Garment workers sew sweatshirts and check for defects at a factory in Phnom Penh in 2013. Though foreign direct investment in the Kingdom is on the rise, the National Bank of Cambodia has said inflows into the garment sector is falling. Pha Lina
The inflow of foreign direct investment (FDI) into Cambodia witnessed solid growth in the first half of this year due to strong funds flowing into the financial and real estate sectors, said a central bank report.
It said this was despite the agriculture and garment sectors suffering a decline.
The semi-annual report by the National Bank of Cambodia (NBC) revealed that total FDI inflow into Cambodia amounted to $1.32 billion during the first half of 2018 – a 14 percent jump from $1.16 billion in the same period last year.
“Banking and real estate sectors saw a strong inflow of foreign capital, while industrial and agriculture [sectors] saw a decline,” the NBC’s report said, adding that FDI inflow into the garment sector continues to fall.
However, it said there is a surge of capital inflow into non-garment sectors like assembly and electronic manufacturing.
While the NBC revealed the total foreign funds entering the domestic market, it did not provide the actual breakdown of FDI in the respective sectors.
Cambodia’s real estate is still attractive to foreign investors – mostly from Asian countries such as mainland China, Hong Kong, Singapore, Taiwan, Korea and Malaysia, said the report.
Supreme National Economic Council senior adviser Mey Kalyan said it is a healthy trend that FDI had increased while the country is gearing for the July 29 national elections.
He acknowledged that the decline in FDI in the garment sector was not good news but this was expected as the sector had almost reached its saturation point and is burdened with high production costs.
However, he said growing investments in the assembly and electronic manufacturing areas appeared to be a good sign as it reflected the diversification of Cambodia’s industrial sector.
“We understand the benefits of the garment sector for our economy and we want to see it grow further, but it is the nature (of the sector) that it will slow down when it reaches a saturation point,” he said.
He said other countries that depended on garment and footwear manufacturing during the initial period of developing their economies also faced a similar predicament but gradually shifted to more advanced industries to sustain economic growth.
The strategy is to diversify the domestic manufacturing sector and focus on producing more high-value products, added Kalyan.
Hing Thoraxy, an economics lecturer at the Royal Academy of Cambodia, said that FDI could help boost the Cambodian economy.
“More capital inflow means more investments to provide jobs to the Cambodian people and provide many benefits to the economy,” he said.
The government in 2015 released a 10-year industrial development policy (IDP) that outlines strategies to expand the country’s narrow industrial base beyond garments and rice. The aim of the policy is to attract more FDI.
