Cambodia and the United Arab Emirates recently signed a comprehensive economic partnership agreement (CEPA) which will assess opportunities in trade, investment, connectivity, energy, agriculture and logistics among others and both parties are confident that the agreement will increase bilateral ties and trade.
Cambodia’s Minister of Commerce Prak Sokhonn and UAE Minister of State for Foreign Trade His Excellency Dr Thani bin Ahmed Al Zeyoudi signed the agreement which was witnessed by Cambodia’s Prime Minister Hun Sen.
These new trade and economic agreements are important for the Kingdom as the country needs to continue its diversification of economic partners and avenues for investment.
This is crucial not only for the growth of the four current economic pillars of tourism, agriculture, construction and manufacturing/garments but for tapping into technological and trade partners who can help Cambodia implement its ambitious broad digital policies and technology frameworks and open up new investment corridors.
Diversification of Trade and Investors
Undoubtedly, China’s investment has greatly contributed to the socio-economic development in Cambodia but for the Kingdom to thrive it needs to increase tapping into new trading partners and attract FDI from new sources without burning bridges with existing partnerships.
A snapshot of selected data in 2023 suggests some areas for concern despite the overall optimistic GDP and economic growth for Cambodia this year and in the future.
While 2023 GDP predictions have been revised down slightly, they are still double those of global predictions as potential recession fears remain in the US, Europe and China.
Comprehensive Economic Partnership Agreement - Cambodia & UAE
Al Zeyoudi said the agreement with Cambodia marked a new milestone in their foreign trade and strengthened their growing role in the east-west trade corridor - the UAE plans to expand into the growing economies of Southeast Asia.
- Currently, the UAE invests USD $3+ million in Cambodia, while the Kingdom invests approximately USD $1 million in direct foreign investment in the UAE.
- The CEPA agreement aims to more than double non-oil bilateral trade between Cambodia and the UAE by 2031.
- CEPA hopes to boost trade from USD $407 million in 2022 to $1 billion, said UAE’s Economy Ministry.
- Metals and minerals are projected to account for 73% of UAE exports by 2030 and the UAE is one of Cambodia’s top trading partners in the Arab world, accounting for 70% of its trade with the region in 2022.
Bilateral trade should see an increase of exports to the UAE from Cambodia for grains, fruits, meats, clothing and leather goods while imports from the UAE will include machinery, oil and lubricants among others as the pair look to facilitate investments, open market access to services exports, and create more opportunities for businesses to forge partnerships.
Once ratified, the UAE-Cambodia CEPA is expected to be enacted before Q4 2023, so what opportunities will we potentially see?
Canopy Sands Development, the master developer of the massive coastal project in Cambodia, showcased its 934-hectare development, the Bay of Lights, at the Annual Investment Meeting (AIM) 2023 Congress in Abu Dhabi in May which saw 10,000 participants from 175 countries.
Canopy Sands Development's mission is to attract global capital flows and global financial institutions to Cambodia.
The Bay of Lights development partner is Prince Real Estate Group and its CEO Edward Lee said that Cambodia, located where it is within Indochina geopolitically and as an emerging economy, stands out as one of the most open and investor-friendly nations.
“However, Cambodia needs to start being more proactive in reaching out to new markets such as Indonesia, Malaysia, and the Gulf Cooperation Council and connect with investors, businesses and tourists to promote, educate and attract them to come to Cambodia to study and consider the Kingdom as a platform to enter the regional market. The current regulations which allow for foreign investment and ease of doing business in Cambodia are excellent for new investors in the region”, added Lee.
Tom O'Sullivan, CEO of Realestate.com.kh,also joined Prince Real Estate (Cambodia) Group Co., Ltd. and Belt Road Capital Management to promote Cambodia as the next investment hub in Southeast Asia.
The GCC is a regional union comprising Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. Lee said: 'The Gulf Cooperation Council businesses can use Cambodia as a platform to reach regional business and new markets and this will hopefully help to spur on new dynamic growth.’
Customs and Market Access
Dubai Customs announced changes to customs policies following trade deals between the UAE and a number of nations which include Cambodia. The Gulf state with India, Israel, Indonesia, and Turkey has also signed other agreements.
The customs authority has established “specialised customs centres and departments to ensure smooth flow of goods and services,” Gulf Business reported. The changes implemented will support CEPA in reducing or removing tariffs, "eliminating barriers to trade, and creating new avenues for strategic investment”.
CEPA also guarantees improved access for UAE products to the Cambodian market and covers 92% of customs tariff lines and over 93% of the value of non-oil trade.
Al Zeyoudi wrote recently; “In practice, this means Cambodia’s manufacturing sector can leverage the UAE’s unrivalled global connectivity and world-class logistics infrastructure to seamlessly serve new markets – not only in the Middle East but into Africa and Europe.”
New Property Buyers
Although not specific to the GCC, a recent report suggested that the return of foreign visitors has accelerated demand for rental housing. In Sihanoukville for example, this has led to increased rental costs and Chinese investors are major players in the Preah Sihanouk real estate market - which was the case pre-pandemic.
Interestingly, the Ministry of Tourism also claims that Indonesians have seen the biggest rise in “business” travel to Cambodia, rising from nearly 6,000 in Q1 2019 to 23,000 in the same period of 2023. Thais meanwhile, comprise the largest number of visitors to Cambodia in 2023 - so developers need to be aware of the audiences they are targeting.
Inbound Travellers and Tourism
The UAE had also announced that it is looking into the potential of tourism investment opportunities in Cambodia and AI Zeyoudi agreed that Cambodia was undergoing rapid development in all sectors.
Thong Khon, Cambodian Minister of Tourism confirmed that Cambodia expects 4.5 million international tourists in 2023 with more than 2 million confirmed in the first five months so far. The Ministry is hopeful that this figure will reach over seven million tourists by 2026.
Al Zeyoudi added that tourism is a high-potential sector and that their hospitality expertise and development knowledge will assist in reviving the sector with new experiences and offerings.” Mastercard Economics Institute’s Travel Industry Trends 2023 also suggests that new experiences are in demand among travellers post-pandemic.
Finally, with the Paris Air Show this past week, one of the world’s newest airlines, Saudi Arabia’s Riyadh Air, made its international debut. With new airports and routes a priority for Cambodia, the airline will launch its first commercial services in early 2025 so this could be an interesting development for Cambodia - especially as the airline has the support of the Saudi government’s $650 billion Public Investment Fund (PIF).
In addition, IndiGo, the Indian low-cost carrier announced an order of 500 Airbus A320 - the largest aircraft order in history, while 470 aircraft were ordered by Air India earlier this year. India is another vital market that the Cambodian government and businesses are actively pursuing and something which the Asian Development Bank in its report, “Southeast Asia’s Aviation Sector: Post-Pandemic Strategies and the Implications of a Rapid Recovery” urged for Cambodia as it taps into new markets including Japan, and the Republic of Korea.
There are several concurrent exciting developments in the works and with the potential of new embassies and trade globally, Cambodia is forging partnerships for long-term economic growth.