Doing Business In Cambodia: What You Need To Know
Venturing overseas to open new markets is exciting but it can also be filled with uncertainties. Cambodia is a fast-growing economy that offers abundant opportunities, but there are things that business owners need to look out for. This is especially important if they are expanding overseas for the first time. Among others, they need to consider the regulatory processes and the availability of infrastructure and services.
Four decades after the Cambodian civil war ended, Cambodia is welcoming foreign direct investments. While the city is now dotted with new, sleek high-rise buildings, back-end policy- making has not exactly caught up with the gleaming facade. The application to start a business in Cambodia can be a slow process, with company incorporation approval, company registration for taxation purposes and other critical procedures taking longer than in their home country. An example of this is the application for electricity supply. Electricity should flow relatively easily in a completed office building, however, companies that are building or taking over new properties may have to wait up to six months to receive a permanent supply of electricity. This includes the wait for application approval, which can take longer than the actual connection and associated works.
To put the above into perspective, consider the statistics released by The World Bank. According to the World Bank, in 2010, Cambodia scored 50.12 in the Distance To Frontier, a measurement that indicates the level of regulatory performance with respect to the ideal (100), across all economies across all time. Over the years, however, the country has made great strides; it reached 54.79 in 2017, translating into a laudable four-point improvement for a new economy. By comparison, Vietnam was at 58.14 in 2010 and is 63.83 in 2017. Thailand was at 73.03 in 2010 and is at 72.53 in 2017. At the current pace, it will not be long before Cambodia catches up with the rest of the region.
Transport infrastructure is usually an important area of consideration for business owners. Since 2008, the Cambodia government has been upgrading roads around the country. This is most visible in Phnom Penh, the capital, though the lack of good road signs does cause some concern. The condition of roads in outlying areas, too, still has room for improvement. Trading companies, however, will be happy to note that Cambodia is well-connected to the rest of the world by sea. Situated 224km from Phnom Penh is the Port of Sihanoukville, a well-regarded deep-sea port. The port, in its present condition, can accommodate 950,000 tonnes of cargo per year, twice its current traffic. This is good news, as it implies that trading volume, and hence, companies that depend on shipping for survival, will be able to grow without considerable difficulty in the years to come.
In terms of Cambodia’s Internet connectivity to the rest of the world, there is reason to cheer. After years of spotty connection, Cambodia will soon receive a boost in capacity, with the completion of the country’s first underwater fibre optic cable. A multinational project saw landing stations built in Sihanoukville in Cambodia, Rayong in Thailand and Cherating in Malaysia, all connected via a 1,300km network of undersea cables. The Malaysia-Cambodia-Thailand Submarine Cable System (MCT) will connect with the 20,000km Asia-America Gateway (AAG), bringing global data almost instantly to Cambodia’s doorstep. This initiative is expected to bring the capacity to 30 times the current level, leading to more data traffic in and out of Cambodia and translating to business growth.
Like Ho Chi Minh City in Vietnam and other emerging cities around the world when they opened themselves to the world, Phnom Penh is experiencing a rise in property prices. However, smaller companies exploring business opportunities in Cambodia need not worry about leasing expensive offices to base themselves in. Many service providers now offer serviced offices and co-working locations, essentially shared offices for business owners to conduct their businesses in. These facilities come complete with furniture, utilities and the Internet, all for a small monthly fee. This will definitely be a welcome development for business owners aspiring to set up shop in Cambodia.
In short, there are great opportunities to leverage in Cambodia, but there are also challenges to overcome in the nascent economy. The processes of getting things done may not be the fastest in the world, however, companies that endure this inconvenience will find themselves the pioneers in what promises to be one of the most exciting business destinations in Asia.
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