The entire industry has for some time been awaiting the confirmation of the details of the plans to address the situation in Sihanoukville with the unfinished buildings, and how the investment would be drummed up to support revitalising the coastal Cambodian city’s real estate projects.
At the end of January 2024, Cambodian Prime Minister Hun Manet finally revealed the “Special Investment Promotion Program in Sihanoukville 2024” alongside Dr. Aun Porn Moniroth, Deputy Prime Minister, Minister of Economy and Finance and Chairman of the Economic and Financial Policy Committee.
The measures are intended to be a comprehensive package, which we have previously discussed, aims to tackle the 362 unfinished buildings (this number has fluctuated and been reported as between 350 and 1,000 over the past year) in Sihanoukville that requires an estimated USD $1.161 billion to complete construction and help create opportunities for businesses and investors. So were there any surprises in the final plan and what has changed compared the some of the drafts proposed in 2023?
Investing in Preah Sihanouk Province 2024
The investment program is also part of a government initiative called “Invest in Preah Sihanouk Province 2024” which has four main objectives.
- Transforming Preah Sihanouk Province into an economy-based province depending on industry, tourism, and investment
- Solving practical challenges that bring immediate results
- Complementing and being consistent with strategies and plans in various sectors set by the Royal Government
- Accelerating the transformation and industrial development in Preah Sihanouk Province to have more value-added, high productivity, and competitive advantage.
Investment Promotion Working Group - Preah Sihanouk Province
In the news following the announcement, there was some ambiguity about the Investment Promotion Working Group in Sihanoukville as it was understood a committee had already been in place for some time to help draft this Special Investment Promotion Program in Sihanoukville 2024 plan. Either way, the Prime Minister appointed Hean Sahip, Secretary of State of the Ministry of Economy and Finance, as the Chairman as well as three Vice-Chairmen, as well as other members to form the working group.
The Investment Promotion Working Group will lead, coordinate, and implement the plan and act as a “One Window Service Mechanism,” to review, decide, and issue permits or licenses as a package for investment projects and business activities.
They will also prepare the necessary documents and procedures for the implementation of the work and “has the right to use the seal of the Ministry of Economy and Finance to fulfil its duties both in the original form and electronically” said the report.
The main seven tasks of the Investment Promotion Working Group are:
- Responsible for leading, coordinating, and implementing this special program.
- Will be composed of relevant ministries and institutions (with several listed).
- Will have a secretariat and financial resources under the management of the Ministry of Economy and Finance.
- Need to help publicize and educate on the Invest in Preah Sihanouk Province 2024 plans.
- Develop capacity-building programs to ensure accountability, transparency, and efficiency.
- Offer ongoing monitoring and evaluation of the implementation of this special program.
- Provide quarterly reports and annual reports by the end of 2024.
New 3-Year Visa
One of the new announcements is a 3-year visa aimed at long-term purchase or rental of property investors in Sihanoukville with a value of USD $100,000+. Previously in the preparation of planning and researching the program, it was mentioned that a visa policy for long-term investors was under its scope.
More details have to be announced (for example who values the project/property) but the Prime Minister said a separate Sub-decree will outline more information.
It will also need to be clarified how this differs from the Cambodia My 2nd Home (CM2H) Program introduced in 2022, and the already existing options to obtain Cambodian citizenship through investments.
What Will The Special Investment Promotion Program in Sihanoukville 2024 Do?
One of the big changes to the previously announced plans is that the grouping of four categories seems to have been dropped - these had been categorized into four investment groups based on their nature and potential (although this may have been purely for the purpose of data collection).
The program now applies to investment projects or business activities in 2024, located in Preah Sihanouk Province, and focuses on the following 3 types of projects:
- Investment projects or business activities related to buildings that are stalled and will start implementation in 2024;
- Investment projects or business activities that are not related to the unfinished buildings, but will immediately start in 2024;
- Expansion of existing investment projects or business activities in accordance with the specific criteria and will start in 2024.
The general measures and incentives are to be implemented until 2026 and are hoped will build investor confidence and market demand through a step-by-step approach.
The Cambodian Prime Minister also pledged there needs to be a positive image of the region to encourage investment and told the Preah Sihanouk Provincial Administration to ensure no illegal activities are ongoing and ensure a peaceful and secure business and living environment.
Tax Breaks and Financial Incentives - Unfinished Buildings Sihanoukville
The confirmed financial incentives tax breaks for the unfinished building construction projects are:
- Exemption from income tax, income tax exemption and minimum tax for an additional 3 years;
- Exemption from value-added tax (VAT) at the rate of zero per cent for the completion and improvement of stagnant buildings;
- 5-year withholding tax exemption on real estate lease;
- Exemption of property tax and exemption of administrative sanctions;
- Exemption from payment of public services and fees in excess of the land use index for construction-related permits;
- Provide concessions on inspection fees and other certifications related to construction.
What Are The Non-Financial Incentives?
In addition to the above, the Cambodian government will:
- Facilitate the procedures for applying for a permit from the competent authority related to construction work;
- Help facilitate investment and business procedures, including applying for licenses, certificates and permits;
- Establish policies and facilitation, and provide investor matching services, including reference pricing for real estate in Sihanoukville;
- Promoting the use of out-of-court dispute resolution mechanisms in accordance with legal provisions for investment-related disputes.
Non-Construction Projects & Expansion of Business Investment Incentives - Sihanoukville
Furthermore, for investment projects that are not related to the unfinished buildings or additional investment projects or business activities that can start immediately from 2024 in Preah Sihanouk Province, there are also announced benefits.
- The facilitation of investment and business procedures, including applying for licenses, certificates and permits;
- Special incentives such as import tax, patent tax, billboard tax, withholding tax on real estate rental and registration fee, etc.
- Incentives for income tax exemption, income tax exemption and minimum tax exemption for an additional three years for qualified investment projects and tax-registered small and medium enterprises (SME).
- Can apply for zero per cent value-added tax (VAT) for small and medium enterprises registered for tax purchase of locally produced inputs.
- Three-year income tax exemption incentive based on the ratio of the capital expansion rate and the allowance of 150% multiplied by the income to be received.
It should be noted that there is an additional section of the plan dealing with current investment in Cambodia, wishing to expand, especially expansion on projects as well as encouraging more investment into the infrastructure and Special Economic Zones. This also refers to:
- Turning land into industrial or enterprise cluster zones and/or tourism areas.
- There will be pilot test areas which could be - Special Economic Zones, Great Tourism Zones, Free Trade Zones, Industrial Cluster Zones, or Customs Bonded Warehouse.
This program is intended to attract opportunities for businesses looking to invest or expand in Sihanoukville as well as revitalise the region to rid the city of these unfinished construction projects. Furthermore, this is being treated as a “Live Document” that may be revised, so any investors looking into this program should stay on top of any possible changes.