Japanese Investment Drops, But Trade Spikes

Cambodia saw a 2 percent drop in investment from Japan between 2013 and 2014, yet trade between the two countries in the same period rose sharply, according to the Japanese External Trade Organization (Jetro).

Masashi Kono, the organization’s representative in Phnom Penh, said on Thursday that Japanese investment in the country amounted to $47.9 million last year, compared to $48.9 million the previous year.

However, Cambodia’s exports to Japan, Mr. Kono said in an email, grew 33 percent year-on-year to $771 million while Cambodia imported $254 million worth of goods from Japan last year, up 21 percent.

Hiroshi Suzuki, chief economist at the Business Research Institute for Cambodia, said the increase in exports to Japan was a good sign for the expansion of Cambodia’s economy, but in order to keep that momentum going the country needed to diversify.

Textiles and garments, which dominate exports, were among the main products shipped to Japan in the past two years, according to Jetro.

“It is necessary to diversify the export goods and export destinations to invite high growth to Cambodian exports and its economy,” Mr. Suzuki said.

Although Mr. Kono said that he did not expect a drastic change in trade figures this year, it was likely that Japanese investment would continue to fall.

“Regarding investment from Japan, value and volume might decrease because of the hike of the minimum wage in Cambodia and the electricity prices in Asean,” he said.

However, independent Cambodian economist Srey Chanthy was more optimistic about the future of Japanese investment in the country.

“Both trade volumes and investment will increase. The business environment is improving and the AEC [Asean Economic Community] is on the horizon,” Mr. Chanthy said, referring to the economic integration of Southeast Asian countries later this year.

“Cambodia not only is a central location for distribution, but has space for factories that are not vulnerable to critical natural disasters such as volcanoes, earthquakes or floods.”

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