Foreign Direct Investment Framework in Cambodia

Despite the impact of the pandemic, Cambodia’s investment climate remains strong. The Kingdom reported the total Foreign Direct Investment (“FDI”) inflows at USD 3.5 billion in 2020, only one percent contraction compared to 2019.

Cambodia’s new investment law, which was just promulgated in mid-October 2021, is aimed to encourage FDI in Cambodia. This new law enables Cambodia to become an open, transparent, predictable, and conducive investment destination for local and foreign investors by providing incentives to the prioritized sectors such as; Science and Technology, SMEs, Agro-Industrial Production, and other various types of Supporting Industries. With such liberal investment regime, FDI can be implemented freely in Cambodia except for the areas in which stated in the Negative List under the investment law which restricts certain investment activities that are harmful to human, animal, and environmental well-being. The investor may take up to 100 percent of shares in their investment projects in most sectors. They are also entitled to fair and equitable treatment, non-discrimination, no nationalization, expropriation, investment protection, and free transfer of capital. Although there is some limitation regarding land ownership, however, foreign investors may take advantage of economic land concession or perpetual lease in order to have long-term use of land. For instance, a perpetual lease permits investors to use land with a minimum of 15 years and a maximum of 50 years which can also be renewed.

This new investment law shortens the application period to 20 working days from 31 days for the issuance of Certificate of Registration. The law also revises and improves the administrative and institutional mechanism to be more convenient for investors by introducing the online portal where investment applications can be submitted online. This law also revises some of the main tax incentives which proved to be more favorable to investors. The investor who has the Qualified Investment Projects (QIPs)’s Certificate of Registration will receive up to 9 years of tax holiday. The investor may choose another option of incentive which is up to 200 percent of special depreciation. In addition to these incentives, the investor will also receive full import duties, export tax exceptions, and some other incentives such as the use of foreign labor. These incentives are provided as an attempt to attract investors in some main sectors such as the high-tech sector, logistics supply chains, industrial serving global and regional value chains, among others. Moreover, investment projects in Special Economic Zones (SEZ) are also entitled to the same incentives as QIPs on custom duty, tax, and other special benefits.

This new law along with the newly formulated Cambodia-China Free Trade Agreement, and the upcoming Cambodia-Korea Free Trade Agreement and Regional Comprehensive Economic Partnership (RCEP) are the essential factors to attract FDI into the Kingdom. The current regulatory frameworks concerning investment in Cambodia are expected to enhance the Kingdom’s competitiveness and attractiveness, modernization, economic diversification, private sector development, and improving the post-Covid-19 recovery.

About the Author

Houn Vannak
Managing Partner
RHTLaw Cambodia
vannak.houn@rhtlawcambodia.com
+855 1273 7123

Vannak is a licensed attorney and a recognised member of the Bar Association of the Kingdom of Cambodia (BAKC) and is currently the Managing Partner of RHTLaw Cambodia. Vannak has strong knowledge of Cambodia commercial and investment regulatory frameworks, he has advised clients in cross-border M&A transaction for multinational corporation including foreign and local properties developer to maximise their investment opportunities throughout their investment while minimising the risks and costs from acquiring business licenses as they look to invest in Cambodia. His areas of expertise include Corporate, Real Estate and Infrastructure, Financial Institutions, Foreign Direct Investment, and Dispute Settlement.