Cambodia

In-depth country-focused analysis on Cambodia's economic, political and operational risk environment, complemented by detailed sector insight

Cambodia

Our comprehensive assessment of Cambodia's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Cambodia, as well as the latest industry developments that could impact Cambodia's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Cambodia before your competitors.

Country Risk

Cambodia Country Risk

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November's ASEAN summit in Myanmar shone the spotlight on the country's political reform drive, which we believe has lost considerable momentum over recent months. In particular, the government has not shown the willingness to make substantive amendments to the constitution, suggesting that opposition leader Aung San Suu Kyi will not be allowed to run for president in 2015's general elections. Furthermore, it looks increasingly likely that the military (Tatmadaw) will retain its automatic 25% share of seats in parliament. Combined with efforts from the ruling USDP to adopt a proportional voting system rather than the first-past-the-post system that has been used in the past, it is likely that the USDP and Tatmadaw will maintain a considerable preference beyond the upcoming elections. At the same time, we also note rising risks that general elections may be postponed, as the government has tied the elections to a nationwide ceasefire which is looking more tenuous by...

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Cambodia Operational Risk Coverage (9)

Cambodia Operational Risk

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BMI View: Cambodia does present some considerable security risks. Relations with neighbouring states can be strained, exacerbated by ongoing border disputes, and there are several flashpoints which have led to the outbreak of hostilities in the recent past. There is, however, a very limited threat from either domestic or international terrorist groups and Cambodia does have strong counter-terror capabilities. The key risk for foreign business workers or tourists stems from the high rate of petty and opportunities crime in the country - and the accompanying inadequacy of the Cambodian police force. Taking these factors into account, Cambodia has a score of 51.4 out of 100 on the BMI Crime and Security Risk Index, which places the country 23rd out of 38 states regionally and 94th out of 201 countries globally.

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Cambodia Crime & Security

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BMI View: Cambodia poses modest security risks to foreign business travellers and tourists. For the most part, the greatest risks to these groups are petty crimes, such as pick-pocketing and theft, rather than violent crimes. Although there is considerable organised crime in Cambodia, stemming from the country's role in the regional drug trade, fraud, and human trafficking, this is unlikely to affect foreigners. Cambodia's police tends to be underfunded and underequipped, meaning that their effectiveness is limited, especially outside the major cities. Corruption is also a major problem in Cambodia, and erodes the integrity of the country's law enforcement agencies.

The risk of a terrorist attack in Cambodia is low, as there are few domestic terrorist groups...

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Cambodia Labour Market

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BMI View: Cambodia's potential labour force does present investors with some considerable risks. The extremely poor education system and lack of adequate healthcare are legacies from the decades of war and internal conflict in the country which largely destroyed public and social infrastructure. Although progress is being made to improve these institutions, poverty remains widespread and investors will face substantial skills shortages over the medium term. Although employment rates in the country are very high, employment is dominated by informal unskilled roles, particularly in agriculture, which reflects the lack of basic skills amongst much of the workforce. Overall, therefore, Cambodia is placed 20th out of 38 Asian states on the BMI Labour Market Risk Index with a score of 49.9 out of 100.

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Cambodia Logistics

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BMI View: Decades of conflict in Cambodia, followed by extremely limited capacity for investment in infrastructure, has resulted in an underdeveloped and poor quality transport network that hampers economic development in the country. As well as a dilapidated road and rail network, investors are also faced with high electricity and fuel costs, poor quality of water and limited internet penetration. Cambodia's reliance on fuel imports also leaves it vulnerable to supply disruptions, while the ageing transmission grid sees high losses resulting in frequent power cuts which can halt production. As a result, Cambodia has an overall score of 35.0 out of 100 on the BMI Logistics Risk Index which places the country 27th out of 38 Asia region states and 154th ...

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Cambodia Trade & Investment

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BMI View: Cambodia is a regional underperformer in this section of the BMI Operational Risk Index. Although the country is rich in a variety of natural resources and has an expanding domestic manufacturing base leading to growing rates of imports and exports, these benefits are offset by the high level of risk posed by the lack of adequate law enforcement and corruption which is endemic throughout the government and judicial system. The domestic financial sector is also underdeveloped and businesses will face excessive bureaucratic hurdles when entering the market. Overall, therefore, Cambodia has a score of 40.5 out of 100 on the BMI Trade and Investment Risk Index. This places the country 25th out of 38 states in Asia and 137th out of 201 states globally.

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Cambodia Industry Coverage (8)

Autos

Cambodia Autos

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The common theme in Cambodia, Myanmar and Laos is that used vehicles make up the overwhelming majority of their auto markets. The low GDP per capita of these economies makes it difficult for consumers to afford new cars. However, as long as carmakers maintain their expectations, we do see an advantage for firms to develop a toehold in these frontier markets.

Between 2015 and 2020, we forecast GDP per capita to exceed 6.0% annual growth in all these economies, aided by their young demographics. As incomes rise, new vehicle sales will inevitably increase when motorisation finally takes off - which we believe will take place when these countries achieve GDP per capita of USD3,000. Based on our forecasts, Myanmar and Laos will reach this stage in 2019 and 2021 respectively, while Cambodia will have yet to attain this by 2024. Firms which have built up their brand awareness and loyalty will then be able to reap the benefits of the motorisation...

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Food & Drink

Cambodia Food & Drink

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BMI View: We believe that Cambodia, Laos and Myanmar (CLM) will offer substantial opportunities for investors as their economies grow rapidly and become more integrated with the world economy. Growing populations, growing GDP, increased urbanisation and a demographic profile favouring a young target base all offer opportunities for food and drink operators looking to establish a foothold in the region. Additionally, a forecast increase in tourist numbers over the next few years will also fuel growing interest in more sophisticated food and drink products among the domestic consumer base.

Headline Industry Data (local currency)

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Infrastructure

Cambodia Infrastructure

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BMI View: A gradually brightening investment outlook bodes well for foreign investing into Cambodia's infrastructure sector, despite structural weaknesses such as land disputes and regional competition dampening growth. A regional drive to improve connectivity with Asia, as well as a more stable political climate will help to boost the business environment in the country.

Key Trends And Developments

  • We believe the investment outlook for Cambodia is gradually brightening, and while we still maintain a cautious outlook for the country's infrastructure sector, a more favourable infrastructure investment climate in Asia, coupled with positive industrial development plans will help to spur construction activity.

  • We forecast the construction sector to grow by 7.9% in 2015 in real terms, down...

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Oil & Gas

Cambodia Oil & Gas

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BMI View: Like many of its oil-producing neighbours in South East Asia, Cambodia is hoping to tap its potential resources. Progress is moving slowly, however, owing to a need to build the industry from scratch. Not only is there a lack of understanding of Cambodia's geology and hydrocarbons potential, it needs a hydrocarbons law to provide investor certainty and to increase its appeal vis-a-vis bigger, more established neighbours such as Vietnam, Thailand and Myanmar.

Headline Forecasts (Cambodia 2013-2019)
2013e 2014e 2015f...

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Pharmaceuticals & Healthcare

Cambodia Pharmaceuticals & Healthcare

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BMI View: Despite improvements to the healthcare sector, high out of pocket expenditure means that access to healthcare will remain a challenging issue in Cambodia. Further investments in the sector will boost overall care quality and boost investments into the pharmaceutical sector.

Headline Expenditure Projections

  • Pharmaceuticals: KHR910.8bn (USD228mn) in 2014 to KHR10007.2bn (USD252mn) in 2015; +10.6% in local currency terms and US dollar terms. Forecast remains unchanged from previous quarter.

  • Healthcare: KHR5,119.8bn (USD1.3mn) in 2014 to KHR5,676.2bn (USD1.4mn) in 2015; +10.9% in local currency terms US dollar terms. Forecast upgraded due to new data from the World Health Organization.

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Power

Cambodia Power

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BMI View: The major players in Asian power supply are clamouring to invest in Cambodia, with the result that huge capacity expansion can be expected from about 2015, as hydro-, gas- and coal-based schemes are introduced. This should leave the country with plentiful spare generation. Neighbouring Vietnam, which will finance a number of power projects, plans to make good use of Cambodia's potential export capability, as does Thailand if a major coal-fired scheme comes to fruition.

Hydropower expansion is already under way in Cambodia and there is a long queue of potential projects with strong regional backing. Several are set to proceed, with a surge in hydro-based supply due from about 2016. Domestic gas resources could contribute additional capacity,...

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Shipping

Cambodia Shipping

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BMI View: Despite ongoing challenges regarding the capacity and development of the ports sector in Myanmar and Cambodia, and Laos' landlocked geographical position, we expect that robust economic growth in all three Southeast Asian countries will lead to rising demand for shipping services in both the near and short term. This will be driven by both imports and exports, as infrastructure projects and increasingly wealthy populations will see incoming goods, while investment in the manufacturing and agricultural sectors will drive up exports.

Looking first at Myanmar, we believe that the country has strong fundamentals with regards to demand for shipping services, and the country is seeking to establish itself as a regional shipping hub, serving not only its domestic demand, but also providing transhipment and transit services. The improving economic openness is encouraging investment...

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Telecommunications

Cambodia Telecommunications

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BMI View : Our long-held view that consolidation is needed in Cambodia and Laos is beginning to gain some traction, which bodes well for the future development of telecoms in Southeast Asia. In Q115, one of Cambodia's smallest operators Beeline was acquired by regional giant Viettel (Metfone). We are gradually seeing the emergence of three strong mobile companies in Cambodia; Metfone, Smart Axiata and Mobitel (CamGSM). There remain a few remaining small players but we expect the mobile market will coalesce around these three, as the smaller become acquisition targets. This should encourage increased investment from the major players, ending price wars which are hurting company financials. This will mostly benefit 3G technology, which has shown strong growth throughout the region and is driving internet uptake. While mobile...

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