Cambodia, a small country located right between the considerably larger economies of Thailand and Vietnam, is elevating as an increasingly attractive destination for foreign investors. With more than 6 million tourists visiting in 2018 and a strong and consistent economic growth, there is no wonder this humble Kingdom is being eyed by property investors worldwide.
Investing in Cambodia
In the first half of 2018, Cambodia was full of tourists who were trying to explore its inner treasures and experience its culture in its full glory. How many tourists? According to the Ministry of Tourism and their official data, in the first half of 2018 alone, 3 million foreigners visited Cambodia, marking a 12.7% increase in comparison to the first half of 2017.
Unsurprisingly, tourists were mainly coming from Vietnam and China. According to the same data mentioned above, 931,763 came from China, accounting for 31% of the total influx. In comparison to last year, this equals to a 75.8% increase — in the first half of 2017, 529,967 visitors were from China. Meanwhile, the situation is a bit different with those who came from Vietnam. In the first half of 2017, the number of Vietnamese visitors went down by 1.5%. However, in 2018, 386,614 of them visited Cambodia, becoming the second-largest group of tourists the Kingdom has seen that year.
Of course, this influx of tourists is not new. In fact, for the last two decades, this country’s economy has been growing fast, and it seems it will continue to do so for the foreseeable future. Given that it has access to global markets and that it welcomes foreign investments in accordance with its economic policy, Cambodia’s popularity is rising. What’s more, since it’s one of those countries that makes it easy to obtain credit (it’s ranked 7th out of 190 economies), banks and financial institutions can now get credit scores and other relevant information without any trouble at all.
Foreign exchange control and the local currency
As far as commercial transactions go, non-residents and residents can use them to exchange up to 10.000 dollars, as long as they make the transaction via an authorized bank. If the transfer is greater than that amount, then they must first declare it to the National Bank of Cambodia.
You might be wondering why we are mentioning dollars here. Although the local currency is KHR or the Khmer Riel, Cambodia features a semi-dollarized economy. As such, even though they introduced the local currency in 1980, about 80% of credits and deposits are given in US dollars. Right now, for one US dollar, you would get about 3800 to 4000 Cambodian riels.
Statuses and memberships
Now, Cambodia is beautiful in and of itself, but it’s important to mention that in October 2004, this country joined the organization that regulates international trade between nations — the World Trade Organization. During the years, it has been chosen as the MFN (Most Favored Nation) by other developed nations, including France, the UK, China, Germany, and the US. In addition, it is also a member of ASEAN — Association of Southeast Asian Nations — since 1999, along with other notable fast-growing economies, such as Thailand.
Why invest in Cambodia? — Enticing incentives
Although investing in Cambodia, especially in property, is worth it in and of itself, it’s important to note that this isn’t the only incentive available.
Foreign entities can hold 100% ownership over a commercial enterprise or local business. However, the Cambodian government plays a key role in welcoming foreign investments too. Namely, they don't discriminate against foreign investors nor follow a nationalization policy. In addition, they don't limit trade with endless restrictions nor use their power to impose foreign exchange or product and service price controls.
What they do, though, is allow free remittance of capital, dividends, loan repayments, interests, and royalties. What’s more, they also offer free repatriation of profits and 50-year leases to foreigners on Cambodian land. As such, even though they cannot own any land in the country according to the Law on Investment, they may enjoy a lengthy lease on their property.
Reasons that make Cambodia a well-worth investment
So what makes Cambodia the perfect place for real estate buyers and businesses? Well, the first reason is that it is a rapidly-growing frontier market. Although small, this country has seen huge economic growth for the last two decades, ever since Khmer Rouge disbanded. It hasn’t been touched by recession during those years! In fact, the 1990s Asian Financial Crisis didn’t affect it, nor did the 2008 Financial Crisis. The early 2000s tech-bubble was skipped by Cambodia too.
Does this mean Cambodia cannot fall victim to a recession? Of course not. Yet, it’s very close to being immune to it. As other frontier markets, it isn’t as connected to the global economy as some other countries. The three greatest players — the US, China, and Europe — can take down the countries that rely on them with their failing economies. However, since Cambodia doesn’t depend on foreign capital, it can skip some of the greatest financial setbacks the world has seen.
When investing in New Nordic Group holiday resorts, investors buy a slice in two of the fastest growing industries in some of the most beautiful areas of the world, the real estate & the tourism industries.
This ability is evident if we consider how much foreign investment has grown over the past decade — by over 800%! Although still not as sought-after as some other countries, investors are slowly taking the hint and realizing that Cambodia's capital, Phnom Penh, is where they should set up their operations. Some of those investors are Toyota, Nike, and Samsung, just to name a few. In addition, the impressive quality of manufacturing in Cambodia, as well as the low cost of labor in comparison to China, is drawing investors in and allowing them to make a more than decent profit.
As mentioned, there isn’t a shortage of investment opportunities in Cambodia. However, there is a slight issue with affluent expats not being able to find apartments that are up to their standard. Indeed, Phnom Penh doesn’t have enough of such apartments, especially when we consider the central and western districts, for example, 7 Makara and Daun Penh.
However, this opens up a whole new world of opportunities. It means it’s possible to invest in older apartments, renovate them and then either sell or rent them out. In fact, this sort of “apartment flipping” is well worth the trouble in Cambodia, as it’s possible to buy property for 50,000 dollars. Then, in order to renovate it, you’d need about 20,000 dollars. In the end, this renovated property can be sold for 100,000 dollars, marking a huge profit for the owner.
Still, this is what’s happening in the Cambodian capital. If we take a look at some other mid-sized towns, we’ll see they are practically booming. There’s plenty of activity there, as well as growth and construction. What’s more, the middle class is becoming more and more prominent, supporting new and exciting changes. However, there's very little foreign investment activity in these cities right now. As such, there’s a lot of potential for investors who are looking to conquer some of the most exciting parts of Asia — and Cambodia should be at the top of their list!
Where to start
It’s important to note that, if you are a foreigner, Cambodia is waiting for your investment with open arms. This country welcomes foreign investment more than any other Asian country, which is why setting up a business with 100% foreign ownership is not just possible but easy as well. In addition, obtaining a multiple entry visa won’t cost an arm and a leg — only 250 dollars and a couple of days. In fact, with a long-term visa, you can live in Cambodia without having to spend a lot of money — living there is just cost-effective.
When it comes to best deals, most would agree that newly built condominium buildings are too expensive to invest in. In fact, they are often overpriced, so the best deals are available for colonial shophouse apartments. Yet, the condominium units allow the foreigners to hold strata titles in their own name. This is not an option for shophouse apartments or plots of land, which are fairly popular among investors due to their huge potential.
As a foreign investor, you can only own a condominium unit. In case you decide to invest in the two other types of properties — land and shophouse apartments — you’d have two options:
- Arrange a nominee agreement with a Cambodian citizen — several other contracts would enforce this agreement
- Establish a land-holding company located in Cambodia — a much better option if you’re worried about legal requirements. However, it entails yearly licensing fees, as well as tax filing every single month. Nevertheless, when it comes to profit, all the expenses and the effort should be well worth it, especially if you decide to buy a few plots of land or a few apartments (large-scale investing).
Only a few units left
Sihanoukville is the future of Cambodian tourism - Sihanoukville has a population of 200 000 and is considered a full-flexed city with highly developed infrastructure. The Sihanoukville Special Economic Zone functions as a magnet for foreign investment and a boost for the local economy. The port of Sihanoukville is a hub for both trade and cruise ships in the region. Being the only city with an international deep water port in Cambodia; Sihanoukville serves as a strategic centre for foreign investment. The harbour is currently under expansion to prepare for even more commercial traffic in the years to come. The International airport of Sihanoukville handled 651,000 passengers in 2018 compared to only 13,000 in 2012. Sihanoukville has an active tourism department with their ear to the ground. They work to regulate prices and ensure prices are not hiked due to tourism. Favourable incentives to draw tourists and development. Airlines receive USD 10 per passenger when scheduling routes to Sihanoukville.
Country head office
The New Nordic Group's office in Cambodia is situated in the capital city of Phnom Penh. Our sales team are here to answer your questions about New Nordic and our projects.
New Nordic Development (Cambodia) Co. Ltd, #167 Sisowath Quay, Sangkat Phsar Kandal 1, Khan Daun Penh 12204, Phnom Penh Cambodia
Phnom Penh, the pearl of the Orient is a hub for travelers with amazing sites to visit, architecture, food and nightlife.