Business and Investment Opportunities Business and Investment Opportunities in Cambodiain Cambodia

SOK CHENDA SOPHEASOK CHENDA SOPHEASecretary GeneralSecretary General

Council for the Development of CambodiaCouncil for the Development of Cambodia

Presented by

Nagoya, 15 November 2006

Key IndicatorsKey Indicators

Land Area: 181,035 Land Area: 181,035 KKmm22

Population: 14 millionPopulation: 14 millionGDP Growth: 9.1% per annum (last 5 years)GDP Growth: 9.1% per annum (last 5 years)GDP per Capita: ~$459GDP per Capita: ~$459Inflation Rate: 5%Inflation Rate: 5%Exchange Rate: US$1 = Riels Exchange Rate: US$1 = Riels 44,105,105

11¥¥ = 35 Riels= 35 Riels

Economic PerformanceEconomic PerformanceGDP Growth (%) and InflationGDP Growth (%) and Inflation

4.1%

9.2%6.5% 5.3% 5.7% 5.0%

12.6%

9.2%7.7%

6.2%8.6%

10.0%

13.4%

8.0%

41%

17.90%

3.50%

10% 9.20%

13.30%

4.00%

-0.80%

0.20%

3.30%1.20%

3.90%5.80%

3.50%

-5.00%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

GDP 4.10% 9.20% 6.50% 5.30% 5.70% 5.00% 12.60% 9.20% 7.70% 6.20% 8.60% 10.0% 13.4% 8.0%Inflation 41% 17.90% 3.50% 10% 9.20% 13.30% 4.00% -0.80% 0.20% 3.30% 1.20% 3.90% 5.80% 3.50%

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Source: SNEC & MEF as of July 2006 Average growth for last 5 years is 9.1%

Economic PerformanceEconomic PerformanceGDP Growth (%) by sectorGDP Growth (%) by sector41.0%

35.9% 34.8%32.2% 32.1% 30.9%

32.4%

27.8%

18.00%

21.80% 22.50%24.40%

25.60% 26.20% 25.30%27.10%

35.40%37.10% 37.70% 38.10% 36.90% 37.50% 37%

39.60%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

Agriculture 41.00% 35.90% 34.80% 32.20% 32.10% 30.9% 32.4% 27.8%Industry 18.00% 21.80% 22.50% 24.40% 25.60% 26.20% 25.30% 27.10%Service 35.40% 37.10% 37.70% 38.10% 36.90% 37.50% 37% 39.60%

1999 2000 2001 2002 2003 2004 2005 2006

Source: SNEC & MEF as of July 2006

19991999 20002000 20012001 20022002 20032003 20042004 20052005 20062006

GDP per capitaGDP per capita 282282 288288 307307 325325 342342 386386 454454 459459

Council for the Development of Council for the Development of CambodiaCambodia

A One Stop ServiceA One Stop Service

Open Door PolicyOpen Door Policy

H.E Mr. Sok ChendaSecretary General

Secretary General CSEZBH.E Sok Chenda

Secretary General CRDBH.E. Mr. Chhieng Yanara

Public relations and investment promotionInvestment project evaluation and incentivesEnvironmental impact assessmentInter-ministerial coordinationPrivate investments strategies analysisLegal affairs and investment lawInvestment projects monitoringAdministration

Public relations and Aid coordination Documentation and informationManagement of bilateral aid AsiaManagement of bilateral aid EU& US Management of multilateral aid Management of aid from the UNNGO coordination and relationsProject evaluationAdministration

H.E Mr. Cham Prasidh, Senior Minister, Minister of Commerce

Vice Chairman

H.E Mr. Keat Chhon, Senior MinisterMinister of Economy and Finance

1st Vice Chairman

H.E Mr. Kong Vibol, First Secretary of StateMinistry of Economy and Finance

Vice Chairman

Secretary General CIBH.E. Mr. Suon Sitthy

Policy and planningOperation and managementProject analysis and registrationAdministration

Trouble Shooting

Committee

Samdech Hun SenPrime Minister of the RGC

Chairman

A One Stop ServiceA One Stop Service

Information & ApplicationInformation & ApplicationApprovalApprovalCustoms Duty & Tax Customs Duty & Tax ExemptionExemptionVisa & Work PermitVisa & Work PermitCompany RegistrationCompany Registration

Licensing AuthoritiesLicensing AuthoritiesCouncil of Ministers : CDC but needs approval Council of Ministers : CDC but needs approval from from CoMCoM for project with investment capital for project with investment capital exceeding $ 50 million, BOT, BOOT, BOO or BLT, exceeding $ 50 million, BOT, BOOT, BOO or BLT, longlong--term strategy, sensitive projects: negative term strategy, sensitive projects: negative impact on the environment and natural resource impact on the environment and natural resource exploitationexploitationCDC : less than $ 50 millionCDC : less than $ 50 millionProvincial Authorities : less than $ 2 millionProvincial Authorities : less than $ 2 millionManagement Board of Special Economic Zones: Management Board of Special Economic Zones: project within the zonesproject within the zones

Investment ApprovalInvestment Approval

Investment application

CDC issues a Conditional Registration Certificate to the Applicant

Company Registration / Ministry of Commerce

Relevant licenses, as appropriate / Ministry of Industry and Energy

Review and approval of construction plan / local authorities-

Ministry of Land Management, Urban Planning and Construction.

Initial environmental impact assessment / Ministry of Environment

Tax Department Registration / Ministry of Economy and Finance

CDC issues a Final Registration Certificate to the Applicant

3 working days

28 working days

Investments by CountryInvestments by Country1994 1994 –– 11stst Half Half 20020066

2,059

357

1,956

559

1,359

267 331

200

500

1,000

1,500

2,000

2,500

China EU Malaysia USA Korea Singapore Thailand Japan

In Million USD Total USD 10,755 million

Investments by SectorInvestments by Sector1994 – 1st Half 2006

Industry36%

Agriculture7%

Service34%

Tourism23%

Encouraged Investment ActivitiesAgriculture and agroAgriculture and agro--industryindustryTransport and telecommunications Transport and telecommunications infrastructures infrastructures Energy and electricity sectorsEnergy and electricity sectorsLaborLabor--intensive industries and eintensive industries and exportxport--oriented processing and manufacturing;oriented processing and manufacturing;TourismTourism--related industriesrelated industriesHuman resource developmentHuman resource development

AgroAgro--businessbusinessBasic agrarian economyBasic agrarian economyNatural endowments:Natural endowments:

Abundant landAbundant landRich fishery resourcesRich fishery resourcesTimber resources Timber resources

Organic cropsOrganic cropsValueValue--added emphasis/ added emphasis/ Food processingFood processingNew product developmentNew product development

Infrastructure: A definite prospect

Priority for infrastructurePriority for infrastructureInfrastructure rehabilitationInfrastructure rehabilitationMultilateral aid availabilityMultilateral aid availabilityDecentralizationDecentralizationRegional opportunitiesRegional opportunitiesASEAN & GMS integrationASEAN & GMS integrationPrivate Participation in Private Participation in Infrastructure (PPI): BOT, Infrastructure (PPI): BOT, BOO, etcBOO, etc……

Thailand LaosRegional opportunities

Tourism Center

Eco-Tourism

Triangle Development Zone

SEZ

Physical Infrastructures: Physical Infrastructures: Work in progressWork in progress

Asian Highway A1: Build and Rehabilitate Asian Highway A1: Build and Rehabilitate Bangkok Bangkok –– Phnom Penh Phnom Penh –– VungVung Tao RoadTao Road

Rehabilitate RN7 from Southern Laos to Rehabilitate RN7 from Southern Laos to Sihanoukville Deep SeaportSihanoukville Deep Seaport

Upgrade and Expand Sihanoukville PortUpgrade and Expand Sihanoukville Port

Upgrade and Expand Phnom Penh, Siem Upgrade and Expand Phnom Penh, Siem Reap and Sihanoukville AirportsReap and Sihanoukville Airports

TourismTourismNatural beautyNatural beauty

World Heritage MonumentsWorld Heritage Monuments

Open Sky Policy to Siem ReapOpen Sky Policy to Siem Reap

Ability to attract Ability to attract ““addadd--onon”” tripstrips

Novelty valueNovelty value

177 220260 219

287

368466

604

786

701

1055

1421

1184

0

200

400

600

800

1,000

1,200

1,400

1,600

1994 1996 1998 2000 2002 2004 as ofSept.06

Visitors to CambodiaVisitors to CambodiaThousand (000)

Tourism Vision 2010Tourism Vision 2010YEAR 2004 2006 2008 2010

Visitor Arrivals 1,471,000 1,500,000 2,200,000 3,120,000

Japanese Visitors to Cambodia

2001 2002 2003 2004 2005 JAN-SEP2006

17,952 19,946

88,401

118,157

137,849

110,945

0

20000

40000

60000

80000

100000

120000

140000

YEARYEAR 20032003 20042004 20052005 JANJAN--SEP 2006SEP 2006

RANKRANK 11STST 22NDND 22NDND 22NDND

VISTORVISTOR 88,40188,401 118,157118,157 137,849137,849 110,945110,945

Manufacturing & ExportManufacturing & Export

Competitive labor costCompetitive labor costTax incentivesTax incentives

•• Market accessMarket access•• Regional arrangementRegional arrangement

Diversification of the economyDiversification of the economy

Promote industries and services currently not available in Cambodia to diversify the growth base

The Government adopted a SubThe Government adopted a Sub--decree on the Establishment decree on the Establishment and Management of Special Economic Zone (SEZ) in Dec 2005and Management of Special Economic Zone (SEZ) in Dec 2005

SEZ will include export processing zones and free trade zonesSEZ will include export processing zones and free trade zones

Special Economic ZonesSpecial Economic ZonesThe main rationale of establishing The main rationale of establishing SEZsSEZs is to:is to:–– Provide investors with adequate infrastructure and supportive faProvide investors with adequate infrastructure and supportive facilitiescilities–– Effectively respond to the challenge of diversifying the CambodiEffectively respond to the challenge of diversifying the Cambodian economy an economy

and to promote demandand to promote demand--driven development, such as export promotiondriven development, such as export promotion–– Enhance competitiveness of garment industry and other labor inteEnhance competitiveness of garment industry and other labor intensive nsive

activitiesactivities–– Promote agroPromote agro--industry, food processingindustry, food processing–– Promote assembling industryPromote assembling industry–– Promote electronic and electric appliances industriesPromote electronic and electric appliances industries

The following growth poles have been identified for industrial dThe following growth poles have been identified for industrial development:evelopment:–– PoipetPoipet and and KohKoh Kong (at the CambodianKong (at the Cambodian--Thai border)Thai border)–– BavetBavet and Phnom Den (at the Cambodianand Phnom Den (at the Cambodian--Vietnamese border)Vietnamese border)–– Phnom PenhPhnom Penh–– SihanoukvilleSihanoukville

SihanoukvilleSihanoukville Port has Port has harbourharbour facilities and facilities and ““dry portsdry ports”” which have been which have been developed to enhance its competitive edge as an international codeveloped to enhance its competitive edge as an international commercial mmercial gatewaygateway

Chhay Chhay SEZ

Stoung HaovSEZ

Manhattan SEZDuong Chhiv

SEZKampot SEZ

S.N.CSEZ

Koh Kong SEZ N.L.C

SEZPhnom

Penh SEZ

Sap

SihanoukvilleSEZ

Map of SEZ

Zone Developer(Private Company)

- Administration- Finance- Operation - Promotion-

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>-

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

Special Economic Zones Administration

(One-Stop Service)

- Representative of the CambodianSpecial Economic Zone Board Chairman

-Representative of the Custom and Excise Department Member

- Representative of CAMCONTROL Member

- Representative of the Ministry of Commerce Member

- Representative of the Ministry of Labor and Vocational Training Member

Samdech Hun SenPrime Minister

Chairman of CDC

Cambodian Special Economic Zones Board

“CSEZB”

Policy and Planning Department

Operation and Management Department

Project Analysis and Registration

Department

Administration Department

Trouble Shooting Committee-Chairmen of the CDC Chairman-Minister of the Council of Ministers Member -Minister of Economy and Finance Member -Minister of Commerce Member -Minister of Land Management, Urbanism and Construction Member

-Minister of Environment Member -Minister of Industry, Mines and Energy Member -Minister of Public Works and

Transportation Member-Minister of Labor and Vocational

Training Member -Secretary General of the CDC Member -Secretary General of the CSEZB Secretary

Secretary General

Deputy Secretary General

Structureat CDC and at each SEZ

Private Sector Development Private Sector Development StrategyStrategy

Trade Facilitation (by2005) : Trade Facilitation (by2005) : Single inspection, Single documentSingle inspection, Single document

Investment Climate: Amendment of LOI Investment Climate: Amendment of LOI Automatic approval Automatic approval -- One Stop ServiceOne Stop Service

GovernmentGovernment--Private Sector Forum: Private Sector Forum: Participatory approachParticipatory approach

JBICJBIC--UNCTAD Blue BookUNCTAD Blue BookTenTen--Point Action PlanPoint Action Plan

1.1. Produce timely official translations of businessProduce timely official translations of business--related laws and decrees into Englishrelated laws and decrees into English2.2. Change regulations to allow prices of CDCChange regulations to allow prices of CDC--approved imported inputs to be calculated at approved imported inputs to be calculated at

transaction valuestransaction values3.3. Install an investment tracking systemInstall an investment tracking system4.4. Develop facilitation and aftercare services units within the CIBDevelop facilitation and aftercare services units within the CIB5.5. Implement a targeted investment promotion strategy: starting witImplement a targeted investment promotion strategy: starting with light manufacturing, h light manufacturing,

including agroincluding agro--processing processing 6.6. Train government institutions in technical dealing with investorTrain government institutions in technical dealing with investors (client orientation)s (client orientation)7.7. Initiate pilot programme on building supplier relationships betwInitiate pilot programme on building supplier relationships between foreign and een foreign and

domestic firms (i.e., business linkages) among CDC/CIB, MAFF,MIMdomestic firms (i.e., business linkages) among CDC/CIB, MAFF,MIME, MOC, and other E, MOC, and other agencies in the garments and agroagencies in the garments and agro--processing sectors, and with affiliates of foreign processing sectors, and with affiliates of foreign TNCsTNCs in Cambodiain Cambodia

8.8. Enhance the monitoring system to track problems raised by the WoEnhance the monitoring system to track problems raised by the Working Groups of the rking Groups of the GovernmentGovernment--Private Sector Forum and the progress achievedPrivate Sector Forum and the progress achieved

9.9. Build up the information base and services of the Cambodia ChambBuild up the information base and services of the Cambodia Chamber of Commerce to er of Commerce to support SMEs and other businesses (utilizing the Internet to achsupport SMEs and other businesses (utilizing the Internet to achieve this)ieve this)

10.10. Support establishment of Support establishment of Provincial Chambers of CommerceProvincial Chambers of Commerce

Study on Economic Policy Support in the Kingdom Study on Economic Policy Support in the Kingdom of Cambodiaof Cambodia

JICA Study Team (Nomura Research Institute, KRI JICA Study Team (Nomura Research Institute, KRI International Corp.)International Corp.)Cambodia Investment GuidebookCambodia Investment Guidebook

Strategic Roadmap for the Development of Food Strategic Roadmap for the Development of Food industry in Cambodia industry in Cambodia

by JBIC, Mitsui Co. Ltd, Toyo Engineering Corporationby JBIC, Mitsui Co. Ltd, Toyo Engineering Corporation

CambodiaCambodia--Japan Joint Efforts for Japan Joint Efforts for Investment Promotion in CambodiaInvestment Promotion in Cambodia

1.1. Bilateral Investment Treaty (BIT): Legal framework for Bilateral Investment Treaty (BIT): Legal framework for liberalization, promotion and protection of investmentliberalization, promotion and protection of investment

-- Ensure fair and equal competitive environment for investorsEnsure fair and equal competitive environment for investors

-- Enhance predictability and transparency of the basic rules and Enhance predictability and transparency of the basic rules and regulationsregulations-- Ensure legal stabilityEnsure legal stability

-- Protect investments Protect investments

2.2. PublicPublic--Private Dialogue Mechanism:Private Dialogue Mechanism:-- Improve the Improve the investmentinvestment environment environment

-- Ensure strict implementation of the BIT, the investment relatedEnsure strict implementation of the BIT, the investment related laws and laws and administrations proceduresadministrations procedures

-- Solve problems faced by investorsSolve problems faced by investors

Investment IncentivesInvestment Incentives20% Corporate Tax 20% Corporate Tax Trigger period +3years+n (automatic) Trigger period +3years+n (automatic) Repatriation of profit (withholding tax)Repatriation of profit (withholding tax)Reinvestment of earning Reinvestment of earning (special depreciation)(special depreciation)FullFull Import Duty ExemptionImport Duty ExemptionNo Export TaxNo Export Tax

Licensing (Simple registration)Licensing (Simple registration)

Light Industry n

K < 5 000 000 USD 0

5000 000 < K < 20 000 000 USD 1year

K > 20 000 000 USD 2year

Heavy Industry

K < 5 000 000 USD 2year

K > 5 000 000 USD 3year

Tourism Projects

K < 10 000 000 USD 0year

K > 10 000 000 USD 1year

Agriculture, Agro-Industry

- Short cycle agriculture 1year

- Long cycle agriculture, agro-industry 2year

Infrastructure

K < 10 000 000 USD 1year

10 000 000 < K < 30 000 000 USD 2year

K > 30 000 000 USD 3year

n in tax holiday formula

BACK

Investment ProtectionInvestment Protection

Equal treatment of all investorsEqual treatment of all investorsNo nationalization adversely affecting the No nationalization adversely affecting the property of investorsproperty of investorsNo price controls on products or servicesNo price controls on products or servicesNo restriction on foreign equity participationNo restriction on foreign equity participationNo restriction on No restriction on forexforex convertibilityconvertibilityRemittance of foreign currencies abroad.Remittance of foreign currencies abroad.

The Investment Law and Sub-decree contains a number of important guarantees for the investors:

Regional and Global IntegrationRegional and Global Integration

Member of WTO (13.10.2004)ASEAN - AFTA/CEPT – AIAGreater Mekong Subregion-GMSWIPO, WCOImplement the International Accounting StandardMember of MIGA, ICSID and other international organizations

JOININGWTO

JOININGASEAN

ACCESS TOTHE U.S.MARKET

ACCESS TO THEEUROPEANMARKET

Cambodia has embraced the globalization process as part of its outward looking economic development strategy….

2005 Index of Economic Freedom2005 Index of Economic Freedomby Heritage Foundation/Wall Street Journalby Heritage Foundation/Wall Street Journal

Cambodia ranks 63 out of 161 countriesCambodia ranks 63 out of 161 countriesCategory : Mostly FreeCategory : Mostly FreeScore : 1 to 5Score : 1 to 5–– Trade policy : 4 (high level of protectionism)Trade policy : 4 (high level of protectionism)–– Fiscal Burden: 2,4 (lost cost of government)Fiscal Burden: 2,4 (lost cost of government)–– Government intervention in the economy : 2,5 (moderate level)Government intervention in the economy : 2,5 (moderate level)–– Monetary policy : 1 (very low level of inflation)Monetary policy : 1 (very low level of inflation)–– FDI : 3 (moderate barriers)FDI : 3 (moderate barriers)–– Banking and Finance : 2 (low level of restriction)Banking and Finance : 2 (low level of restriction)–– Wages and Finance : 2 (low level of intervention)Wages and Finance : 2 (low level of intervention)–– Property rights : 4 (low level of protection)Property rights : 4 (low level of protection)–– Regulation : 4 (high level)Regulation : 4 (high level)–– Informal market : 4 (high level of activity)Informal market : 4 (high level of activity)

BACK

Reasons to invest in CambodiaReasons to invest in CambodiaOpen economyOpen economySound Macroeconomic EnvironmentSound Macroeconomic EnvironmentCompetitive Investment IncentivesCompetitive Investment IncentivesOne Stop Service One Stop Service –– FastFast--Track Investment Track Investment Approval Process (28 days)Approval Process (28 days)Low Labor CostLow Labor CostAccess to ASEAN and World MarketsAccess to ASEAN and World MarketsPreferential Trading StatusPreferential Trading StatusStrategic LocationStrategic Location

Invest in Cambodia and you

have 14 million consumers

Invest Invest in Cambodia in Cambodia and you and you

havehave 14 million14 million consumers consumers Invest in Cambodia and you

have 225 million consumers

virtually at your doorstep

Invest Invest in Cambodia in Cambodia and you and you

havehave 225 million225 million consumers consumers

virtually at your doorstepvirtually at your doorstep

Invest in Cambodia and you have 500

million consumers at your doorstep

Invest in Cambodia Invest in Cambodia and youand you havehave 500 500

millionmillion consumers at consumers at your doorstepyour doorstep

.

Phnom PenhThe Philippines

Singapore

Indonesia

MyanmarSouthern China

ManilaBangkok

Kunming

Yangon

Brunei

Jakarta

Begawan

Hanoi

Laoso Vientiane

CAMBODIA

Malaysia

Kuala Lumpur

ThailandVietnam

1h:30 in average

Looking Forward to Welcome Looking Forward to Welcome You inYou in Cambodia, Cambodia,

TO GO

TO SEE

TO HEAR

TO ENJOY

TO ASSESS

TO DECIDEA R I G A T O

The Land of ANGKOR and OPPORTUNITIES!

www.cambodiainvestment.gov.kh

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