1 The 2 nd Mekong – Republic of Korea Business Forum “ Strengthening Value-Supply Chains Connectivity in the Mekong Sub-region ” Hanoi, VN, 29 March 2014 CAMBODIA - UPDATING INVESTMENT AND BUSINESS ENVIRONMENT AND OPPORTUNITIES FOR ENHANCED CONNECTIVITY OF VALUE-SUPPLY CHAINS IN THE MEKONG SUB-REGION SOK SOKEN Deputy Director, Private Investment Strategy Analysis Department Cambodian Investment Board (CIB) Council for the Development of Cambodia (CDC) KINGDOM OF CAMBODIA
Strengthening Value-Supply Chains Connectivity in the Mekong Sub-region 2 Table of contents • Putting everything into perspective • GVC, GSC (external forces, trends) • Regional initiative (ASEAN, APEC) • Sub-regional initiative (GMS, BIMP-EGA, IMT-GT) • Current Investment and Business environment • FDI Policy regimes • Investment data • Investment promotion materials (including G-PSF) • Updates on investment and Business environment • Supply chain Infrastructure and Cross border infrastructure (CBI) – (hard [transport and energy] and soft [border administration, etc.]) • G-PSF and outcomes • Opportunities for enhanced connectivity of value- supply chains in the Mekong sub-region • Domestic value chain – downstream (agro processing for rice, rubber, cassava, maize) • Domestic value chain – upstream (parts and components for domestic industry, Fabric production for garment) • Regional value chain – (miniature motors, wire harness, ignition parts, INTERMEDIARY goods)
Strengthening Value-Supply Chains Connectivity in the Mekong Sub-region 3 I - Putting everything into perspective Natural disasters Regulatory trend : (disruptions to key new rules (CSR, component sustainability) supplies) Demographic Ecological trend : trend awareness of env. (demographic issues (scarce structure changes resource costs demand and supplies) preferences) Economic trend : New emerging markets, GSC & GVC technological BRIC, ROK, Africa trend (new (80% of global trade, (patterns of business WTO) outsourcing and models/platforms) offshoring) Source: Chang et al. (2012), APEC Policy Supporting Unit
Strengthening Value-Supply Chains Connectivity in the Mekong Sub-region 4 I – Putting everything into perspective – Regional and sub-regional initiatives • To enhance scalability and expand market through improving supply chain connectivity across borders and improve business environment behind the border: cost, time and uncertainties for trade • Regional ASEAN – CBI Development • • Physical Connectivity • Transport projects - 9 regional transport agreements (air freight, goods in transit…), ASEAN Highway networks [38,400km], Singapore-Kunming Rail link [7,000km] • Energy sector projects (ASEAN Power Grid – 14 interconnection projects, trans-ASEAN Gas pipeline – 8 gas interconnection projects) • APEC • Supply Chain Connectivity Framework Action Plan • Supply Chain Visibility Initiative (reduce logistics and warehousing costs) • Sub-regional • GMS 10-year Strategic Framework – increase connectivity and competitiveness(11 programmes and 3 economic corridors) • Cross-border Transport Agreement (CBTA) – facilitates [single stop custom inspection, movement of people, road • standards and signage, transit traffic regimes] • BIMP-East Asia Growth Area IMT – Growth Triangle • • Pan-Asia Infrastructure initiative: Asian Highway • CHALLENGES to supply chain connectivity • Gaps in economic and infrastructure development (asymmetric distribution of regional infrastructure) • Too many different regulatory requirements
Strengthening Value-Supply Chains Connectivity in the Mekong Sub-region 5 II – Investment and business environment in Cambodia
Strengthening Value-Supply Chains Connectivity in the Mekong Sub-region 6 Embracing globalization process – outward looking economic development strategy JOINING JOINING WTO ASEAN ASEAN Economic Everything Community But Arms (EBA)
Strengthening Value-Supply Chains Connectivity in the Mekong Sub-region 7 Assessment of FDI Policy Regimes based on legal documents - ASEAN Source: Urata and Ando (2010) + High score indicates open FDI policy regime + Singapore is very open + The Philippines, Thailand, Indonesia and Cambodia are relatively open + Myanmar, Malaysia, Brunei and Lao, PDR are relatively closed.
Strengthening Value-Supply Chains Connectivity in the Mekong Sub-region 8 Investment environment in Cambodia 14% 25.00% 12% 20.00% 10% 15.00% 8% 10.00% 6% 5.00% 4% z 0.00% 2% 0% -5.00% 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 e GDP 9.20 6.50 5.30 5.70 5.00 12.6 9.20 7.70 6.20 8.60 10.0 13.3 10.8 10.2 6.70 0.10 5.90 7.10 7.30 7.60 Inflation 17.9 3.50 10% 9.20 13.3 4.00 -0.8 0.20 3.30 1.20 3.90 5.80 4.70 5.9% 19.7 -0.6 4.00 4.90 3.00 4.00 Source: SNEC & MEF
Strengthening Value-Supply Chains Connectivity in the Mekong Sub-region 9 Rectangular Strategy Phase III - Growth, Employment, Equity and Efficiency
Strengthening Value-Supply Chains Connectivity in the Mekong Sub-region 10 Encouraged Investment Activities Agriculture and agro-industry Transport and telecommunications Energy and electricity Labor-intensive industries, processing and manufacturing; Tourism Human resource development Oil & Gas, Mining New high value-added and more creative industries Heavy industries Assembly, electronics and spare parts manufacturing
Strengthening Value-Supply Chains Connectivity in the Mekong Sub-region 11 Council for the Development of Cambodia (CDC) Investment application 3 working CDC issues a Conditional Registration Certificate (CRC) to the Applicant days Company Registration / Ministry of Commerce Relevant licenses, as appropriate / Ministry of Industry and Handicraft Review and approval of construction plan / local authorities- 28 working Ministry of Land Management, Urban Planning and Construction. days Initial environmental impact assessment / Ministry of Environment Tax Department Registration / Ministry of Economy and Finance CDC issues a Final Registration Certificate (FRC) to the Applicant
Strengthening Value-Supply Chains Connectivity in the Mekong Sub-region 12 Incentives Non-fiscal incentives Fiscal incentives • Low corporate tax at 20% No nationalization • Exemption on import duty and export tax No requirement of local equity • Production equipment and Construction participation materials imported by Qualified No discrimination between foreign Investment Project (QIP) and domestic investors (except land • Production inputs imported by Export QIP ownership) • Profit tax exemption – No restriction on capital repatriation • Trigger period 0-3 years + Grace Special accelerated depreciation for period 3 years + Priority period 0-3 years determine by Financial reinvestment of profit Management Law No foreign exchange control • Up to 9 years (Agriculture, Heavy No price control and quantitative Industry [>5m] and infrastructure [>30m] ) trade restriction
Strengthening Value-Supply Chains Connectivity in the Mekong Sub-region 13 Accumulated Investments (1994-2013) US$ Million 12,000 Agriculture 10% 10,000 9,611 Tourism Industry 44% 29% 8,000 6,000 4,405 Service 4,000 3,649 17% 2,620 2,000 1,524 1,294 1,021 899 870 786 391 - China Korea EU Malaysia Vietnam USA Taiwan Thailand HongKong Singapore Japan
Strengthening Value-Supply Chains Connectivity in the Mekong Sub-region 14 Investment by Mekong sub-region countries and ROK Investment from Korea, Vietnam, and Thailand in Cambodia $1,200,000,000 $1,000,000,000 $800,000,000 $600,000,000 $400,000,000 $200,000,000 $0 2009 2010 2011 2012 2013 Jan-Apr 2014 Korea $120,135,261 $1,063,407,238 $163,249,209 $293,288,856 $85,150,716 $44,085,480 Vietnam $352,085,036 $153,252,238 $690,973,515 $84,754,552 $279,661,413 $2,641,181 Thailand $182,899,276 $2,044,408 $8,207,022 $125,831,610 $216,653,329 $16,699,385
Strengthening Value-Supply Chains Connectivity in the Mekong Sub-region 15 Investment Ranking (2008-2013) 2008 2009 2010 2011 2012 2013 Rank $11,420,127183 $6,309,435,594 $3,029,497,634 $7,984,908,645 $2,965,537,652 $3,314,528,763 Country % Country % Country % Country % Country % Country % 1 China 39.45 Cambodia 60.81 Korea 35.10 U.K 30.93 Cambodia 42.08 Cambodia 68.80 2 Cambodi 36.73 China 14.93 China 28.73 Cambodia 29.76 China 20.69 China a 15.68 3 10.89 Vietnam 5.58 Cambodia 14.91 China 22.05 Korea 9.89 Vietnam Korea 6.10 4 USA 5.59 Singapore 4.81 Malaysia 8.53 Vietnam 8.65 Japan 9.15 Thailand 4.37 5 Israel 2.63 Russia 3.84 Vietnam 5.23 Malaysia 3.03 Malaysia 6.04 Korea 1.76 6 Russia 0.92 Thailand 3.53 Portugal 1.66 Korea 2.10 Thailand 4.53 Japan 1.59 7 U.K 0.59 Korea 2.89 Australia 1.65 U.S.A 1.78 Vietnam 2.89 Malaysia 1.04 8 Austria 0.54 India 1.90 Singapore 1.02 Japan 0.83 Singapore 2.59 Singapore 1.03 9 Vietnam 0.51 Malaysia 1.19 Denmark 0.97 Australia 0.31 U.K 0.51 UK 0.43 10 France Singapore 0.50 Japan 0.20 Japan 0.86 0.20 U.S.A 0.42 France 0.27 11 Others 1.28 Others 0.32 Others 1.35 Others 0.35 Others 1.21 Others 0.96
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