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Is Cambodia the right place for Japanese investors?

Is Cambodia the right place for Japanese investors?

National October 28, 2019
Taing Rinith / Khmer Times

Miyao Masahiro, chief representative of the Japan External Trade Organisation. KT/Tep Sony
In an exclusive interview with Khmer Times, Miyao Masahiro, chief representative of the Japan External Trade Organisation, shares his institution’s view on the Kingdom’s economy as well as its bilateral relationship with Japan.

KT: First of all, what is JETRO? And what are its functions?

Mr Masahiro: JETRO, standing for Japan External Trade Organisation, is a semi-governmental organisation that promotes trade and investment between Japanese companies and the rest of the world. In Cambodia, of course, we are promoting trade and investment between the two countries, but also supporting Japanese companies operating their businesses in Cambodia. We are also working closely with the Cambodian government to enhance business empowerment in Cambodia to increase foreign direct investment into Cambodia.

KT: How many Japanese companies have been registered in Cambodia since JETRO opened here in 2010?

Mr Masahiro: According to MOC [the Ministry of Commerce], since JETRO opened its representative office in Cambodia in 2010, probably 2,000 Japanese companies have been registered. My understanding is the number of companies which withdrew from Cambodia are not counted here, so I think their number is much smaller than that. We are also taking care of the Japanese Business Association in Cambodia, which has 270 member companies. So we believe that approximately 400 or 500 companies remain in Cambodia and the number is increasing.

KT: What encourages Japanese companies to keep coming to Cambodia?

Mr Masahiro: In the past year, Japanese investment to Cambodia slowed down a little bit because they were seeking other business opportunities and watching the political situation in Cambodia because we had an election here. But from 2019, we have found manufacturing, and other service industries such as retailing and wholesaling, are getting more interested in the Cambodian market, and the number of the companies visiting Cambodia is dramatically increasing.

KT: Which sector appears to be the most interesting for Japanese investors?

Mr Masahiro: From JETRO’s point of view, we are very interested in attracting Japanese manufacturers to come to Cambodia. Manufacturing is one of the big industries, not only affecting Cambodia’s economy but also hiring Cambodian staff, which can reduce the unemployment rate in Cambodia and provide training to Cambodian workers. We believe that the manufacturing industry is one of the keys to stimulate Cambodia’s economy.

KT: What can you tell us about the volume of Cambodia-Japan trade?

Mr Masahiro: I don’t have the statistics now, but I know that in the past ten years, imports and exports have dramatically increased. And in 2018, I found that the amount of trade was $2 billion, and we expect this figure to increase in 2019.

KT: What are the challenges for Japanese companies operating in Cambodia?

Mr Masahiro: We are working closely with the Japanese Business Association in Cambodia. What we are doing here is to help with communication and negotiations with the Cambodian government to make business empowerment much easier for Japanese investors or companies. From JETRO’s point of view, yes, there are many challenges but we believe that the Cambodian government is really listening to our voices and opinions. It will change step by step.

For manufacturers, one problem is an electricity shortage, or the price of the electricity is higher than that in Thailand or Vietnam. We want the cost to be competitive compared to other countries. And electricity stability is required.

The other thing is the taxation system which is still completely different from the surrounding countries. So we would like the Cambodian government to consider what the benefits of doing business in Cambodia are compared to Vietnam or Thailand. Another thing is the trade customs system or trade-related procedure or logistic system. For example, the number of ships coming to Cambodia’s ports is lower than those coming to Vietnam’s and Thailand’s, which means the transportation cost increases. Land transportation in Cambodia is quite more expensive. If all these costs are reduced, trade between Cambodia and Japan will increase, I believe.

KT: Can you go a little bit into detail about the taxation system in Cambodia? How is it different from Thailand and Vietnam?

Mr Masahiro: First thing, we are surprised that we have to pay monthly tax for income here before companies have benefits. The companies have to pay the tax on turnover in advance before their benefits are decided. This makes the cash flow in the companies difficult to control. Although when the benefit is less than expectation, the tax is still needed to be paid in advance, which will not be returned. That makes the companies surprised and difficult to manage. Such a system does not exist in the neighbouring countries.

KT: And what have neighbouring countries been doing to assist foreign companies?

Mr Masahiro: It is not only the matter or taxation. There are also other factors as well. Taxation is one of the factors that the companies will consider before making an investment. They are struggling on that issue and the communication with the government.

KT: How has JETRO been assisting in negotiations with the government?

Mr Masahiro: We have a big meeting twice per year, which is called the Joint Meeting between the Government and the Private Sector, which is led by the Japanese Ambassador and CDC. Before the big meeting, we have specific meetings with each ministry. As far as I know, more than ten to 20 meetings are held between each ministry and our organisation.

KT: Overall, is Cambodia a good place for Japanese investment?

Mr Masahiro: Cambodia is a hidden, attractive market for Japanese companies. I don’t think it is for the giant companies. I think it is for SMEs because there are limited giant companies here. There are also limited regulations or rules restricting foreign companies in the business. I definitely think Cambodia is a good place for medium-sized businesses.

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