Magazine article Global Finance

The Contender

Magazine article Global Finance

The Contender

Article excerpt

Cambodia is emerging as a key investment destination-and potential consumer market -for companies focused on Southeast Asia.

Often overshadowed by its regional rivals Vietnam,Thailand and, most recently, Myanmar, Cambodia has been undergoing a quiet transformation. After more than a decade of 6%-plus growth-with just one hiccup during the global crisis in 2009-the Southeast Asian nation of 15 million people has begun attracting serious investment.

But unlike in other frontier markets, investor interest has been driven more by corporate demand than by the country's self-promotion efforts. In fact, for many labor-intensive manufacturing operations, Cambodia has become an attractive option almost by default. A series of disastrous factory fires and collapses has dented Bangladesh's appeal,Vietnam is weighed down with bureaucracy, while growing awareness of wage inflation in China has companies looking elsewhere in the region. Cambodia, renowned for its relatively light-touch regulation of foreign investors, is a prime choice.

The resulting surge in investment has been dramatic. Last year direct investment hit a record $1.5 billion, according to Unctad, with foreign companies now pouring more investment-per-capita into Cambodia than they are into China.

"Wages are a third to a quarter of those in China," Duke Shin at New York-based brokerage Auerbach Grayson, notes. "For companies looking for a manufacturing base, Cambodia has increasingly become an alternative."

Daniel Riegler, an associate with M Invest, a corporate finance advisory firm based in Phnom Penh, Cambodia, and Yangon, Myanmar, says the country's population is young, entrepreneurial and motivated. With strong GDP growth, an emerging middle class and a growing local consumer market, Cambodia is gaining appeal as a market to sell into, he notes.

Cambodia is also extremely well positioned geographically, with easy access to China, Myanmar and India, says Albert Yuen, head of global portfolio management at LR Global Partners. …

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