Located at the heart of the Greater Mekong Subregion, Cambodia remains one of Southeast Asia’s fastest growing economies. Business-friendly policies and favourable conditions continue to attract investors and residents to the Kingdom
Basics
Currency
The official currency is the Cambodian riel, though the Kingdom is a partially dollarized economy with the majority of deposits and credits in the country’s banks held in US dollars. There has been a massive increase in digital payments in recent years, and QR codes are now available for nearly every purchase, even in wet markets and from small vendors such as street sellers or tuk tuk drivers.
1 USD ≈ 4,150 KHR (04/2024)
Demographics
- Population: 16.94 million (2023)
- Median age: 27.3 (2023)
- Phnom Penh Population: 2.35 million (2024)
Key Economic Indicators
- Labour force: 9.05 million (2022)
- GDP: $29.5 billion (2022)
- GDP per capita: $1,625.24 (2023)
- GDP growth: 5.3% (2023)
- GNI per capita: $1,690 (2022)
- Economic status: lower-middle income
- Inflation: 3% (2023)
Foreign Exchange Control
Commercial transactions up to $10,000 may be made freely between residents and nonresidents, provided they are through an authorised bank. Transfers exceeding $10,000 must be declared to the National Bank of Cambodia prior to the transfer.
Investment Incentives
Foreign entities can own 100% of a local business or commercial enterprise. The Cambodian government:
- Does not discriminate against non-Cambodian investors
- Does not undertake a nationalisation policy
- Does not impose price controls on products or services
- Does not impose controls on foreign currency
- Does not impose trade restrictions
- Protects intellectual property
- Allows for the free repatriation of profits and free remittance of royalty, interest, loan repayments, dividends and capital
- Allows foreigners to lease land for up to 50 years (the Law on Investment restricts foreigners from owning land in Cambodia)
Law on Investment (2021)
Since 2021, an updated Law on Investment (LOI) has been implemented to establish “an open, transparent and predictable legal framework to attract and promote quality, effective and efficient investments by Cambodian nationals or foreigners in the Kingdom of Cambodia.”
Under the new LOI there are a number of incentives offered to operations that receive Qualified Investment Projects (QIP) from the Council for the Development of Cambodia or a Municipal/Provincial Investment SubCommittee.
Industries entitled to QIP status
Along with agriculture, manufacturing, tourism and adjacent supporting industries, the new LOI is working to promote sectors in line with the government’s development goals.
- High-tech industries involving innovation or research and development
- Digital industries
- Environmental management and protection, and biodiversity conservation and the circular economy
- Green energy and technology contributing to climate change adaptation and mitigation
Tax incentives for QIPs
Option 1:
- Tax exemption for 3 to 9 years, depending on the sector and investment activities
- After the exemption period has expired, the QIP is entitled to paying income tax at a rate proportional to the total tax due: 25% for the first 2 years, 50% for the next 2 years, and 75% for the last 2 years
- Additional incentives as outlined in the LOI
Option 2:
- Deduction of capital expenditure through special depreciation
- Eligibility of deducting up to 200% of specific expenses incurred for up to 9 years, depending on the sector and investment activities
- Additional incentives as outlined in the LOI
Additional incentives
Value-added tax exemption for the purchase of locally made Production Inputs.
Deduction of 150% from the tax base for any of the following activities:
- Research, development and innovation
- Human resource development through the provision of vocational training and skills to Cambodian workers/employees
- Construction of accommodation, food courts or affordable canteens where reasonably priced foods are sold, nurseries and other facilities for workers/employees
- Upgrade of machinery to serve the production line
- Provision of welfare for Cambodian workers/employees
Preferential Market Access
Trade and Commerce with the European Union: Exports to the EU have remained strong despite the partial withdrawal of Everything But Arms (EBA) trade preferences in 2020. The withdrawal impacted select garment and footwear products and sugar exports, amounting to one fifth of Cambodia’s annual exports to the EU.
With Cambodia expected to graduate from Least Developed Country (LDC) status by 2027, the remaining trade preferences previously enjoyed under the EU’s EBA agreement will no longer be available. However, the upgraded status opens the door to a host of new tariff concessions under the EU’s sustainability-minded GSP+ programme. To qualify, Cambodia must demonstrate compliance with human rights standards, “Rules of Origin” requirements and other trade and export rules.
Association of Southeast Asian Nations (ASEAN): A member since 1999, Cambodia benefits from a number of regional trade agreements, incentives and schemes that have been established through ASEAN initiatives.
- ASEAN-Australia-New Zealand Free Trade Area
- ASEAN-China Free Trade Area
- ASEAN-India Free Trade Area
- ASEAN-Republic of Korea Free Trade Area
- ASEAN-Japan Comprehensive Economic Partnership
Other Free Trade Agreements
Cambodia has entered into a growing number of bilateral and multilateral agreements that provide support internationally and across the region.
Regional Comprehensive Economic Partnership (RCEP): Entered into force in 2022, RCEP brings together the Asia-Pacific nations of Australia, Brunei, Cambodia, China, Indonesia, Japan, South Korea, Laos, Malaysia, Myanmar, New Zealand, the Philippines, Singapore, Thailand and Vietnam. By member nation GDP, it is the largest FTA in the world.
Cambodia-China Free Trade Agreement (CCFTA): Cambodia’s largest trading partner is China and the CCFTA has helped improve the competitiveness of Cambodian products, notably agricultural and aquacultural exports.
Cambodia-Korea Free Trade Agreement (CKFTA): Ratified in 2022, the CKFTA eliminates duties on 93.8% of South Korean goods imported to Cambodia and removes tariffs on 95.6% of Cambodian products sent to South Korea.
Cambodia-United Arab Emirates Comprehensive Economic Partnership Agreement (CAM-UAE CEPA): Going beyond a traditional FTA, the CAM-UAE CEPA covers everything from investment, e-commerce, rules of commodity origins, trade facilitation, and intellectual property rights, to economic and technical cooperation and laws and institutions.
Tip:
The Council for the Development of Cambodia (CDC) has made upgrades to its website and launched a digital portal for QIP registration.
This new QIP Online system streamlines the application process and increases confidence and transparency, while reducing costs for those looking to do business in the Kingdom.
