This article was originally written and published in Chinese.

The vast world calls for “unexplored waters”. Momentum Works’ friends are showcasing a series revolving around “Unknown Markets”

In Southeast Asia, there is a strong focus in Indonesia as its large population and abundant resources offer many investment opportunities. Vietnam and Thailand are also seeing large investments in the tech industry.

Though some Southeast Asian cultures and practices might overlap, key differences are prevalent. It is likely that there would be interesting opportunities for investors in the small market of Cambodia. Let’s explore.

During the past 10 years, Cambodia has been receiving large investments from China. Through this, the economy has maintained a high growth rate of over 7% for 10 consecutive years.

In the most recent years, China, Japan, and South Korea have invested heavily in Cambodia’s real estate. This caused a boom in the real estate industry, and Cambodians have accumulated wealth through the selling and purchasing of leased land and real estate. This injection of foreign capital has enabled Cambodia’s labor to earn basic income and a boost in their purchasing power.  

With the heightened economic prosperity, Cambodia’s internet and e-commerce industry have also achieved rapid development. Cambodia acts as a new hub for investors to enter the promising internet industry, which is at a stage of garnering people’s attention.

Rapidly developing Cambodia

With regards to overseas investment and startups, Cambodia has the following advantages…

This article was originally written and published in Chinese.

The vast world calls for “unexplored waters”. Momentum Works’ friends are showcasing a series revolving around “Unknown Markets”

In Southeast Asia, there is a strong focus in Indonesia as its large population and abundant resources offer many investment opportunities. Vietnam and Thailand are also seeing large investments in the tech industry.

Though some Southeast Asian cultures and practices might overlap, key differences are prevalent. It is likely that there would be interesting opportunities for investors in the small market of Cambodia. Let’s explore.

During the past 10 years, Cambodia has been receiving large investments from China. Through this, the economy has maintained a high growth rate of over 7% for 10 consecutive years.

In the most recent years, China, Japan, and South Korea have invested heavily in Cambodia’s real estate. This caused a boom in the real estate industry, and Cambodians have accumulated wealth through the selling and purchasing of leased land and real estate. This injection of foreign capital has enabled Cambodia’s labor to earn basic income and a boost in their purchasing power.  

With the heightened economic prosperity, Cambodia’s internet and e-commerce industry have also achieved rapid development. Cambodia acts as a new hub for investors to enter the promising internet industry, which is at a stage of garnering people’s attention.

Rapidly developing Cambodia

With regards to overseas investment and startups, Cambodia has the following advantages:

  1. Political Stability & Friendship with China

    Cambodia is a constitutional monarchy: the King is the head of the state, however, the executive power comes from the prime minister. Cambodia is conservative and peaceful, with 90% of the population being devout Buddhists. Because of its harmonious community, the happy citizens are known as the Smiling Cambodians or Smiling Khmers.

    Hun Sen has been the leader of the Cambodian government since 1985

    The political situation in Cambodia has been stable. Since the 1980s, there has been only one national leader, Prime Minister Hun Sen. Due to this, many view Cambodia as a country under a dictatorship. However, the correct term for its political status is new authoritarianism, where most of the resources are efficiently allocated to those who can contribute to the growth of society.

  2. Economic GrowthRapid Growth in GDP and Purchasing Power
    GDP growth has been stable at 7% all year round. It is rare for a third world country, apart from India and China, to produce a satisfactory and achieve high growth rates. In the process of rapid economic development, the consumption power of the Cambodians has also grown exceptionally. Since 2011, the minimum wage has risen by more than 300%. The current minimum wage is US$185/month, the per capita GDP has reached US$1,500, and the urban per capita GDP has reached US$4,000.Demographic Dividend
    Cambodia is a young country, with 70% of the population under the age of 30. The demographic structure provides strong labor support for Cambodia’s economic growth. Young people who are enjoying economic growth are also more willing to spend.

    The Belt and Road Initiative and rapid growth of FDI
    The Belt and Road initiative’s purpose is to expand China’s global connection. This initiative has increasingly been making an impact on people’s lives. For instance, most of Cambodia’s infrastructure construction is invested by Chinese companies, such as power grids, submarine cables, highways, ports, and airports.

    According to the annual report issued by the Cambodian Development Committee, Cambodia received more than US$6.3 billion in foreign direct investment in 2017. Compared with the US$3.6 billion investment that Cambodia received in 2016, it has nearly doubled, with investment from China accounting for more than 50%.

    Now that Cambodia’s economy and development potential are recognized, many investors have shifted their focus away from China, Thailand, and Vietnam, to take advantage of Cambodia’s favorable investment environment.

Cambodia’s Internet Development

In 2019, “Hootsuite” and “We are social” released a joint report that gave authoritative and detailed understanding into the development of Cambodia’s internet industry.

Figures related to the e-commerce industry:

The proportion of online retail sales increased from 0.6% in 2018 to 3.8%, and mobile e-wallet usage increased from close to zero in 2018 to 5.7% currently. 

The landmark event for online payment was on December 21, 2017, when Alipay cooperated with local third-party payment company PI PAY. In 2018, Wechat also officially entered Cambodia.

Local third-party payment companies such as WING also has been developing rapidly. 

These companies took advantage of their 10 years worth of experience to achieve rapid development in mobile payments and enabled the number of users to exceed a million in a short period of time.

Compared with Alipay’s restrictions in other Southeast Asian countries, Cambodia’s political and economic circles have embraced China’s payments to enter the Cambodian market, which has injected a strong impetus into Cambodia’s mobile Internet development.

Cambodia’s E-commerce Development

Currently, e-commerce in Cambodia is developing rapidly. Many early investors, such as 58Cam, have made good profits. In 2018, online information platforms have become a popular sector for entrepreneurship. They have received investments worth tens of millions of dollars.

In 2018, the competition increased in the ride-sharing industry. Southeast Asia’s unicorn 

Grab has faced competition from local company Passapp. According to Phnom Penh post, Grab is planning to acquire Passapp to eliminate its competition in the ride-sharing industry.

In 2018, the food delivery industry witnessed tremendous growth. NHAM 24, a Local food delivery platform, received investment from telecom operator Smart.

In 2018, the e-commerce sector officially started expansion. A Cambodian fashion e-commerce platform, L192, announced that it had received US$5 million in a Series A investment round. L192 is a clothing wholesale and retail store, which has been operating in Cambodia for more than 10 years. Subsequently, they developed their own website and app. At present, L192’s business model is similar to Taobao’s: attracting consumers and small businesses to open smalls. However, the platform has yet to implement online payment, and more of its offline products are displayed online.

We believe that while exploring uncharted waters, we not only have to learn from the successful e-commerce models from markets such as China and the US but also observe localized operations and local innovations that are already in place.

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at hello@mworks.asia.

 

ad