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.
Cambodia Country Risk
The transition between the USDP-dominated former government and the NLD-dominated one has gone as well as could have possibly been expected so far, with the latter group having taken their places in Myanmar's parliament on February 1. However, significant questions still remain as to the identity of the NLD's presidential nominee, as leader Aung San Suu Kyi remains barred from the role by constitutional article 59(f). At the time of writing, Suu Kyi's chances at the role appear to be very minimal, with wide-ranging reports indicating that negotiations between the two parties on the subject have not been successful. Instead, the NLD is likely to elect a loyalist candidate who will be heavily influenced by Suu Kyi, in line with our long-held core view. Despite what may be seen as somewhat of a setback for the NLD, the party still holds a massive majority in parliament, and can legislate...
Cambodia Operational Risk Coverage (9)
Cambodia Operational Risk
Cambodia Operational Risk
BMI View: Investors considering setting up businesses in Cambodia do stand to benefit from the large potential labour pool, low minimum wages and openness to foreign investment which help to make the country an attractive investment destination, particularly in light of its natural resource wealth. However there are considerable risks presented by a lack of adequate education, the underdeveloped transport network, high fuel costs and, especially, corruption which is endemic in Cambodia. These risks largely offset the growth potential presented by Cambodia, and as a result the country is a regional underperformer on the BMI Operational Risk Index, with a score of 43.0 out of 100 placing Cambodia 2...
Cambodia Crime & Security
Cambodia Crime & Security
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...
Cambodia Labour Market
Cambodia Labour Market
BMI View: Cambodia does offer a relatively sizeable potential workforce, which benefits further from a high level of female participation, expanding the size of the overall labour pool and helping to offset the risks from a low rate of urbanisation and limited formal employment. Employers will likely be required to provide additional workplace training, particularly as Cambodia's education system is weak and basic skill levels are lacking. One potential upside for businesses is the relatively low minimum wage, combined with competitive labour and social tax rates. As a result, we have given Cambodia a score of 49.8 out of 100 on the BMI Labour Market Risk Index which places the country 20th in Asia, and 102 out of 201 states on a global basis.
BMI View: Investors in Cambodia face major operational challenges due to the country's underdeveloped transport and utilities infrastructure. Decades of conflict destroyed much of Cambodia's road and rail network and since the end of conflict the country has struggled to attract significant investment in its internal infrastructure. As a result, businesses are faced with a crumbling road and rail network, causing substantial risk of delays to supply chains, as well as poor water quality and a limited internet network. Compounding these risks is the high cost of fuel and electricity due to a reliance on imports, along with frequent blackouts due to the ageing transmission and distribution grid. Overall, therefore, Cambodia has a subdued score of 35.0 out of 100 on the BMI Logistics Risk Index, placing the country 27 thregionally...
Cambodia Trade & Investment
Cambodia Trade & Investment
BMI View: Cambodia has had some success in attracting international investment and as such domestic manufacturing capacity is expanding alongside greater utilisation of the country's extensive natural resources. There are, however, major risks facing potential investors. The rule of law is exceptionally weak in Cambodia and corruption is prevalent throughout the government and judicial system. The market also suffers from a lack of capital and businesses will face significant challenges when attempting to access credit or other formal financial services. There are also extensive restrictions placed on foreign investment, clouding an already opaque investment environment. As a result, Cambodia is a regional underperformer on the BMI Trade and Investment Risk Index, ranking 21st out of 35 Asian states (and 133rd out of 201...
Cambodia Industry Coverage (7)
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 area 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 not yet have attained this by 2024. Firms which have built up their brand awareness and loyalty will then be able to reap the benefits of the motorisation boom...
Food & Drink
Cambodia Food & Drink
BMI View: We believe that Cambodia, Laos and Myanmar 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. Nonetheless, the risks of operating in the region are still high, which means that multinational companies need to be here for the long run.
Key Trends & Industry Developments
Food sales per capita in Cambodia, Laos and Myanmar (CLM) are still low by regional and global standards, and food...
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.
Forecast And Latest Updates
We forecast the construction sector to grow by 7.9% and 9.9% in 2015 and 2016 in real terms respectively and believe the investment outlook for Cambodia is gradually brightening.
Investment from China continues to be a key driver of growth, with the recent move by Chinese conglomerate Herun Group to establish a real estate development company in Cambodia reinforcing our view. Proposals...
Oil & Gas
Cambodia Oil & Gas
BMI View: Being a frontier region for oil and gas exploration, Cambodia does not have any proven reserves or production. A deferral of development at KrisEnergy's Block A, which is the most progressive development in the country, prompted us to remove our forecast of 80mn bbl of proven oil reserves in 2016 and for first oil in 2018. The Cambodian government confirmed that exploration is inactive in licensed areas, which reinforces our bearish outlook for Cambodia's upstream sector.
Pharmaceuticals & Healthcare
Cambodia Pharmaceuticals & Healthcare
BMI View: Cambodia's pharmaceutical market will remain favourable for low-cost generic drugs. This is due to the low per-capita pharmaceutical and healthcare spending in the country as well as the growing chronic disease burden in the country, which will drive up demand for treatments. Firms seeking to leverage opportunities in Cambodia will face competition from traditional medicines, which remain entrenched in the country.
Headline Expenditure Projections
Pharmaceuticals: KHR1,008.1bn (USD250mn) in 2015 to KHR1,113.5bn (USD280mn) in 2016; +10.5% in local currency terms and US dollar terms. Forecast remains unchanged from previous quarter.
Healthcare: KHR3,981.1bn (USD1.0bn) in 2015 to KHR4,181.1bn (...
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 power due from about 2016. Domestic gas resources could contribute additional capacity,...
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 South East Asia. The key trend in Cambodia is one of consolidation. Meanwhile, the telecoms sector in Myanmar looks set to continue outperforming its regional peers and is readying itself for the emergence of a fourth mobile operator.
|Cambodia And Laos Mobile Sector Forecasts|