An Opportunity for American Business in Cambodia

The United States of America remains Cambodia’s largest export market, with 37% of total exports valued at $4.2 Billion in the first half of 2023. Underscoring the importance of this relationship, the Prime Minister met with senior members of the American business community on Friday at the US-Cambodia Business Forum in New York City during the United Nations General Assembly. This event was an important opportunity for American businesses to greet the new PM and, likewise, for the new Royal Government to show support for American companies and promote Cambodia to American investors.

Meeting with US businesses during the first 100 days of taking office sent a strong message that American companies are valued at a time when many are seeking opportunities to reposition overseas investments and supply chains. Equally as important, this event was attended by representatives from the largest US companies investing in Cambodia, including Visa, Mastercard, Chevron, Abbott, and AHF Products. The presence of several large investment banks and fund managers was notable, a first for a Cambodian private-sector event in the US.

American companies have a timely opportunity as the Royal Government works to diversify the economy, emphasizing higher-value manufacturing, agriculture, and food processing industries. US companies typically compete on quality, an attribute that favors higher value chain enterprises. An example trade deal is the SCAFCO Grain Systems’ rice silos in Battambang province, Cambodia’s first-ever private-sector recipient of a loan guaranteed by the US Export-Import Bank. On the investment side, AHF Products, Cambodia’s largest fully American-owned enterprise, employs approximately 700 people in manufacturing quality goods for the US market.

For US brands, the Cambodian market, while seemingly small, is a ready fit that has lower barriers to entry than many adjacent markets. American goods and services are highly valued by Cambodian consumers, evidenced by Ford’s status as the bestselling new car brand and the dominance of American technology products across industry and personal consumption. When people have a choice, they often choose American products.

Cambodia is a natural choice as American companies look to re-orient supply chains to ASEAN. Unlike many regional alternatives, the possibility for 100% foreign ownership means US companies can own their business outright, and there is no legal discrimination between local and foreign companies apart from land ownership. As a US Dollar economy without capital controls, there is no currency risk, and repatriation of profits is painless.

Demographically, the workforce of Cambodia is solid, as 65% of the population is of working age, and the median age is 26 years. Cambodia has the second youngest population in Southeast Asia, creating the foundation for Cambodia to leap-frog its neighbors in technology transfer. That youthful demographic with an English-speaking workforce will enable American companies to phase out expensive expatriate staff as Cambodians rapidly grow into management and leadership roles.

Under normal circumstances, special access to the US market through the Generalized System of Preferences (GSP) program offered duty-free exports of thousands of items, including footwear, garments, and travel goods. This has been a boon for Cambodia’s manufacturing sector, contributing to Cambodia’s development and benefiting the American consumer.

Unfortunately, the GSP program expired in December of 2020 and has yet to be re-authorized by the US Congress. Many groups are working to see those benefits renewed, including AmCham Cambodia, which visited Congress this past July to deliver this message. We remain hopeful that re-authorization will happen before the end of 2023 and that Cambodia will be aligned with any new eligibility criteria.

In addition to considerations affecting the US market for Cambodian-manufactured goods, American companies in Cambodia can benefit from an array of existing trade schemes. These include the Regional Comprehensive Economic Partnership (RCEP), which significantly reduces tariffs for goods between Asia’s largest economies, the European Union (EU) Everything But Arms (EBA) trade preferences, which have been immensely beneficial to the Cambodian economy, particularly for the garment sector, and bilateral agreements, such as the Cambodia – Republic of Korea FTA. These can sweeten the deal for American companies building supply chains to access these markets.

The foundation for any investment is the regulatory environment or the ‘rules of the road.’ In the new Royal Government thus far, we have seen robust outreach to the international business community and positive policy announcements, such as the Pentagonal Strategy, which expresses intentions to reduce bureaucracy, improve access to education and training, and support equitable development. These are encouraging signs, and we believe implementing these initiatives will make Cambodia among the most attractive investment destinations in the region.

 

Allen Dodgson Tan is an Advisor to the Council for the Development of Cambodia (CDC), the author of Essential Cambodia: Essential Cambodia: A Guide for Foreign Entrepreneurs, Investors and Managers, former President of the AmCham Cambodia and Group Vice President of WorldBridge Group (Cambodia) with thirteen years of experience working in the Kingdom.

Devin Barta is the President of AmCham Cambodia and Managing Director for AHF Products in Cambodia, with 18 years of leadership and manufacturing/industrial experience.

AmCham Cambodia has established a new Committee on US Trade and Investment to advance knowledge of these issues. This committee will serve as the focal point for trade and investment promotion with US companies, US market promotion with Cambodian investors, interfacing with stakeholders in the Cambodian and US governments, and educating the membership on issues affecting US investors and trade.

 

  • Tags: American Business in Cambodia


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