Current Situa+on of FDI and its impact on Economic Development in Cambodia

Transcription

1 RULE Special Seminar Series Current Situa+on of FDI and its impact on Economic Development in Cambodia Presenter: Dr. Ngov Penghuy Date: March 18 th 2017 Venue: RULE, Hall G Table of Contents I. CharacterisKcs of Cambodian Economy II. Investment into Cambodia III. Industrial Development (IDP) IV. Recent Change in FDI Inflows V. Conclusion 1

2 I. Characteris+cs of Cambodian Economy Liberalized Economic Regime since 1993 Labor intensive manufacturing, especially garment and footwear Heavily Dollarized Economy Private Sector- and FDI- led Growth Key pillars of growth: garment, construckon, tourism, finance, agriculture I. GDP and Sectoral Growth Rate Agriculture Industry Services GDP Source: ADB, Key Indicators

3 I. Composi+on of GDP 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Agriculture Industry Services Source: ADB, Key Indicators 2016 I. Sectoral Contribu+on to Growth Contribution to Growth (In percent) 16 Agriculture 14 Hotels and transportation Real estate 12 Other Garment Trade and finance Construction Real GDP Proj Source: IMF Country report, Tourism remains strong, mainly due to the increase in the 3

4 40 I. Export Contribu+on to Growth Export contribution to growth (In percent) Textile Rice 30 Other agriculture Other Total exports Source: IMF Country report, apid credit growth, particularly in construction and real I. Garment Exports from Cambodia $7,000 $6,000 $5,000 Garment exports Footwear exports US$ 5,960 US$ 5,384 US$ 6,827 $4,000 $3,000 $2,000 US$ 1,549 US$ 1,602 US$ 1,995 US$ 1,681 US$ 1,773 $1,000 $ Source: MEF, RGC Q Q Q Q Q

5 II. CommiCed FDI Inflow by Sector 3, ,000.0 Investments by sector ( ) Investment Capital ( ) Total of USD 22.3 billion Million USD 2, , ,500.0 Tourism 10% Agriculture 14% Industries 35% 1, Infastructure 41% Agriculture , Industries 1, , , , Infastructure 2, , ,129.8 Tourism Source: Council for the Development of Cambodia II. FDI Inflow by Country (Commitment-based) Year Total $5.7 Billion $2.9 Billion $4.9 Billion $3.9 Billion $4.6 Billion Rank Country % Country % Country % Country % Country % 1 Cambodia Cambodia Cambodia Cambodia Cambodia China China China China China Vietnam Korea 9.89 Vietnam 6.10 Malaysia 2.18 UK U.K 4.30 Japan 9.15 Thailand 4.37 Japan 1.72 Singapore Malaysia 4.20 Malaysia 6.04 Korea 1.76 Korea 1.66 Vietnam Korea 2.91 Thailand 4.53 Japan 1.59 Vietnam 1.26 Malaysia U.S.A 2.47 Vietnam 2.89 Malaysia 1.04 UK 1.13 Japan Japan 1.15 Singapore 2.59 Singapore 1.03 Singapore 0.89 Thailand Australia 0.43 U.K 0.51 UK 0.43 Thailand 0.88 Korea Singapore 0.28 U.S.A 0.42 France 0.27 Australia 0.51 Canada Others 0.48 Others 1.21 Others 0.94 Others 1.36 Others 0.52 Source: Council for the Development of Cambodia 5

6 Cambodia s Demographic Pyramid Investment Incen+ves Corporate Tax: 20% Tax holidays: 6 years ~ 9 years Special Depreciation (Reinvestment of Earning) OR Full Import Duty Exemption 6

7 II. Investment Cost Comparison (Jan. 2015) Minimum Wage Nominal Wage Increase Cambodia Laos Myanmar Vietnam Thailand $128 per month $77 per month na $146 per month $9.09 per day na na na na 2011: 7.18 % 2012: 11.82% 2013: 8.28% (1) $0.08 (less Electricity Tariff than 5MW) $ $0.18 for Business (2) $0.09 (more than 5MW) (1) $0.10 (2) $ Manufacturing (1) $0.04 (off-peak, 22:00-4:00) (2) $0.06 (normal, Mon-Sat: 4am-9:30, 11:30-17:00, 20:00-22:00, Sun: 4:00-22:00) (3) $0.11 (peak, Mon-Fri: 9:30-11:30, 17:00-20:00) 2. Distribution and Service (1) $0.05 (off-peak, 22:00-4:00) (2) $0.09 (normal, Mon-Sat: 4am-9:30, 11:30-17:00, 20:00-22:00, Sun: 4:00-22:00) (3) $0.16 (peak, Mon-Fri: 9:30-11:30, 17:00-20:00) (1) $0.14 per kwh (peak, Mon-Fri: 9:00-22:00) (2) $0.07 per kwh (offpeak, except (1) ) Corporate Tax 20% 24% 25% 22% (Max) 20% Income Tax 20% 24% 25% 35% (Max 35% (Max) Value Added Tax 10% 10% 5% 0%, 5%, 10% (depending on item) 7% Source: JETRO (2015) III. Industrial Development Policies (IDP) To capture regional trends and changes in regional architecture (AEC, China+1, Thailand+1, and RCEP). To promote a platform for growth focusing on economic diversification, strengthening national competitiveness, and enhancing productivity. Source: Council for the Development of Cambodia 7

8 III. Infrastructure for Industrial Development Four key priorities to be achieved by 2018 in IDP Improving electricity supply to key industrial areas/estates: reduce the electricity tariff from 18.8 cents/kwh in 2014 to 12 cents/kwh and ensure the stability of the electricity supply. Building multi-modal transport and logistic system to connect to 3 keys industrial corridors namely Phnom Penh Sihanoukville, Phnom Penh - Bavet, and Phnom Penh - Poi Pet. Building modern institutions for vocational and technical training / human resources development needed by industries. Develop and transform Sihanoukville Province into a multipurpose Special Economic Zone. Source: Council for the Development of Cambodia III. Law on Investment: What is New? - Pioneer status - SMEs : supporting activities - Incentives for provision of: Accommodation Transportation Canteen Training Source: Council for the Development of Cambodia 8

9 III. Law on SEZ - Promote the establishment of large industrial parks and clusters by enacting the Law on Special Economic Zone by providing incentives and other supporting measures to promote investments in SEZs; - Continue developing industrial zones in provinces, aimed at promoting hubs for SMEs and logistics links as well as other incentives and facilitation from the government; Source: Council for the Development of Cambodia III. Law on SEZ - Promote more active participation from the private sector to develop physical infrastructure in government approved. - Set a clear standards and guiding principles on environmental protection and production safety for investment projects located in SEZs and other industrial zones; - Continue strengthening and streamlining the administrative capacity and institutional framework for managing the operations of SEZs by way of increasing the effectiveness of the One-Window Service mechanism. 9

10 III. Law on Investment: What is New? - Streamlining administrative procedures : Customs extra territory status Construction permit Environment requirement (EIA) Factory licensing Worker health control Tax registration (ID) C.O. online - Timely provision of basic infrastructures - Effective development, revocation if no development Opera+onal SEZs No. Name Loca+on Number of Factories Number of Workers 1 Phnom Penh SEZ Phnom Penh 74 33,156 2 Goldfame Pak Shun SEZ Kandal 5 5,186 3 Manhadan (Svay Rieng) SEZ Svay Rieng 36 34,345 4 Tai Seng Bavet SEZ Svay Rieng 22 14,866 5 Dragon King SEZ Svay Rieng 4 2,664 6 Sihanoukville SEZ 2 Sihanoukville 61 34,665 7 Sihanoukville SEZ 1 Sihanoukville Sihanoukville Port SEZ Sihanoukville H.K.T SEZ Sihanoukville Kampot SEZ Kampot Neang Kok Koh Kong SEZ Koh Kong 5 10, Poi Pet O Neang SEZ Banteay Meanchey 5 2,473 Source: Sok Chenda Sophea 10

11 Cambodia s Special Economic Zones Poi Pet O Neang SEZ Neang Kok Koh Kong SEZ Phnom Penh SEZ Goldfame Pak Shun SEZ - Sihanoukville SEZ 2 - Sihanoukville SEZ 1 - Sihanoukville Port SEZ - H.KT SEZ Kampot SEZ - Manhadan (Svay Rieng) SEZ - Tai Seng Bavet SEZ - Dragon King SEZ IV. Recent Change in FDI Climate Garment Sector on the rise Emergence of FDI in Electronic sector by Japanese Firms 11

12 IV. Case: Minebea (Cambodia) Ltd Precision maker Oct. 2010: Established in Cambodia Apr. 2011: Start operakon in a rental factory in PPSEZ, with 300 workers. Sept. 2016: 6,500 workers Dec. 2016: Opening of 3 rd ProducKon Line. Business Model: Import parts from its subsidiary factories in Thailand, Malaysia, and China Assemble in PPSEZ Export to factory in Thailand. IV. Why Minebea to Cambodia? Proximity with its subsidiary factories in Thailand Cheap and abundant labor Strong government supports Good service provided by PPSEZ Risk DiversificaKon from concentrakon of produckon base. 12

13 3/18/17 IV. Determinants of FDI Decision Close Proximity with Thailand: Wage/Skill DifferenKal Division of labor Thailand on relakvely high value- added produckon, while Cambodia on relakvely low value- added one. ASEAN economic integrakon: Low or no tariff among ASEAN members IntegraKon into the regional produckon chain Phnom Penh Special Economic Zone 26 13

14 Yazaki (Cambodia) 27 V. Conclusion DiversificaKon and integrakon into regional value chain network is important. Complementary ProducKon with Thailand + 1. Need to move up to higher value- added produckon. Thus, linkage educakon- occupakon nexus needs to be well coordinated. In the future, from industrial development policy to industry-specific policy is needed

15 Thank You! 15