PHNOM PENH – It’s not entirely plain sailing, but Japan Inc. is increasingly investing in Cambodia.
Japan was the third-largest foreign investor in 2015, with 250 companies setting up shop. China led the field, with 1,055 firms, and South Korea followed, with 278.
Japanese investment ranges from imports and exports, tourism, factories, consulting and real estate services, to agriculture and construction.
Japan External Trade Organization figures show that the 250 Japanese companies registered with Cambodia’s Ministry of Commerce in 2015 is a major increase from 19 in 2010 and 179 three years ago.
While the number of Japanese companies is booming, Japanese restaurants are also mushrooming. There are now more than 150 of them, serving the roughly 2,500 Japanese expatriates registered at the Japanese Embassy as of January.
A Japanese school also opened last year.
Sok Chenda Sophea, secretary-general of the Council for Development of Cambodia, a government agency, said engagement by the Japanese government and people spans 20 years, contributing to Cambodia’s rehabilitation and reconstruction with funding for roads, bridges, schools and hospitals, as well as for development of human resources.
Cambodia is grateful for this, he said.
“Now, I wish to see Japanese companies doing businesses, making money and spearheading industrial development of Cambodia,” he said.
“What we value most from Japanese investment is not only the inflows of capital but most importantly the transfer of technology and the Japanese work ethic.”
Council statistics show investments to Cambodia increased from $3.9 billion in 2014 to $4.6 billion in 2015, with Japanese investments totaling $47.9 million and $56.7 million, respectively.
And for the first six months of 2016, Japanese investments went against the flow, heading into Cambodia at a time when overall investment was poor.
The council said there were 94 projects totaling $3.35 billion in the first half of 2015, while within the same period in 2016, there were only 79 projects, amounting to $1.87 billion.
Of the 10 leading foreign investors in Cambodia, Japan was ranked fourth in the first six months of 2015, with investments totaling $25.53 million, while within the same period in 2016, the sum was 10 times higher at $258 million and the nation ranked third.
But Chan Sophal, an economist and director of the Center for Policy Studies, said the recent increase in Japanese investment was strong only in services, not in manufacturing.
He said the first Aeon Mall opened two years ago and the second one — currently under construction — accounts for a lot of the recent Japanese investments.
He said Cambodia’s political stability is conducive to Japanese investment, but as elections are due in 2017 and 2018, it is unclear whether the influx will continue. Some investors may take a wait-and-see approach before the general election in July 2018, he said.
Hiroto Yasuhara, on the council’s Japan Desk, echoed Sophal’s view and said he is “not very optimistic” about Japanese investment in the next six months.
He said the figure for the first half of the year was heavily dependent on the service sector, such as shopping malls and hotels. The manufacturing sector is quite weak, except for activity in the town of Poipet on the Thai border.
A 23-floor Toyoko Inn hotel, costing $14 million, opened last year in Phnom Penh. It is the capital’s first ever Japanese hotel.
The first giant Japanese Aeon Mall, built at a cost of $250 million, opened in Phnom Penh in 2014.
Plans for the second were unveiled a year later. It is expected to be completed by 2018.
The prospect for future Japanese investment in Cambodia is mixed though.
In Channy, president and group managing director of ACLEDA Bank PLC, Cambodia’s largest local bank, and chairman of the board of the Cambodia-Japan Association for Business and Investment, said he believes more Japanese investors will flow to ASEAN, and in particular Cambodia, due to the political stability they are assured there over the medium and long term.
By the end of last year, ACLEDA Bank had 247 Japanese corporate customers and 369 individual customers. In just the past six months, he said the bank received 277 corporate customers and 707 individual customers.
From 2009 to 2015, Cambodia’s exports to Japan totaled $968 million. This included apparel and textiles, footwear and leather goods.
Imports from Japan of cars, machinery, electronic items, meat, ships and boats, iron and steel fell by more than half to only $302 million, JETRO figures show.
JETRO meanwhile said Japanese investors suffer difficulties that include electricity costs and the lack of trained and educated workers.
While the administrative system and laws have been developed, the actual approval process is opaque, with decisions depending on the person in charge in some cases.
Lastly, infrastructure is poorly maintained, especially roads in rural areas. Internet connections are another problem.
Regardless of whether Japanese investment rises further, many Cambodians express satisfaction with Japanese products, investments and assistance, including with infrastructure such as bridges and roads.
Businessman Pen Sophal, 42, said Japanese products such as cars and appliances are always good quality. He singled out Okamoto brand condoms, noting that they are the most expensive in Cambodia.
And if appearances are anything to go by, Japanese brands, names and lettering appear in most parts of Cambodia, especially in Phnom Penh, seen on everything from restaurants, bridges and cars, to electronics and Japanese used-product shops.
In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.