Some economic commentators believe that due to the gradual shift of China's supply chain to Southeast Asia, it is expected that Chinese companies' foreign direct investment (FDI) in Cambodia's manufacturing industry will continue to increase in the near future. According to Michael Glancy, the regional head of Jones Lang LaSalle in Thailand, as enterprises implement the "China+1" strategy, that is, to establish more manufacturing bases outside Chinese Mainland to mitigate the impact of supply chain disruption, Southeast Asian countries are expected to benefit from it.

Cambodia's foreign direct investment will continue to grow

In the context of the "China+1" strategy, Southeast Asia and India are expected to see Chinese investors accelerate the diversification of manufacturing and production locations in the next decade. According to a report by JLL, the rise in wages and material costs in China over the past decade has also accelerated the shift of supply chains to new overseas destinations, as manufacturers seek more favorable conditions in overseas markets.

At the same time, the price of industrial land in China is twice that of some Southeast Asian countries, which once again increases the production costs of Chinese manufacturers. In contrast, Southeast Asia provides tremendous appeal to Chinese manufacturing investors, including its vast labor resources, lower production costs, and other incentive measures.

Sisavuthara Sim, founder and CEO of Nexus Capital&Investment Advisory, recently stated in an interview with the Khmer Times Chinese website that both the United States and China are competing for a better geopolitical environment to promote international trade growth, which is a key factor driving the transfer of manufacturing from China to countries such as Cambodia. The tense relationship between China and the United States has led to various trade barriers between the two countries.

At the same time, European and American manufacturers are also seeking investment opportunities outside of China, which is another potential driving force for the growth of foreign direct investment in Cambodia. Cambodia benefits from preferential trade agreements, such as the Everything But Arms (EBA) for entering the European market and the Generalized System of Preferences (GSP) for entering the US market, providing a favorable operating environment for the country's manufacturers. "

Sisavuthara also stated that for Cambodia, given the reduction in transportation and electricity costs and overall production costs, Cambodia is expected to attract more foreign direct investment. He stated that Cambodian manufacturers seeking to export their products to international markets still face high transportation costs, and a large portion of Cambodian traders still rely on Vietnamese ports for transportation, which increases transportation costs.

Sisavuthara emphasized that considering Cambodia's goal of becoming a global manufacturing hub, reducing transportation costs to stimulate increased foreign direct investment in the manufacturing sector is crucial. In order to obtain more manufacturing investment, the Cambodian government has made a clear commitment to prioritize large-scale infrastructure development in the coming years, such as the Dechong Funan Canal (FTC) project, which broke ground this year.

He stated that the main reason for prioritizing the construction of national highways, airports, waterways, and railways is to improve the trade convenience of Cambodia's manufacturing industry and reduce the overall trade logistics costs of the economy.

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