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Cambodia

Population: 17.6 million inhabitants
GDP: Approximately 46 billion USD (2024), with strong growth (6% per year)

Cambodia for Western SMEs and Investors: Advantages and Challenges (2025)

Key Advantages of the Cambodian Market

Cambodia positions itself as an attractive destination for Western SMEs and investors, thanks to several key advantages:

  1. Sustained Economic Growth and Macroeconomic Stability


    The country recorded a GDP growth of 6.1% in 2025, one of the highest in Southeast Asia, with similar prospects in the coming years. This growth is driven by sectors such as textiles, tourism, real estate, and infrastructure. Cambodia also benefits from controlled inflation and a stable currency (the US dollar is widely used), limiting currency fluctuation risks for foreign businesses.

  2. Full Openness to Foreign Investment


    Unlike other countries in the region, Cambodia imposes no sectoral restrictions on foreign investors, who can hold 100% of their subsidiary’s capital. The government has simplified company registration procedures (1–2 weeks on average) and offers tax incentives (exemptions, reduced rates) to attract capital. Additionally, the country is integrated into ASEAN and benefits from the Everything But Arms (EBA) agreement with the EU, allowing duty-free exports to Europe.

  3. Competitive Production and Living Costs


    Cambodia has some of the lowest wages in the region (150–250 USD/month in textiles), making it attractive for manufacturing and subcontracting industries. Costs for office space and daily living in Phnom Penh or Siem Reap remain well below those in Bangkok, Hanoi, or Singapore, reducing operational expenses for SMEs.

  4. Promising and Diverse Sectors:

  5. Several sectors offer concrete opportunities for Western SMEs:

  • Textiles and Apparel: Cambodia is a major exporter from EU and the US, with subcontracting factories for brands like H&M, Adidas, and Nike.

  • Tourism: With UNESCO World Heritage sites (Angkor) and post-pandemic recovery, investments in hotels, restaurants, and ecotourism are increasing.

  • Real Estate: Residential and commercial projects are booming in Phnom Penh and Siem Reap, with infrastructure developments (e.g., new international airport planned for 2025).

  • Agri-food: Export of rice, pepper, mangoes, and growing demand for processed and organic products, particularly to Europe.

  • Infrastructure: Road, port, and renewable energy projects (solar, hydroelectric), often financed through public-private partnerships.

  • Tech and Digital: Development of fintech, e-commerce, and software solutions for local SMEs, with startups such as Pi Pay and Sabay.

  1. Improving Business Environment


    Cambodia has implemented reforms to facilitate business, including a one-stop shop for foreign investors and training programs for SMEs. The European Chamber of Commerce in Cambodia and other local agencies provide support to foreign businesses. Finally, widespread use of the US dollar simplifies transactions and reduces currency risk.

GDP Growth: Cambodia maintains steady growth, with GDP up 6.1% in 2025 and similar prospects for 2026, driven by textiles, tourism, real estate, and infrastructure.
Macroeconomic Stability: Low inflation, stable currency (US dollar widely used), and absence of major natural disasters provide confidence to investors.
Simplified Administration: Company registration in 1–2 weeks via a one-stop shop for foreign investors.
SME Support: Training and support programs via the European Chamber of Commerce and local agencies.
Dollarization: Use of the US dollar facilitates transactions for foreign businesses.

Challenges and Risks to Anticipate

  1. Regulation and Bureaucracy

  • Administrative Complexity: Despite reforms, some procedures (licenses, construction permits) can be slow and opaque. SMEs often rely on local advisors.

  • Corruption: Cambodia remains one of the most corrupt countries in Asia, potentially impacting project costs and timelines.

  1. Limited Infrastructure

  • Transport and Logistics: Roads, ports, and airports are developing but lag behind neighbors (Thailand, Vietnam). Logistics costs can be high outside Phnom Penh.

  • Electricity: Frequent shortages and high costs, though renewable energy projects are underway.

  1. Access to Financing

  • Limited Bank Credit: Local banks are reluctant to lend to foreign SMEs without strong guarantees. Interest rates can reach 10–12%.

  • Dependence on Foreign Capital: Many projects rely on Chinese or Thai investors, potentially limiting autonomy for Western SMEs.

  1. Human Resources

  • Skills Shortage: While labor is abundant, technical and managerial skills are often lacking, especially outside major cities. SMEs need to plan training programs.

  • High Turnover: Employee mobility is high, complicating team management.

  1. Legal Risks and Investment Protection

  • Intellectual Property: Trademark and patent protection is weak, exposing SMEs to counterfeiting.

  • Contracts and Litigation: Cambodian courts are slow and unpredictable. It is advisable to include international arbitration clauses (e.g., Singapore) in contracts.

  1. Political and Social Instability

  • Political Context: Power is concentrated in the Cambodian People’s Party (CPP), with little opposition. Regulatory changes can be sudden and opaque.

  • Social Tensions: Rising inequalities and dissatisfaction with corruption and land grabs, especially in rural areas.

Examples of Success and Failure

Successes:

  • Textiles – French SME: A French eco-friendly clothing SME established in Phnom Penh in 2018. Partnering with a local factory, it exported to the EU under the EBA agreement, multiplying revenue by 5 in 3 years. Keys to success: strong local partnership, employee training, and focus on quality.

  • Tourism – Boutique Hotel in Siem Reap: A Belgian investor opened an eco-friendly hotel near Angkor in 2020. Focusing on sustainable tourism and European partnerships, the hotel achieved 85% occupancy in high season.

  • Agri-food – Cambodian Pepper Export: An Italian SME invested in an organic pepper cooperative in Kampot. Within 2 years, it exported to Italy and France with a 40% margin due to growing demand for exotic and organic products.

Failures:

  • Real Estate, Phnom Penh Residential Project: A Spanish developer launched a condominium project in 2019 without sufficient local regulatory study. The project was blocked for 18 months due to permit issues, with 30% cost overruns, ultimately abandoned.

  • Tech – Mobile Payment Startup: A German startup launched a payment app in 2021 without adapting to local habits (preference for cash). Despite a $500,000 initial investment, it closed after 18 months due to lack of customers.

Manufacturing, Furniture: A Canadian SME opened a furniture factory in 2017 but underestimated logistics costs and Chinese competition. After 2 years of losses, the factory was sold to a local group.

Cambodia offers strong potential for Western SMEs, thanks to its economic growth, young and low-cost workforce, and openness to foreign investment. However, challenges bureaucracy, infrastructure, and access to financing require careful preparation and a tailored strategy.