Blue Chips – Multinational Corporations Investing in Cambodia

One way to measure an emerging economy is by the quality and size of investors making a home there. With international brands such as Marriott, Mizuho and Coca-Cola entering the market or consolidating operations of late, the spotlight is well and truly on Cambodia.

From property developers to manufacturing plants, companies from around the region and the world are flooding Cambodia. And with average GDP  growth of about 7% each year, it is no surprise. The financial services sector follows such growth wherever it happens, and with so many Japanese firms making a mark in Cambodia it is only natural that Mizuho Bank, one of Japan’s largest financial services providers with more than $1 trillion in assets, has entered the market.

“Cambodia is one of the most promising candidates to become a ‘China Plus One’ partner. We believe that Cambodia is and should be playing an increasingly important role in the regional and global supply chain,” says Takeshi Fukui, the CEO of Mizuho in Cambodia, referring to the school of thought that Cambodia is primed to see an influx of multinational manufacturing plants and other investments looking to safeguard their operations by basing operations in more than one country.

Upward trend

And with the surge in interest, a rising tide is set to lift all boats. “Some multinational companies may relocate their production centres here from China,” he adds. “Complete car manufacturing and other sophisticated industries may locate laboratory and research functions in the country. The current perception of Cambodia, which is often associated with low-tech and labour intensive industries, will change significantly if the current trend continues.”

Companies coming into Cambodia are seeing vast opportunities in the local labour force. According to Rocky Khou,  general manager of Khou Investment and developer for the new Marriott hotel in Phnom Penh, a young, vibrant population is, indeed, a great attraction. “There’s an abundance of robust, determined and trainable individuals in the workforce,” he says.

Filling the Gaps

The Marriott project engages local talent in the construction, hospitality and tourism sectors, and with more than five million expected arrivals in  2017, tourism will remain one of  the pillars of Cambodia’s growing economy. Mr Khou believes that with such numbers, there are still many niches be filled. “We have found that the accommodation options for international guests are either large, high-end five-star hotels or small, local establishments,” he says. So his latest project will offer something in between.

Fukui, too, says  that Mizuho has identified a particular area where they can make an immediate impact in the Cambodian market, with a gap in the capabilities of local financial institutions to fund multinational companies. “Roughly speaking, loans with ‘non-large exposure” comprise approximately 80-100% and loans ‘with collateral’ comprise nearly 99% among these. The statistics shows that they lend mainly to SMEs and individual persons,” he says. “Mizuho is willing to transfer its knowledge on evaluating companies and taking, as well as managing, risks as an international bank. Such knowledge is essential to support large businesses, including multinational corporations, which need a large volume of funds.”

Old Hands

And it is not only new players that are making a splash in Cambodia. As the population continues to grow and business opportunities continue to develop, well-established companies such as Coca-Cola are also reaffirming their commitment to the country. “We recently opened a new factory with a $100 million investment and that will allow us to capture the growth opportunities in this young, increasingly competitive and dynamic marketplace,” says David Wigglesworth, general manager of Coca-Cola’s Cambodia operations. “Cambodia is on an upward trajectory and the government is committed to sustaining that progress. The country is improving i ts transport connectivity and making changes to the river port to provide better access to regional deep sea ports in order to ease the transporting of goods.”

Despite being a long way behind regional powerhouses such as Malaysia, Thailand and Singapore, Cambodia obviously has the potential to play a more important role in ASEAN. The big players agree that political stability is a key factor to the investment landscape in Cambodia. “Foreign investors need to have confidence in the political status of the country before they invest,” says Khou.

Wiggleswoth, of Coca-Cola, praised efforts to clean up a previously non-transparent investment climate, which had previously been a deterrent for investors, with the introduction of an Anti-Corruption Law and the Anti-Corruption Unit. “Following this, cases of bribery, extortion and fraud have been prosecuted. The government has also organised multiple educational events to disseminate the Anti-Corruption Law, and we would expect this to continue,” he says. Asked to identify other possible deterrents for potential investors, Wigglesworth pointed to the price of electricity. “The high cost of electricity remains  a chief challenge for manufacturing industries in Cambodia. To attract more investors in manufacturing, the government should consider finding ways to make improvements on this front.”

Words by Vivaddhana Khaou