Why Has Cambodia Become the First Choice for Foreign Investment in Southeast Asia?

Cambodia have seen positive performance in its import and export trade in recent years, especially driven by special economic zones and industrial parks, which has attracted the attention of many investors. 

Compared with other countries in Southeast Asia, Cambodia has shown unique investment advantages.

1. Overview and Trends of Cambodia's Imports and Exports in Recent Years

1.1Strong Growth in Total Import and Export Volume

- 2022 data: Cambodia's total imports and exports reached US$52.425 billion, a year-on-year increase of 9.2%, of which exports were US$22.483 billion (+16.4%) and imports were US$29.942 billion (+4.3%).

- 2023 data: Cambodia's total imports and exports reached US$46.82 billion, a year-on-year decrease of 1.9%, of which exports were US$22.64 billion (+18%) and imports were US$24.18 billion (-5%).

- 2024 data: Cambodia's total imports and exports reached US$54.74 billion, a year-on-year increase of 16.9%, of which exports were US$26.19 billion (+15.7%) and imports were US$28.54 billion (+18%).

1.2 Main Export Markets and Product Structure

According to the report of the Ministry of Commerce, Cambodia's major trading partners and imports and exports in 2024 are as follows:

China: China was Cambodia's largest trading partner in 2024, with bilateral trade reaching $15.18 billion, an increase of 23.8% compared to 2023. Of this amount, the imports were valued at $13.43 billion (an increase of 24.6%), while Cambodian exports to China totalled $1.75 billion (an increase of 18%).

The US: The United States ranks as Cambodia’s second-largest trading partner in 2024, with bilateral trade reaching $10.1 billion, an increase of 11%. Cambodia’s exports to the US surpassed $9.9 billion (an increase of 11%), while imports from the US to Cambodia totalled over $260 million (an increase of 3%).

Vietnam: Vietnam was the third largest trading partner. In 2024, the trade volume between Cambodia and Vietnam reached US$7.78 billion, an increase of 18% year-on-year. Cambodia's exports to Vietnam amounted to $3.61 billion, an increase of 22%, while imports from Vietnam reached $4.16 billion, a 15% rise compared to 2023.

In addition, Cambodia's other major trading partners include Thailand, Japan, Canada and Indonesia.

Main export products include apparel, machinery, electrical equipment, footwear, leather products, grains, furniture, rubber, fruits, vegetables, pearls, toys and textiles.

Main import products include pharmaceuticals,supplements, consumer goods, and food and beverages.

2. Core motivations for investing in Cambodia’s SEZs and industrial parks

2.1 Tariff Preferences and Market Access Advantages

Cambodia has signed many trade agreements with countries and trading blocs, and obtained significant tariff preferences, which provides strong support for Cambodia’s competitiveness in the international market, enabling the country to better integrate into the ASEAN market and the global supply chain and expand international trade and investment opportunities.

Among them, Cambodia's free trade agreements with China and South Korea as well as the Regional Comprehensive Economic Partnership (RCEP) have promoted Cambodia's bilateral trade growth in 2024.

2.2 Cost Competitiveness Compared with Southeast Asian Neighbors

In addition to policy and tariff advantages, Cambodia tends to have lower operating costs, particularly due to its younger workforce and relatively inexpensive land compared to neighboring countries like Thailand and Vietnam, making Cambodia an ideal choice for foreign-invested enterprises seeking low-cost operations.

2.3 Prominent Policy Benefits of Special Economic Zones

As a landmark project of the Belt and Road Initiative (BRI) jointly built by China and Cambodia, the Sihanoukville Special Economy Zone (SSEZ) has performed particularly well and is a benchmark for the development of many special economic zones and industrial parks in Cambodia:

①The SSEZ had attracted 28 new enterprises in 2024, bringing the total number of enterprises in the zone to 202, with approximately 32,000 jobs created.

②In the same year, the total trade volume of the enterprises in the SSEZ reached 4.07 billion U.S. dollars, a year-on-year increase of 21.3 percent, accounting for about 7.45% of Cambodia's total import and export trade.

 ③ Special Economic Zone Policies:

- Export tax: 0%

- Import tax: 0%: Machinery and equipment used in production, building materials, spare parts, raw materials, etc.

- Corporate income tax: Up to 6-9 years of tax exemption period (0%); 6 years of tax reduction period (5%-15%); final tax rate (20%);

- Value-added tax (VAT): 0% for production equipment & building materials, etc.; 0% for raw materials of industries serving the export market; 10% for industries serving the domestic market.

3 Cambodia's Differentiated Advantages Compared With Other Southeast Asian Countries

Compared with other Southeast Asian countries, Cambodia's SEZs and industrial parks have the following unique advantages:

- Clear leading industries: Cambodia's SEZs and industrial parks have clearly defined leading industries, and companies can choose the most suitable park for their needs. 

- Friendly policy environment: Cambodian government is highly open for foreign investment, providing a variety of preferential policies, and relatively simplified administrative procedures.

In conclusion, Cambodia has become a highly-anticipated investment destination in Southeast Asia due to its triple advantages of "tariff dividend + cost depression + policy inclination". Special economic zones and industrial parks significantly reduce corporate operating costs through tax exemptions, infrastructure guarantees and administrative convenience, which are particularly suitable for export-oriented industries like textiles, electronics, and agricultural processing. 

For investors seeking opportunities in emerging markets, Cambodia's special economic zones and industrial parks undoubtedly provide broad development space.

Data source: Ministry of Commerce, General Department of Customs and Excise of Cambodia, Sihanoukville Special Economy Zone (SSEZ), Cambodia Securities Plc.