Executive Summary

Cambodia has experienced rapid economic growth over the last decade, with average annual gross domestic product (GDP) growth topping seven percent. During this time period, the country’s poverty rate decreased by two-thirds, hitting 13.5 percent in 2016. According to Cambodia’s Ministry of Economy and Finance, GDP per capita stood at USD 1,434 in 2017. The tourism, garment, construction and real estate sectors accounted for the bulk of the growth. The average annual inflation rate was estimated at 3.8 percent in 2017.

Cambodia has an open and liberal foreign investment regime. Foreign direct investment (FDI) incentives available to investors include: 100 percent foreign ownership of companies, corporate tax holidays of up to eight years, a 20 percent corporate tax rate after the incentive period ends, duty-free import of capital goods, and no restrictions on capital repatriation.

Despite these incentives, Cambodia has not historically attracted significant U.S. investment. Apart from the country’s relatively small market size, other factors dissuading U.S. investors have included: corruption, a limited supply of skilled labor, inadequate infrastructure (including high energy costs), and a lack of transparency in government approval processes. Failure to consult the business community on new economic policies and regulations has also created difficulties for domestic and foreign investors alike. Notwithstanding these challenges a number of American companies have maintained investments in the country and, in December 2016, Coca-Cola officially opened a USD 100 million bottling plant in Phnom Penh.

The total stock of FDI registered in Cambodia through 2017 was USD 34.6 billion. In 2017 alone, nearly USD 2 billion in FDI flowed into the country. Asian countries represented the largest sources of FDI in 2017 with China investing USD 1.44 billion, Singapore investing USD 252 million, South Korea investing USD 150 million, Hong Kong investing USD 85 million, and Taiwan investing USD 23 million.

Table 1

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2017 161 of 180 http://www.transparency.org/
World Bank’s Doing Business Report “Ease of Doing Business” 2017 135 of 190 www.doingbusiness.org/rankings
Global Innovation Index 2017 101 of 127 https://www.globalinnovation
U.S. FDI in Partner Country (M USD , stock positions) 2012 USD 54 http://www.bea.gov/
World Bank GNI per capita 2016 USD 1,140 http://data.worldbank.org/

Policies Towards Foreign Direct Investment

As mentioned above, Cambodia has an open and liberal foreign investment regime and actively courts FDI. The primary law governing investment is the 1994 Law on Investment. The government permits 100 percent foreign ownership of companies in most sectors. In a few sectors, such as cigarette manufacturing, movie production, rice milling, gemstone mining and processing, publishing and printing, radio and television, wood and stone carving production, and silk weaving, foreign investment is subject to local equity participation or prior authorization from authorities. There is little or no discrimination against foreign investors either at the time of initial investment or after investment. Some foreign businesses, however, have reported that they are at disadvantaged vis-a-vis Cambodian or other foreign rivals that engage in acts of corruption or tax evasion or take advantage of Cambodia’s poor regulatory enforcement.

The Council for the Development of Cambodia’s (CDC) is the lead investment promotion agency in Cambodia and is the principal government agency responsible for providing incentives to stimulate investment. Investors are required to submit an investment proposal to either the CDC or the Provincial-Municipal Investment Sub-committee to obtain a Qualified Investment Project (QIP) status depending on capital level and location of the investment question. More information about investment and investment incentives in Cambodia may be found on the website at: www.cambodiainvestment.gov.kh .

To facilitate foreign investment, Cambodia has created special economic zones (SEZs). These zones provide companies with ready access to land, infrastructure, and services to facilitate the set-up and operation of businesses. Services provided include utilities, tax services, customs facilitation and other administrative services designed to support import-export processes. Projects within the SEZs are also offered with incentives such as tax holidays, zero rate VAT and import duty exemption for raw materials, machinery and equipment. The primary authority responsible for SEZs is the Cambodia Special Economic Zone Board (CSEZB).

Limits on Foreign Control and Right to Private Ownership and Establishment

There are few limitations on foreign control and ownership in Cambodia. Foreign investors may own 100 percent of their investment projects except in the sectors mentioned above. According to Cambodia’s 2003 Amended Law on Investment and related sub-decrees, there are no limitations based on shareholder nationality or discrimination against foreign investors except in relation to investments in real property or state-owned enterprises. Both the Law on Investment and the Amended Law on Investment state that the majority interest in land, however, must be held by one or more Cambodian citizens. Pursuant to the Law on Public Enterprise, the Cambodian government must directly or indirectly hold more than 51 percent of the capital or the right to vote in state-owned enterprises. In addition, the Cambodian Bar has periodically taken actions to restrict or impede the work of foreign lawyers or foreign law firms.

Other Investment Policy Reviews

In compliance with WTO requirements, Cambodia conducted its first review of trade policies and practices in November 2011. The second review was conducted on November 21-23, 2017. Cambodia’s full trade policy review report can be found on the WTO website: https://www.wto.org/english/tratop_e/tpr_e/tp464_e.htm . Cambodia also conducted an Organization for Economic Co-operation and Development investment policy review in 2017.

In response to the WTO trade policy review recommendations, Cambodia completed the following reforms:

  • Elimination of the Certificate of Origin requirement for exports to countries where a certificate is not required;
  • Implementation of online business registration;
  • Adoption of a competitive hiring process for Ministry of Commerce staff;
  • Implementation of risk evaluation measures for the Cambodia Import-Export Inspection and Fraud Repression Directorate General (CamControl) and creation of a CamControl risk management unit;
  • Enactment of the Law on Public Procurement;
  • Enactment of three judicial system laws: the Law on Court Structures, the Law on the Duties and Discipline of Judges and Prosecutors, and the Law on the Organization and Functioning of the Supreme Council of Magistracy;
  • Creation of the Commercial Court as a specialized Court of First Instance;
  • The creation of a credit bureau;
  • Establishment of a Telecom Regulator of Cambodia (TRC); in 2012, the Ministry of Posts and Telecommunication transferred its regulatory role to the TRC;
  • Enactment of the Law on Telecommunications in December 2015; and
  • Enactment of the Law on Animal Health and Production in February 2016.

Areas of ongoing or planned reforms include a law on Special Economic Zones, amending the Standards Law, and enacting laws on competition, food safety, and e-commerce.

Business Facilitation

All businesses are required to register with the Ministry of Commerce (MoC) and the General Department of Taxation (GDT). In January 2016, the Ministry of Commerce launched an online business registration portal that allows all existing and new businesses to register their companies at: http://www.businessregistration.moc.gov.kh . Information about the online business registration process is available on the website of the MoC at www.moc.gov.kh/en-us/company-registration . The link also provides sources of information for various types of business registration documents. Depending on the types of business activities, new businesses are also required to register with other relevant ministries. For example, travel agencies must register with the Ministry of Tourism and private universities must register with the Ministry of Education, Youth and Sport, in addition to registering with the MoC and the GDT. The World Banks 2018 Ease of Doing Business Report ranks Cambodia 183 of 190 countries globally for the ease of starting a business. The report notes that it includes nine separate procedures and can take up to three months to complete all business, tax, and employment registration processes.

Cambodia’s 1994 Law on Investment created an investment licensing system to regulate the approval process for foreign direct investment and provide incentives to potential investors. The website of the Council for the Development of Cambodia (CDC) provides a list of laws, rules, procedures and regulations, which could be useful for foreign investors. CDC’s website is found here: www.cambodiainvestment.gov.kh .

Outward Investment

There are no restrictions on domestic citizens investing abroad. A number of local companies have already invested in neighboring countries, particularly Laos and Myanmar, in various sectors including banking, IT services, legal and consulting services, and the entertainment industry.

BITs or FTAs

Cambodia has signed bilateral investment treaties (BITs) with Austria, Belarus, Bangladesh, China, Croatia, Cuba, Czech Republic, Democratic People’s Republic of Korea, France, Germany, Hungary, India, Indonesia (later terminated), Japan, Kuwait, Laos, Malaysia, the Netherlands, Pakistan, the Philippines, the Republic of Korea, Russia, Singapore, Switzerland, Thailand, Vietnam, and the Organization of the Petroleum Exporting Countries. Future agreements are planned with Algeria, the Belgium-Luxembourg Economic Union, Bulgaria, Egypt, Hungary, Israel, Iran, Libya, Macedonia, Malta, Qatar, Turkey, the United Kingdom, and Ukraine. Cambodia does not have an existing BIT with the United States.

Cambodia has also signed several regional Free Trade Agreements including ASEAN Australia New Zealand Free Trade Agreement, ASEAN India Free Trade Agreement, ASEAN China Free Trade Agreement and ASEAN Investment Comprehensive Agreement. Cambodia is also negotiating ASEAN-Hong Kong, China Investment Promotion and Protection Agreement; Regional Comprehensive Economic Partnership Agreement (RCEP); and ASEAN-Republic of Korea Investment Agreement under the Framework Agreement.

In July 2006, Cambodia signed a Trade and Investment Framework Agreement (TIFA) with the U.S. to promote greater trade and investment in both countries and provide a forum to address bilateral trade and investment issues. In August 2017, the fourth TIFA meeting was held in Washington DC.

Bilateral Taxation Treaties

In the past, Cambodia’s national tax agency, the General Department of Taxation (GDT), has lacked the capacity to collect taxes on a large scale. As a result, many companies avoided paying taxes such as salary tax, value-added tax (VAT), and real estate tax, despite being required to do so under Cambodian laws. The GDT has taken steps, however, to increase tax revenue both by building capacity within the organization and through better implementation of existing tax laws.

Application of Cambodia’s tax laws, while improving, remains inconsistent. In some cases, foreign investors face greater scrutiny to pay taxes than their domestic counterparts. In others, the GDT has been criticized for employing audits and assessing large tax obligations for political purposes.

Cambodia does not have a bilateral taxation treaty with the U.S. The country has entered into taxation agreements with Thailand, Brunei, China, and Singapore. Details of those agreements may be found on Cambodia’s General Department of Taxation (GDT) website here: http://www.tax.gov.kh/en/ir.php .

Transparency of the Regulatory System

Numerous issues related to the general lack of transparency in the regulatory regime arise from the lack of legislation and limited capacity of key institutions. Investors often complain that the decisions of Cambodian regulatory agencies are inconsistent, arbitrary, or motivated by corruption. For example, in May 2016 in what was perceived as a populist move, the government set caps on retail fuel prices, with little consultation with petroleum companies.

Cambodian ministries and regulatory agencies are not legally obligated to publish the text of proposed regulations before their enactment. Draft regulations are only selectively available for public consultation with relevant non-governmental organizations (NGOs) or parties before their enactment. Approved or passed laws are available on websites of some line Ministries but are not always up to date. The Council of Jurists, the government body reviewing law and regulation, publishes a list of updated laws and regulations on its website at http://www.coj.gov.kh .

Under Prakas (sub-decree) 643 of the Ministry of Economy and Finance, enterprises must submit their annual financial statements to be audited by an independent auditor registered with the Kampuchea Institute of Certified Public Accountants and Auditors (KICPAA) provided those enterprises meet two of the following three criteria: (1) annual turnover above KHR 3 billion (approximately USD 750,000); (2) total assets above KHR 2 billion (approximately USD 500,000); and (3) more than 100 employees. QIPs registered with the CDC are also obligated to submit their annual financial statement to be audited by an independent auditor registered with the KICPAA.

International Regulatory Considerations

As a member of the ASEAN since 1999, Cambodia is required to comply with certain rules and regulations with regard to free trade agreements with the 10 ASEAN member states. These include tariff-free importation of information and communication technology (ICT) equipment, harmonizing custom coding, harmonizing the medical device market, as well as compliance with tax regulations on multi-activity businesses, among others.

As a member of the WTO, Cambodia has been drafting new laws and amending existing laws and regulations to comply with WTO rules. Relevant laws and regulations are notified to the WTO legal committee after their adoption. A list of Cambodian legal updates in compliance with the WTO is described in the above section regarding Investment Policy Reviews.

Legal System and Judicial Independence

The Cambodian legal system is primarily based on French civil law. Under the 1993 Constitution, the King is the head of state and the elected Prime Minister is the head of government. Legislative power is vested in a bicameral parliament, while the judiciary makes up the third branch of government. Contractual enforcement is governed by Decree Number 38 D Referring to Contract and Other Liabilities. More information on this decree can be found at http://www.cambodiainvestment.gov.kh/decree-38-referring-to-contract-and-other-liabilities_881028-2.html .

Although the Cambodian Constitution calls for an independent judiciary, most investors are generally reluctant to use the Cambodian judicial system because the courts are perceived as unreliable and susceptible to external political influence or bribery. Both local and foreign businesses report problems with inconsistent judicial rulings, corruption, and difficulty enforcing judgments. For these reasons, most commercial disputes are currently resolved through negotiations facilitated by the Ministry of Commerce, the Council for the Development of Cambodia, the Cambodian Chamber of Commerce, or other institutions.

Cambodia adopted a Commercial Arbitration Law in 2006. In 2010, the government provided for the establishment of the National Commercial Arbitration Center (NCAC), the country’s first alternative dispute resolution mechanism, to enable companies to resolve commercial disputes more quickly and inexpensively than through the court system. The NCAC was officially launched in March 2013, but has limited capacity.

Laws and Regulations on Foreign Direct Investment

Cambodia’s 1994 Law on Investment created an investment licensing system to regulate the approval process for foreign direct investment and provide incentives to potential investors. In March 2003, the government simplified licensing and increased transparency and predictability by enacting the Law on the Amendment to the Law on Investment (Amended Law on Investment). Sub-decree No. 111 on the Implementation of the Law on the Amendment to the Law on Investment, issued in September 2005, lays out detailed procedures for registering a QIP, which is entitled to certain taxation incentives, with the CDC and provincial/municipal investment subcommittees.

Information about investment and investment incentives in Cambodia may be found on the CDC’s website: http://www.cambodiainvestment.gov.kh .

Competition and Anti-Trust Laws

The government has announced plans to draft a competition law but the law has yet to be enacted. A competition department was established under the Directorate General of CamControl in 2016. The department aims to work on drafting laws and regulations on competition, study and coordinate with various relevant agencies on local and international competition. The draft law is now reportedly being considered in a technical working group at the Council of Ministers.

Expropriation and Compensation

Land rights are a contentious issue in Cambodia, complicated by the fact that most property holders do not have legal documentation of their ownership as a result of official policies and social upheaval during Khmer Rouge era in the 1970s. Numerous cases have been reported of influential individuals or groups acquiring land titles or concessions through political and/or financial connections, and then using force to displace communities to make way for commercial enterprises.

In late 2009, the National Assembly approved the Law on Expropriation, which sets broad guidelines on land-taking procedures for public interest purposes. It defines public interest activities to include construction, rehabilitation, preservation, or expansion of infrastructure projects, and development of buildings for national defense and civil security. These provisions include construction of border crossing posts, facilities for research and exploitation of natural resources, and oil pipeline and gas networks. Property can also be expropriated for natural disasters and emergencies, as determined by the government. Legal procedures regarding compensation and appeals are expected to be established in a forthcoming sub-decree, which is under internal discussion within the technical team of the Ministry of Economy and Finance.

In 2017, a U.S.-owned independent newspaper had its bank account frozen purportedly for failure to pay taxes. It is believed that, while the company may have had some tax liability, the action taken by Cambodia’s General Department of Taxation, notably an inflated tax assessment, was politically motivated and intended to halt operations. These actions took place at the same time the government took steps to reduce the role of press and independent media in the country as part of a wider anti-democratic crackdown.

Dispute Settlement

ICSID Convention and New York Convention

Cambodia has been a member of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention – also known as the Washington Convention) since 2005. Cambodia is also a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the New York Convention) since 1960.

Investor-State Dispute Settlement

International arbitration is available for Cambodian commercial disputes. In March 2014, the Supreme Court of Cambodia upheld the decision of the Cambodian Court of Appeal, which had ruled in favor of the recognition and enforcement of an arbitral award issued by the Korean Commercial Arbitration Board of Seoul, South Korea. Cambodia became a member of the World Bank’s International Center for Settlement of Investment Disputes in January 2005.
In 2009, the International Center approved a U.S. investor’s request for arbitration in a case against the Cambodian government, and in 2013 the tribunal rendered an award in favor of Cambodia.

International Commercial Arbitration and Foreign Courts

Commercial disputes can also be resolved through the National Commercial Arbitration Center (NCAC), Cambodia’s first alternative dispute resolution mechanism, which was officially launched in March 2013.

Bankruptcy Regulations

Cambodia’s 2007 Law on Insolvency was intended to provide collective, orderly, and fair satisfaction of creditor claims from debtor properties and, where appropriate, the rehabilitation of the debtor’s business. The Law on Insolvency applies to the assets of all business people and legal entities in Cambodia. The World Bank’s 2018 Doing Business Report ranks Cambodia 74 out of 190 in terms of the “ease of resolving insolvency.”

In 2012, Credit Bureau Cambodia (CBC) was established in an effort to create a more transparent credit market in the country. CBC’s main role is to provide credit scores to banks and financial institutions, and to improve access to credit information.

Investment Incentives

All investments must be registered with the Ministry of Commerce. Cambodia’s Law on Investment and Amended Law on Investment offers varying types of investment incentives for projects that meet specified criteria. Investors seeking an incentive must submit an application to the CDC. Investors who wish to apply are required to pay an application fee of KHR 7 million (approximately USD 1,750), which covers securing necessary approvals, authorizations, licenses, or registrations from all relevant ministries and entities, including stamp duties. Under a 2008 sub-decree, the CDC is required to seek approval from the Council of Ministers for investment proposals that involve capital of USD 50 million or more, politically sensitive issues, the exploration and exploitation of mineral or natural resources, or infrastructure concessions. The CDC is also required to seek approval from the Council of Ministers for investment proposals that will have a negative impact on the environment or the government’s long-term strategy.

Since 2011, tax incentives have been provided for rice farming, paddy rice purchase and the export of milled rice. Meanwhile QIPs are entitled to receive different incentives such as corporate tax holiday, special depreciation allowance, and import taxes exemption on production equipment, construction materials, and production inputs used to produce exports. Investment projects located in designated special promotion zones or export-processing zones are also entitled to the same incentives. Industry-specific investment incentives, such as a three-year profit tax exemption, may be available in the agriculture and agro-industry sectors. More information about the criteria and investment areas eligible for incentives can be found at the following link: www.cambodiainvestment.gov.kh/investment-scheme/investment-incentives.html .

Investment activities excluded from incentives are detailed in the September 2005 Sub-Decree on the Implementation of the Amendment to the Law on Investment. These include the following sectors: retail, wholesale, and duty-free stores; entertainment establishments (including restaurants, bars, nightclubs, massage parlors, and casinos); tourism service providers; currency and financial services; press and media-related activities; professional services; and production and processing of tobacco and wood products. Incentives also may not be applied to investments in the production of certain products if the investment is less than USD 500,000. This includes food and beverages; textiles, garments, and footwear; and plastic, rubber, and paper products. Investors are not required to place a deposit guaranteeing their investment except in cases involving a concession contract or real estate development project.

Foreign Trade Zones/Free Ports/Trade Facilitation

To facilitate the country’s development, the Cambodian government has shown great interest in increasing exports via geographically defined special economic zones (SEZs). In December 2005, the government adopted the Sub-Decree on Special Economic Zones to speed up the creation of the zones by detailing the procedures, conditions, and incentives for investors. The Government is also drafting the law on Special Economic Zones, which is now undergoing technical review within the CDC. There are currently 13 special SEZs, which are located in Phnom Penh, Koh Kong, Kandal, Kampot, Sihanoukville, and near the borders of Thailand and Vietnam. The main investment sectors in these zones include garments, shoes, bicycles, food processing, auto parts, motorcycle assembly, and electrical equipment manufacturing. Twelve more SEZs are under construction.

Performance and Data Localization Requirements

The Law on Investment permits investors to hire foreign nationals for employment as managers, technicians, or skilled workers if the qualifications and/or expertise are not available in Cambodia. According to the Cambodian Labor Law, the number of foreign employees should not exceed ten percent of the total number of Cambodian employees. In practice, companies can request an increase in this ratio from the Ministry of Labor.

Under Cambodian law, most foreign investments and foreign investors are subject to the following taxes: corporate profits tax (20 percent), tax on individual salaries (0 to 20 percent), withholding taxes (4 to 15 percent), value-added taxes (0 to ten percent), and import duties (0 to 35 percent).

Cambodia does not have any forced localization policy that obligates foreign investors to use domestic contents in goods or technology. Cambodia also does not require foreign Information Technology providers to turn over source code. The General Department of Information and Communications Technology (ICT) in the Ministry of Post and Telecommunications oversees ICT-related policy in Cambodia.

Real Property

Mortgages exist and Cambodian banks often require certificates of property ownership as collateral before approving loans. The mortgages recording system, which is handled by private banks, is generally considered reliable.

The 2001 Land Law provides a framework for real property security and a system for recording titles and ownership. Land titles issued prior to the end of the Khmer Rouge regime in 1979 are not recognized due to the severe dislocations that occurred during the Khmer Rouge period. The government is making efforts to accelerate the issuance of land titles, but in practice the titling system is cumbersome, expensive, and subject to corruption. The majority of property owners lack documentation proving ownership. Even where title records exist, recognition of legal title to land has not been uniform, and there are reports of court cases in which judges have sought additional proof of ownership. Although foreigners are constitutionally forbidden to own land, the 2001 law allows long- or short-term leases to foreigners. Cambodia also allows foreign ownership in multi-story buildings from the second floor up.

Cambodia was ranked 123 out of 190 economies for ease of registering property in the 2018 World Bank Doing Business Report.

Intellectual Property Rights

Infringement of IPR is pervasive, particularly related to software, music, books, cigarettes, alcohol, and pharmaceuticals. In March 2015, the Cambodian government submitted its instrument of accession to the Madrid Protocol for International Registration of Marks at the World Intellectual Property Organization.

Although Cambodia is not a major center for the production and export of pirated compact discs, DVDs, or other copyrighted materials, local businesses report Cambodia is growing as a source of pirated material due to weak enforcement. An inter-ministerial committee was established to combat piracy of compact discs and DVDs in the domestic market in 2013. Infringement complaints may be made to the Economic Police, Customs, the Cambodia Import-Export Inspection and Fraud Repression Directorate General, or the Ministry of Commerce. The division of responsibility among each agency, however, is not clearly defined. The Cambodian Counter Counterfeit Committee was established in 2014 as an umbrella organization for the ministries and agencies working on anti-counterfeit enforcement measures. In April 2018, Cambodia Counter Counterfeit Committee destroyed 60 tons of fake cosmetic products that purported to be made in countries like Japan and South Korea.

Cambodia is not listed in the U.S. Trade Representative (USTR)’s Special 301 report or notorious markets report.

For additional information about treaty obligations and points of contact at local IP offices, please see the World Intellectual Property Organization’s country profiles at: http://www.wipo.int/directory/en/details.jsp?country_code=KH .

Cambodia has adopted legislation concerning the protection of intellectual property rights (IPR), including the Law on Copyrights and the Law on Patent and Industrial Design. Cambodia is a member of the World Intellectual Property Organization and the Paris Convention for the Protection of Industrial Property, and is a party to the ASEAN Framework Agreement on Intellectual Property Cooperation. Cambodia has also concluded bilateral agreements on intellectual property protection and cooperation with the United States, China, Thailand, Japan, Singapore, the EU (i.e., the European Patents Office), and South Korea.

Cambodia has enacted several laws pursuant to its WTO commitments on intellectual property. Copyrights are governed by the Law on Copyrights and Related Rights, which was enacted in January 2003. Trademarks are governed by the Law Concerning Marks, Trade Names and Acts of Unfair Competition, which was enacted in 2002. A patent law has been in place since 2003.

Some gaps in intellectual property protection remain, however, and outstanding legislation includes a draft law for protecting trade secrets, a law on integrated circuit protection, and legislation on protecting encrypted satellite signals required by the World Intellectual Property Organization. In January 2014, Cambodia enacted the Law on Geographical Indications, recognizing geographical indications of local and foreign products. Cambodia became a member of the Patents Cooperation Treaty (PCT) in December 2016 and joined the Hague Agreement Concerning the International Registration of Industrial Design in February 2017.

Capital Markets and Portfolio Investment

In a move designed to address the need for capital markets in Cambodia, the Cambodian Securities Exchange (CSX) was launched on July 11, 2011. In April 2012, the Phnom Penh Water Supply Authority, a state-owned enterprise, was the first domestically registered company on the CSX.

In September 2017, the National Bank of Cambodia (NBC) adopted Prakas B7-017-300 Pror Kor on Condition for Banking and Financing Institutions to be listed on the Cambodian Securities Exchange. The Prakas sets additional requirements for banks and financial institutions that intend to issue securities to the public. This includes prior approval from the NBC and minimum equity of KHR 60 billion (approx. USD 15 million).

Cambodia does not currently have a functioning debt market but has taken steps to establish one. The Securities and Exchange Commission of Cambodia is working toward the issuance of Cambodia’s first government bond by 2018.

Money and Banking System

As the central bank, the National Bank of Cambodia (NBC) regulates the operations of banking systems in Cambodia. Foreign banks and branches are freely allowed to register and operate in the country. There are 39 commercial banks, 15 specialized banks (set up to finance specific turn-key projects such as real estate development), 54 licensed microfinance institutions, and seven licensed microfinance deposit taking institutions in Cambodia. NBC has also granted licenses to 11 financial leasing companies and one credit bureau company to improve transparency and credit risk management and encourage more lending to small-and medium-sized enterprise customers.

In August 2017, Moody’s Investor Services affirmed Cambodia’s issuer rating at B2 with a stable outlook. The overall B2 rating was based on Cambodia’s strong revenue collection and macroeconomic and exchange rate stability. However, Moody’s cited several potential threats such as corruption, weak rule of law, high dollarization, and political risk. In addition, persistently strong credit growth, which has outpaced nominal GDP growth, poses risks to economic and financial stability, Moody’s said.

The government does not use regulation of capital markets to restrict foreign investment. Banks have been free to set their own interest rates since 1995, and increased competition between local institutions has led to a gradual lowering of interest rates from year to year. However, in March 2017, at the direction of Prime Minister Hun Sen, the NBC capped interest rates on loans offered by micro-finance institutions (MFIs) at 18 percent per annum. MFIs had no opportunity to consult about the decision, and were given just three weeks to implement the interest rate cap.

In March 2016, the NBC doubled the minimum capital reserve requirement for banks to USD 75 million for commercial bank and USD 15 million for specialized banks. Based on the new regulations, microfinance deposit taking institutions are required to increase capital reserves from USD 2.5 million to USD 30 million and other microfinance institutions need to increase to USD 1.5 million.

Cambodia’s financial system is dominated by banking institutions (commercial and specialized banks), whose assets comprise approximately 90 percent of the total assets in the financial system. By the end of 2016 (the latest figure available), total assets in banking institutions had reached USD 23.76 billion, an increase of 21 percent from 2015 and equivalent to 118.20 percent of the GDP. ACLEDA bank and Canadia bank, both local banks, have the most assets in the market, amounting to 19.30 percent and 13.80 percent of the national total, respectively. The increasing maturity of the financial sector were evidenced by the public’s improved understanding of financial services, the expansion of financial intermediation, and the increasing diversity of financial products and services. In 2016, the number of depositors increased by 13.4 percent to 2,993,386, and the number of borrowers went up by 45.72 percent to 746,930. Loans and deposits rose by 20.52 percent to USD 13.83 billion and 21.82 percent to USD 13.75 billion, respectively.

The ratio of non-performing loans increased by 0.4 percentage points to 2.4 percent in 2016.

Foreign Exchange and Remittances

Foreign Exchange Policies

Though Cambodia has its own currency, the riel (denoted as KHR), U.S. dollars widely circulation in Cambodia and remain the primary currency for most large transactions. There are no restrictions on the conversion of capital for investors. Cambodia’s 1997 Law on Foreign Exchange states that there shall be no restrictions on foreign exchange operations through authorized banks. Authorized banks are required, however, to report the amount of any transfer equaling or exceeding USD 100,000 to the NBC on a regular basis.

Loans and borrowings, including trade credits, are freely contracted between residents and nonresidents, provided that loan disbursements and repayments are made through an authorized intermediary. There are no restrictions on the establishment of foreign currency bank accounts in Cambodia for residents.

The exchange rate between the riel and U.S. dollar is governed by a managed float and has been stable at around one U.S. dollar to KHR 4,000. Daily fluctuations of the exchange rate are low, typically under three percent. The Embassy is not aware of any cases in which investors have encountered obstacles in converting local currency to foreign currency or in sending capital out of the country. In the past several years, the Cambodian government has taken steps to increase general usage of the riel but, as noted above, the country’s economy remains largely dollarized.

Remittance Policies

Article 11 of the Law on the Amendment to the Law on Investment of 2003 states that QIPs can freely remit abroad foreign currencies purchased through authorized banks for the discharge of financial obligations incurred in connection with investments. These financial obligations include:

  • Payment for imports and repayment of principal and interest on international loans;
  • Payment of royalties and management fees;
  • Remittance of profits; and
  • Repatriation of invested capital in case of dissolution.

Sovereign Wealth Funds

Cambodia does not have a Sovereign Wealth Fund.

Cambodia currently has 15 state-owned enterprises (SOEs). Cambodian SOEs include Electricite du Cambodge, Sihanoukville Autonomous Port, Telecom Cambodia, Cambodia Shipping Agency, Cambodia Postal Services, Rural Development Bank, Green Trade Company, Printing House, Siem Reap Water Supply Authority, Construction and Public Work Lab, Phnom Penh Water Supply Authority, Phnom Penh Autonomous Port, Kampcheary Insurance, Cambodia Life Insurance, Cambodia Securities Exchange.

In accordance with the Law on General Stature of Public Enterprises, there are two types of commercial SOEs in Cambodia. One type is that the state company’s capital is 100 percent owned by the Government; and another type is a joint-venture in which a majority of capital is owned by the state and a minority by private investors.

Each SOE is under the supervision of a line ministry or government institution and is overseen by a board of directors drawn from among senior government officials. Private enterprises are generally allowed to compete with state-owned enterprises under equal terms and conditions. These entities are also subject to the same taxes and value-added tax rebate policies as private-sector enterprises. SOEs are covered under the law on public procurement, which was promulgated in January 2012, and their financial reports are audited by the appropriate line ministry, the Ministry of Economy and Finance, and the National Audit Authority.

Privatization Program

There are no ongoing privatization programs, nor has the government announced any plans to privaitize existing SOEs.

The government does not have policies to promote responsible business conduct (RBC) or corporate social responsibility (CSR). However, there is strong awareness of RBC among larger and multinational companies in the country. U.S. companies, for example, have implemented a wide range of CSR activities to promote skills training, the environment, general health and well-being, and financial education. These programs have been warmly received by both the general public and the government.

A number of economic land concessions in Cambodia have led to high profile land rights cases. The Cambodian government has recognized the problem, but in general, has not effectively and fairly resolved land rights claims. The Cambodian government does not have a national contact point for Organization for Economic Cooperation and Development (OECD) multinational enterprises guidelines and does not participate in the Extractive Industries Transparency Initiative.

The Anti-Corruption Law was adopted in 2010 to combat corruption through education, prevention, and more effective enforcement. Under this law, all civil servants are obligated to declare their financial assets to the government every two years. The fourth round of asset and debt declaration took place during January 2015. The Anti-Corruption Unit (ACU), which was formed in 2010, has launched several high-profile prosecutions against public officials, including members of the police and judiciary. The ACU has also been accused of deliberately targeting the political opposition.

Despite the passage of the Anti-Corruption Law and creation of the ACU, business people, both local and foreign (including U.S. companies), have identified corruption, particularly within the judiciary, customs services, and tax authorities, as one of the greatest deterrents to investment in Cambodia. Corruption was cited by a plurality of respondents to the World Economic Forum survey as the most problematic factor for doing business in Cambodia. The minimum salary for administrative civil servants was raised from USD 138 to USD 175 per month in 2016. However, these wages still remain below the level required to maintain a suitable quality of life in Cambodia. As a result, public employees remain susceptible to corruption. Local and foreign businesses report that they must often pay facilitation fees to expedite business transactions. Even though the Cambodian government has published the official fees of public services since early 2013, the practice of paying additional fees remains common. Furthermore, the process for awarding government contracts is not transparent and is susceptible to corruption. Transparency International’s Corruption Perception index ranks Cambodia 161th of 180 countries globally, the worst ranking of all ten ASEAN member states and the third worst in the Asia Pacific region, with only North Korea and Afghanistan receiving worse rankings.

In 2015, the ACU, in collaboration with the private sector, established guidelines encouraging private companies to create internal codes of conduct prohibiting bribery and corrupt practices. The guidebook is publicly available on the website of the ACU at http://www.acu.gov.kh/en_index.php . Private companies can sign a Memorandum of Understanding (MoU) with the ACU pledging to operate corruption-free and cooperate on anti-corruption efforts. Since the program started in 2015, more than 80 private companies have signed an MoU with the ACU.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

Cambodia ratified the UN Convention against Corruption in 2007 and endorsed the Action Plan of the Asian Development Bank / OECD Anti-Corruption Initiative for Asia and the Pacific in 2003. Cambodia is not a party to the OECD Convention on Combating Bribery.

Resources to Report Corruption

Contact at government agency or agencies are responsible for combating corruption:
Om Yentieng
President, Anti-Corruption Unit
No. 54, Preah Norodom Blvd, Sangkat Phsar Thmey 3, Khan Daun Penh, Phnom Penh
Telephone: +855-23-223954
Email: info@acu.gov.kh

Contact at “watchdog” organization
Preap Kol
Executive Director, Transparency International Cambodia
Telephone: +855-23-214430
Email: info@ticambodia.org

Foreign companies have been the targets of violent protests in the past, such as the 2003 anti-Thai riots against the Embassy of Thailand and Thai-owned commercial establishments. More recently, there were reports that Vietnamese-owned establishments were looted during a January 2014 labor protest. Authorities have also used force, including truncheons, electric cattle prods, fire hoses, and even gunfire, to disperse protestors. Incidents of violence directed at businesses, however, are rare. The Embassy is unaware of any incidents of political violence directed at U.S. or other non-regional interests.

Nevertheless, political tensions remain. After relatively competitive communal elections in June 2017 where Cambodia’s opposition party won nearly 50 percent of available seats, the government took steps to strengthen its grip on power and weaken any viable political opposition. In September 2017, the head of the country’s leading opposition party was arrested and charged with treason and, in November, the same opposition party was banned. The government has also taken steps to consolidate power, limit free speech, and stifle independent media. While there are few overt signs the country is growing less secure today, the possibility for insecurity exists going forward, particularly if a large percentage of the population remains disenfranchised.

Cambodia’s economy is primarily focused on four sectors: agriculture, garment production, tourism, and construction. The agricultural sector employees some 65 to 70 percent of the labor force. There around one million people working in the garment and footwear sector, the majority of whom are women; around 988,000 are employed in the tourism sector; and a further 200,000 people in construction. Around 1.5 to 2 million Cambodians work abroad – the official statistic is 1.2 million, but most experts estimate the figure far higher. Around 55 percent of the population is under the age of 25. The United Nations has estimated that around 300,000 new job seekers enter the labor market each year.

Given the severe disruption to the Cambodian education system and loss of skilled Cambodians during the 1975-1979 Khmer Rouge period, workers with higher education or specialized skills are few and in high demand. The Cambodia Socio-Economic Survey conducted in 2014 (the latest report available) found that about 36 percent of the labor force had completed a primary education. Only seven percent of the labor force had completed secondary education. The 2015-2016 Global Competitiveness Report of the World Economic Forum (WEF) identified an inadequately educated workforce as one of the most serious problems to doing business in Cambodia. Cambodia ranked 48 out of 137 on labor market efficiency of the WEF 2017-2018. Many middle management positions in the formal garment sector are filled by foreign nationals.

Cambodia’s 2016 Trade Union Law (TUL) erects barriers to the right of association and the rights to organize and bargain freely. The ILO has stated publicly that the law could hinder Cambodia’s obligations to international labor conventions 87 and 98, and has suggested substantial revisions to the law both during the 2017 meeting of the Committee on Application of Standards, and through a Direct Mission sent by the ILO to investigate the law’s implementation. The government has expressed a willingness to revisit some aspects of the law as initially drafted.

Unresolved labor disputes are mediated first on the shop-room floor, after which they are brought to the MOLVT for conciliation. If conciliation fails, then the cases may be brought to the Arbitration Council (AC), an independent state body that interprets labor regulations in collective disputes, such as when multiple employees are dismissed. The TUL states that only unions with most representative status (MRS – according to which a union must attain the membership of at least 30 percent of all enterprise employees) have the right to represent their members in the AC. Since the TUL went into force, AC cases have decreased from over 30 per month to less than five.

The labor code prohibits forced or compulsory labor, establishes 15 as the minimum allowable age for paid work, and sets 18 as the minimum age for anyone engaged in work that is hazardous, unhealthy, or unsafe. The statute also guarantees an eight-hour workday and 48-hour work week, and provides for time-and-a-half pay for overtime or work on an employee’s day off.

Cambodia maintains a minimum wage for workers in the garment and footwear sector. The minimum wage for garment workers was set at USD 170 per month in 2018 by the Labor Advisory Committee (LAC), a tripartite group comprised of representatives from the government, labor, and manufacturers. Since 2010, the wage rate for workers in the sector has increased from USD 61 to USD 170. The MOLVT has recently had its third tripartite consultation on a Draft Minimum Wage Law that is likely to take effect in the third quarter of 2018. The law will, for the first time, allow minimum wages outside of the garment and footwear sector.

Cambodia has an agreement with the Overseas Private Investment Corporation (OPIC) to encourage investment and is eligible for the Quick Cover Program under which OPIC offers debt financing and political risk insurance coverage for projects on an expedited basis. A number of companies in Cambodia have received approval for OPIC financing. Cambodia is also a member of the Multilateral Investment Guarantee Agency of the World Bank, which offers political-risk insurance to foreign investors. The Export-Import Bank of the United States (Ex-Im) provides financing for purchases of U.S. exports by private-sector buyers in Cambodia on repayment terms of up to seven years. Ex-Im support is typically limited to transactions with a commercial bank functioning as an obligor or guarantor. Ex-Im will, however, consider transactions without a bank on a case-by-case basis.

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

Host Country Statistical Source USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) (M USD ) 2017 USD 22,200 2017 USD 21,985 www.worldbank.org/en/country 
Foreign Direct Investment Host Country Statistical Source USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in Partner Country (M USD , stock positions) 2017 USD 1,362 2012 USD 54 BEA data available at
Host Country’s FDI in the United States (M USD , stock positions) N/A N/A BEA data available at
Total Inbound Stock of FDI as % host GDP 2017 155.8% N/A N/A

According to International Monetary Fund (IMF) data, total FDI in Cambodia as reported by counterpart economies increased by 66.66 percent reaching USD 5 billion in 2016. The number of Cambodian investments outside the country is still quite small compared to inward foreign direct investment. In 2016, Cambodia’s outward foreign direct investment totaled USD 260. Singapore remained the top outward investment destination for Cambodia. The IMF’s 2017 data are not yet available.

NOTE: A discrepancy exists between IMF data and investment figures tracked by The Council for the Development of Cambodia (CDC). While the IMF database did not record any investment value from China in 2016, there were USD 731 million investment values as reported by the Council for the Development of Cambodia. Readers should consult with the CDC’s website for the official FDI as represented by the Cambodian government.

Table 3: Sources and Destination of FDI, 2016

Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward 5,022 100% Total Outward 260 100%
Netherlands 1,384 27.56% Singapore 162 62.31%
South Korea 1,261 25.11% China 105 40.38%
Thailand 994 19.79% Philippines 12 4.62%
Malaysia 920 18.32% South Korea 12 4.62%
France 358 7.13% Myanmar 10 3.85%
“0” reflects amounts rounded to +/- USD 500,000.

Table 4: Sources of Portfolio Investment

Data not available.

David Ryan Sequeira
Economic Officer
U.S. Embassy Phnom Penh
No. 1, Street 96, Sangkat Wat Phnom, Phnom Penh, Cambodia
Phone: (855) 23-728-401
Email: CamInvestment@state.gov

2018 Investment Climate Statements: Cambodia
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