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Why Invest In Cambodia

After emerging from its dark past, Cambodia has begun to solidify the remarkable progress it has achieved since adopting free-market economic policies in the 1990s. From 1998 to 2007, Cambodia’s 9.8% GDP growth ranked sixth in the world and fastest in the Far East after China. Cambodia’s continued upward trajectory is buttressed by durable fundamentals:

  • Political stability
    • Prime minister (under 60) has held power since 1985
    • Several key ministers are also long-serving and experienced
    • Ruling party’s mandate decisively renewed in 2008 election
  • Advantageous location
    • Sandwiched between two larger, more developed economies (Thailand and Vietnam) facilitating economic spillover
    • Midway between China and India – the most important growth areas of the 21st century
    • Along the Gulf of Thailand providing the country with ease-of-access to maritime trade
  • Favorable investment climate
    • 100% foreign ownership, except land (99-year land leases)
    • Attractive investment incentives
    • Open capital account; easy repatriation of profits
    • Government-Private Sector Forum helps reduce obstacles and inefficiencies
  • Largely “dollarized” economy
    • Minimal foreign exchange risks
    • Stable monetary policy and fiscal responsibility
  • Increasing trade integration
    • WTO member since 2004
    • ASEAN membership offers regional trade benefits
    • Duty free or preferential export access to most developed economies
  • Advantageous labor conditions
    • Among Asia’s lowest-cost workforces
    • Abundance of willing, trainable workers
    • Rising literacy rate has surpassed 75%
  • Improving transport connectivity
    • All key road and bridge links with neighboring countries have been or will soon be upgraded
    • Railroad system is being rehabilitated
    • Container sea port in Sihanoukville has been modernized and expanded
    • River port in Phnom Penh is being relocated and enlarged to better access Vietnam’s new deep sea ports
    • Three international airports have been opened
  • Lower costs in telecoms and internet; power next
    • Hyper-competition in mobile and internet sectors has cut user costs
    • New hydropower and coal-fired power plants underway will replace oil-based generation and cut energy costs
  • Untapped natural resources and land
    • Fertile land for production and processing of agricultural commodities
    • Aquaculture and livestock farming and processing potential
    • Abundant mineral deposits await mining
    • Off-shore oil and gas reserves
    • World-class tourism sites (beaches, islands, history, culture, nature)
  • Underpenetrated, growing domestic consumer market
    • Exceptionally youthful demographics ensures rising domestic demand (61% of Cambodians are under 25 years old; median age: 21)
    • Workforce participation, household formation, and urbanization will all show robust growth over the next decade
    • Per capita GDP and purchasing power has more than doubled over the past decade and will continue to rise
    • Emerging import substitution opportunities in various industries
  • Unleveraged financial position
    • Relatively low levels of sovereign, corporate, and consumer debt
    • Well capitalized, conservative banking system
    • No tradition of government bailouts and subsidies (capitalism’s last bastion)
  • Future stock exchange
    • Cambodia Stock Exchange launched in 2011
    • Listing criteria are not onerous

The Role of Private Equity

Cambodia’s banks require debtors to pledge land titles as loan collateral and the bank typically lends 30-50% of the land’s assessed value. While this strict approach has helped keep the banking system solvent, it has excluded many businesses from securing project finance or working capital from banks. In the absence of equities or bond markets, or leasing or factoring companies, private equity stands out as one of the only viable and flexible financing solutions. Leopard Capital has gained prominence in Cambodia as the country’s first, largest, and most experienced private equity group. Thus, it is uniquely positioned to invest in many of Cambodia’s best businesses through transactions negotiated in a comparatively non-competitive environment.

For more information on investment opportunities in Cambodia, please see our Newsletter, Media Coverage, Documents and Links sections.

 

 

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