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Japanese Investment in Cambodia Grows, but Hurdles Remain

Japanese Investment in Cambodia is steadily increasing as a result of sharply rising wages in China and other Southeast Asian nations. But experts warned this week that for sustained investment growth and to avoid driving Japanese companies to other attractive investment destinations such as Burma the government must address the country’s skilled labor shortage and reduce electricity costs.

Japanese investment in Cambodia reached $75 million last year, up from about $35 million in 2010 and about $15 million in 2009, according to the Japanese Embassy.

This year, however, investment by Japanese companies will reach $300 million thanks to the $205 million Aeon Mall development in Phnom Penh, construction on which begins this month.

“The biggest advantage of Cambodia is the low cost of labor, Japanese companies made very big investments in China, Vietnam and Thailand, [where] labor costs are increasing rapidly,” said Hiroshi Suzuki, CEO and chief economist at the Business Research Institute for Cambodia.

Restrictions on foreign-owned business, especially in China and Vietnam, also contrast with Cambodia’s “free economic system” and minimal taxes, Mr. Suzuki said, adding that in Vietnam, companies must be 50 percent owned by Vietnamese nationals and have a board of directors that is also half-Vietnamese.

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