Cambodia is quickly becoming a hub for Japanese exports, according to the latest figures from the Japan External Trade Agecy, JETRO.

The state-run agency’s latest trade figures show Cambodia exported more than $584 million worth of locally made products to Japan over the first nine months of the year. The result represents a 35 per cent increase compared to the same period in 2013 – the largest year-on-year increase of all ASEAN nations.

“Economic cooperation between Cambodia and Japan is stronger and stronger and the trend is still promising for the future,” Ken Ratha, spokesman of the Cambodian Commerce Ministry said.

Cambodia’s 100 per cent foreign ownership laws and cheap labour have proven to be lucrative drawcards for Japanese manufacturing firms. Today, in addition to garment factories, auto-parts makers Minebea and Yazaki Corporation and electrical products maker Sumi have all set up manufacturing operations in Cambodia, which then ship back to Japan.

The Kingdom’s main exports to Japan are garments and footwear, electrical machinery and leather goods.

Suzuki Hiroshi, chief economist at Business Research Institute for Cambodia (BRIC), said that foreign direct investment in local projects was the single biggest reason for the big jump in Japanese exports.

“Japanese FDI is one of the most important engines for the Cambodian economy’s growth,” he said.

“Some of the Japanese factories [in Cambodia] are now in full production and exporting their products such as automobile parts, electronic parts and even Japanese Kimono [traditional Japanese dress] to Japan.”

But Cambodia’s popularity with Japanese firms may also be the result of a worsening investment climate in neighbouring Thailand.

The Thai government is reportedly considering amendments to its Foreign Business Act. The changes include clauses stipulating that majority owners in joint-venture operations must be a Thai national, the Bangkok Post reported on Sunday.

Mitsugo Saito, minister and deputy chief of mission at the Japan Embassy in Thailand told the Bangkok Post that many Japanese firms could be forced to leave the neighbouring nation as a result of the new law.

Thailand imports from Japan declined more than 14 per cent during the first nine months of the year, according to the latest JETRO data.

Exports from Thailand to Japan, meanwhile, also declined slightly, by less than one per cent.

“This shows clearly that any government’s attitude to FDI could seriously affect Japanese investment,” Bric’s Hiroshi Suzuki said, referring to the Thai government’s proposed changes to the Foreign Business Act.

“Many Japanese companies are looking for their next investment destination after China, Thailand and Vietnam. Cambodia could be one of the best candidates to receive the needs of Japanese investors.”