-track" investment approval: The CDC provides information and application documents, evaluates and processes investment applications in less than 45 days. The CDC also grants customs duties and tax exemption, registers the company, issues visas and work permits, and facilitates other downstream administrative procedures procedures. 3. 2.5 Special Promotion Zones: Industrial Zones are being developed in the capital, Phnom Penh and the main deep-water port, Sihanoukville. Investment in these zones will qualify investors for additional incentives. 3.2.6 Plentiful supply of labour and natural resources: Cambodia has a population of 9 million people, of which 51% are in the 'working age" group. Our labour force is hard working and motivated. Labour costs are low compared with other Asian countries and our natural resources- especially oil and minerals-are only now being discovered. 3.2.7 Southeast Asia's burgeoning markets are on the doorstep: As part of the Greater Mekong Sub-regional Economic Group, Cambodia is ideally placed to take advantage of the area's fast-developing consumer markets. Cross-border movement of goods will further boost trade when Cambodia becomes a member of the Association of Southeast Asian Nations (ASEAN). ( ) 3.2.8 International financing for Infrastructure projects: Promises for one billion US dollars in foreign aid have already been made...a vote of confidence by the international community in the future of Cambodia. 3.2.9 3 2 9 Preferential Trading Status: Cambodia qualifies for Generalized System of Preferences (GSP) and this status has already been granted to the Kingdom by the European Union, Japan, Scandinavia, Canada and Australia. We are also discussing Most Favored Nation Status (MFN) with the United States of America. We believe Cambodia's free market economy has enormous potential for far-sighted investors investors. 24/12/2010 21
  3. 3. 3- Prospects of Foreign Entrepreneurs in Cambodia (Cont.) 3-3-What are the businesses in Cambodia? 1) Crop production. 2) Livestock production. 3) Fishery. 4) Manufacturing and processing of food and related products. 5) Manufacturing of textile mill products. 6) Manufacturing of apparel and other textiles. 7) Manufacturing of furniture and fixtures. 8) Manufacture of paper and allied products. 9) Manufacturing of chemicals and allied products. 10) Manufacture of rubber and miscellaneous plastics. 11) Manufacture of leather and other products. 12) Manufacture of fabricated metal products. 13) Manufacture of electrical and electronic equipment. 14) Manufacture of transportation and equipment. 1 5) Highway and bridge construction. 16) Exploitation of minerals, ore, coal, oil and natural gas. 1 7) Production of machinery and Industrial equipment. 18) Hotel construction. 19) Medical complex of international standards, educational facilities of international standards, vocational training centers. 20) Physical infrastructure facilities to support the tourism and cultural sectors. 21) Production and exploitation activities to protect the environment. 24/12/2010 22 3- Prospects of Foreign Entrepreneurs in Cambodia (Cont.) 3-3-What are the businesses in Cambodia? (Cont.) Highlight: Agriculture: CDC approved agricultural investment projects worth a combined $499.7 million in the first eight months of 2009, in comparison to $ $81.7 million worth of projects approved over the same period in 2008. For investors looking to grow and process crops, Cambodia is an ideal location with plenty of land available for f agricultural concessions. i lt l i Garment: Garment exports from Cambodia in 2008 were worth about US$2.8 billion, with 70 percent of shipments going to retailers i the U it d St t il in h United States. Th E The European U i Union i the is h second-biggest market. Oil & Gas : RGC has been actively seeking to promote and facilitate the development of the country's petroleum resources. Minerals: International mining firms see Cambodia as a new frontier that has yet to be explored. For this reason, and the fact that Cambodia is the only country in South East Asia that allows 100 per cent foreign ownership, overseas mining companies have been keen to invest. Source: Invest in Cambodia, 24/12/2010 23
  4. 4. 3- Prospects of Foreign Entrepreneurs in Cambodia (Cont.) 3-4-TYPE OF FOREIGN BUSINESS IN CAMBODIA According to the Law on Commercial Enterprises, a foreign business is a legal person formed under the o e g bus ess s ega pe so o ed u de t e laws of a foreign country, which has a place of business and conducts business in the Kingdom of Cambodia. It is subject to registration at the Ministry of Commerce Commerce. The three main forms of a foreign business are a representative office a branch and a subsidiary: office, 3 4.1. 3-4.1. Representative Office A Representative Office (RO) may be established by an eligible foreign investor to facilitate the sourcing of local goods and services and to collect information for its parent company. The p p y RO-Agent is subject to a commercial registration requirement, which is handled by the Ministry of Commerce. The words “Representative Office Agent” must be placed before or after the name of the principal enterprise. 24/12/2010 24 3- Prospects of Foreign Entrepreneurs in Cambodia (Cont.) 3-4-TYPE OF FOREIGN BUSINESS IN CAMBODIA (Cont.) ( ) 3.4.2 Branch of Foreign Company A Branch Office is an office that is opened by a company of another foreign country for the purpose of conducting a particular commercial activity in Cambodia. The Branch Office is also subject to the commercial registration requirement which is requirement, handled by the Ministry of Commerce. Additionally, the word “Branch Office” must be placed before or after the name of the parent company. t 3.4.3 Subsidiary A subsidiary is a company that is incorporated in the Kingdom of Cambodia and has at least 51% percent of its capital held by a foreign company. Its formation, management, right and y g p y , g , g other obligations must be detailed in the memorandum and articles of association of the limited company. Each subsidiary is subject to commercial registration requirement, which is handled by the Ministry of Commerce. 24/12/2010 25
  5. 5. 3- Prospects of Foreign Entrepreneurs in Cambodia (Cont.) 3-5-Cambodian Economic Outlook 2010-2011  May 2010, Cambodia's real GDP is expected to expand at modest rates in 2010 and 2011. The report predicts the Cambodian economy will grew in each of the next two years at estimated rates of 4.1% in 2010 and 5% in 2011.  Main drivers: textile tourism construction and agriculture textile, tourism,  The Cambodian National Assembly passed a law on favoring property ownership by foreigners. Developers within th country h D l ithi the t hope th new llaw will the ill encourage foreigners to invest in the construction sector of the economy.  Construction work began on two large hydropower dams in Koh Kong province. Cambodian officials hope these p a ts plants will allow Cambodia to become an electricity a o Ca bod a beco e a e ect c ty exporter. Source: Hubpages, Kingdom of Cambodia Outlook for 2010 2011 24/12/2010 26 3- Prospects of Foreign Entrepreneurs in Cambodia (Cont.) 3-6-Country SWOT Analysis y y  Strengths Weaknesses  Inflation stability  Poor banking and financial system  Low currency volatility  Low labor cost  High corruption  Low tax payable bl  Low educated workforce  Independent Central Bank  Difficult to access credit  Good recent macroeconomic  Inadequate physical and performance f financial infrastructure  High economic growth  Weak legal and judicial  Dollarization of economy institutions  Macroeconomic stability  Prosperous natural resources  Hard work willingness of people g p p  Favorable culture for business management  Liberalized economy and y business 24/12/2010 27
  6. 6. 3- Prospects of Foreign Entrepreneurs in Cambodia (Cont.) 3-6-Country SWOT Analysis (Cont.) (Cont )  Opportunities Threats o WTO membership o Regional integration (ASEAN)  Political conflicts o Emerging market  Large debts. o Democratic country  Crime and theft o Many reforms in many sectors  Large government o Tourist destination (Angkor budget deficit (spend Wat...) more than income) o Strong partnership with many international organizations o Large proportion of active population o Recent political stability 24/12/2010 28 3- Prospects of Foreign Entrepreneurs in Cambodia (Cont.) 3-7- Interviews with Some Foreign Entrepreneurs Q: h Q The global economic d l b l i downturn h has hi hli h d highlighted Cambodia’s vulnerability due to its narrow economic Colin Low base. Is this not then the perfect time for the GE President and Regional Executive - GE country to speed up progress, diversify production, , Growth Initiatives, increase exports, and b i d become more competitive? ii ? south-east Asia A: I think that any country should be focused on all of those things, all of the time, but yes, the downturn should provide an incentive to drive harder on those things. One of Cambodia’s A: We see Cambodia, a young and optimistic biggest problems is a perception issue. Most population, as a key driving force toward development foreign investors are surprised to discover that and reform of the business environment. It is rich in culture and resources that have great potential for doing business here is much easier than in many growth. Cambodia can also boast of its young, Asian countries. The government is pro-business, hardworking and highly-skilled workforce with high infrastructure issues are gradually being fixed, education qualifications. GE recognizes these there is a large, young workforce available, and opportunities and untapped growth potential that are just waiting to be discovered. Cambodia is at the geographic heart of the most dynamic region on the planet. We are excited to partner with the government and the business community towards a total package solution that GE can provide for the development of the country. GE affirms its long-term commitment in the country as a p partner for growth and development. g p Stephen Higgins Q: What attracts a company like GE CEO, ANZ Royal Bank y to C b di ? t Cambodia? Source: Invest in Cambodia, 24/12/2010 29
  7. 7. V- Conclusion and Recommendations 1-Conclusion  Cambodia is good macro economic performance after peace establishment.  Some issues remaining: political conflicts, poor legal & judicial framework, corruption, poor infrastructures poor financial & banking infrastructures, system, large debt etc.  However many strengths & opportunities However, to invest in Cambodia even poor international ranking.  Cambodia would like to invite foreign entrepreneurs to explore opportunity for cooperation and investment in Cambodia Cambodia, namely in any sectors (agriculture, tourism, oil/gas…) where Cambodia has the comparative advantage advantage. 24/12/2010 30 V V- Conclusion and Recommendations (Cont.) 2- Recommendations  Cambodian government itself is the key to improve all sectors of the country with supports of strong willingness of Cambodian people, along with the great foreign aid.  Foreign entrepreneurs should take a look on to invest in because Cambodia would be profitable business place.  The Ministry of Commerce of Cambodia is committed itt d to t implement i l t it its motto:'' tt '' promoting the private sector as the driving force for the Cambodian g economy's growth". 24/12/2010 31