Cambodia - Market Overview Cambodia - Market Overview
Cambodia has experienced rapid economic growth over the last decade. Cambodia’s gross domestic product (GDP) has grown at around seven percent per year over the past decade, and it is expected to continue growing at a similar rate for the next several years. Cambodia’s Gross National Income (GNI) per capita stood at $1,230 in 2017, having graduated to lower-middle income status as measured by the World Bank in 2016. The country, however, remains one of the poorest in Asia. Cambodia is still reliant on foreign aid, with donor support totaling approximately 25 percent of the government’s budget. Despite the strong performance of the garment, tourism, construction, and real estate sectors, Cambodia remains an agrarian country.
Since Cambodia became the first least-developed country (LDC) to join the World Trade Organization (WTO) in 2004, trade has steadily increased. The United States is Cambodia’s largest single-country export destination, with approximately 20 percent of Cambodia’s total exports going to the United States – primarily garment and footwear products. In 2018, Cambodian exports to the United States were valued at $3.82 billion, an increase of 25 percent from the year before, and U.S. exports to Cambodia totaled $447 million. Cambodia became a beneficiary of the United States’ Generalized System of Preferences (GSP) in 1997, and travel goods were added to GSP in 2016. Since that time, the travel goods industry has grown rapidly, with Cambodia exporting $392 million in travel goods to the United States in 2018.
The United States and Cambodia are signatories to a 2006 Trade and Investment Framework Agreement (TIFA) to promote greater trade and investment in both countries and to provide a forum for addressing bilateral trade and investment issues. In January 2019, the fifth TIFA meeting was held in Siem Reap. The United States and Cambodia began exploratory discussions on a Bilateral Investment Treaty (BIT) in May 2013, but the Cambodian government has not yet officially indicated interest in negotiating a BIT.
Cambodia is also a member of the Association of Southeast Asian Nations (ASEAN) and the Asia Free Trade Area (AFTA).
Cambodia’s economy is very open to foreign investment, but the bulk of that investment originates from China, especially in the last five years. Cambodia has not historically attracted significant U.S. investment for several reasons: the country’s small market size, corruption, a limited supply of skilled labor, inadequate infrastructure (including high energy costs), and a lack of transparency in some government approval processes. China has eagerly stepped up to fill many of Cambodia’s investment needs, highlighting China’s desire for influence in Cambodia, and Southeast Asia more broadly. Moreover, Chinese businesses, many of which are state-owned enterprises, may not assess the challenges in Cambodia’s business environment in the same manner as U.S. businesses. A frequently-cited downside risk to Cambodia’s economy is its reliance on China: a slowdown in China would very likely cause Cambodia’s growth to also slow.