Asia St: Why Cambodia’s New Investment Law Matters

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Why Cambodia’s New Investment Law Matters

August 17, 2021

Cambodia’s Skyline (Photocredit: Wikimedia Commons).

The BGA Cambodia team, led by Bora Chhay, wrote an update to clients on Cambodia’s new investment law. The update addressed the background behind the new law and its potential implications for businesses and other stakeholders.

Context 

Cambodian Prime Minister Hun Sen approved a newly drafted law on investment last month. The law was greenlighted on July 9, which was the latest step after the Council for the Development of Cambodia completed the draft law in February.

The investment law constitutes a significant development within Cambodia’s ongoing thinking in this area. It is an update of the 1994 law on investment that was amended in 2003, and the process of formulating the law had involved consultations with private sector and other stakeholders to address major concerns and challenges facing investors in Cambodia.

Significance

The law is designed to improve the investment environment. It provides incentives to qualified investment projects that support trade and priority sectors identified as key to driving sustainable growth, including tech and value-added manufacturing. It holds the prospect of greater transparency as the government signals its commitment to nondiscriminatory treatment of foreign investors and ensures compliance with international law.

The new investment law is also designed to stimulate domestic measures to enhance competitiveness and support a post-Covid-19 economic recovery. It is expected to stimulate productivity and attract more and higher quality investment by spurring research and development, innovation and skills development, allowing Cambodian industry to better compete in the region.

Implications

The new draft law on investment is expected to take effect in Q4 2021 and the process will occur amid other related developments. This law itself will be in effect after it is reviewed and passed by the National Assembly and Senate. Separately, Cambodia is looking to enact a competition law by Q3 2021 and soon plans to release its five-year 2020-2025 development plan for the garment, textile, travel goods and bag industry.

Companies operating in Cambodia should be on the lookout for a series of investment reforms. These will occur once the law takes effect at the end of the year and begins to be implemented out to 2022.

BGA will continue to keep you updated on developments in Cambodia. If you have any comments or questions, please contact BGA Cambodia Managing Director Bora Chhay at bchhay@bowergroupasia.com.