As global manufacturing landscapes are changing, Cambodia is gradually emerging as a prime manufacturing destination for Chinese enterprises. Known for its strategic location, competitive labour costs, and favourable investment policies and laws, Cambodia is becoming an attractive hub for manufacturing activities. This South-east Asian nation is not only offering a cost-effective alternative but also providing a favourable environment for growth and expansion.
This blog will further look into the key factors that make Cambodia an appealing choice for Chinese manufacturers and explore the advantages that position it as the next manufacturing destination.
1. Competitive advantages of setting up in Cambodia
One of Cambodia's most significant advantages as a manufacturing hub is its low labour costs, which are among the most competitive in the region. This factor alone makes Cambodia an appealing Southeast Asian country for trading as compared to others like Vietnam and Thailand, where labour costs are rising. For example, the minimum wage for garment factory and footwear factory workers in Cambodia in 2023 was US$200 per month, significantly lower than in neighbouring countries.
Besides this, Cambodia’s location in the heart of Southeast Asia provides excellent connectivity to major markets. It is part of the ASEAN Free Trade Area, which includes preferential access to a vast regional market. Additionally, Cambodia's membership in the Regional Comprehensive Economic Partnership (RCEP) further enhances its appeal by offering duty-free access to numerous key markets, including China, Japan, and South Korea.
The Cambodian government has also implemented numerous policies to create a favourable investment climate. This includes the establishment of Special Economic Zones (SEZs) that offer tax incentives, streamlined customs procedures, and infrastructure support to foreign investors. For instance, Phnom Penh’s SEZ has attracted substantial foreign direct investment due to its comprehensive facilities and business-friendly environment.
Furthermore, Cambodia manufacturing industry benefits from several free trade agreements (FTAs) that enhance its export potential. One such agreement is the Cambodia-China Free Trade Agreement significantly boosts Cambodia's export potential by providing duty-free or reduced-tariff access to the Chinese market, enhancing the competitiveness of Cambodian-manufactured goods.
Government incentives also play a crucial role. Investors in SEZs can benefit from tax holidays, import duty exemptions, and other financial incentives designed to reduce operational costs and encourage foreign direct investment. These policies, coupled with the country's young and growing workforce, make Cambodia an increasingly attractive hub for manufacturing activities.
2. Cambodia's infrastructure and supply chain ecosystem
Cambodia has made significant strides in developing its infrastructure, with notable improvements in transport networks, ports, and logistics capabilities. The country's infrastructure growth is driven by substantial investments, including a projected US$28 billion required between 2016 and 2040. Key developments include the expansion of the Sihanoukville Port, improvements in road networks, and the establishment of the Phnom Penh Logistics Centre, which enhance the country's connectivity and efficiency in trade operations.
Besides infrastructure, a robust supply chain ecosystem is critical in supporting Cambodia's manufacturing and export activities. The integration of Special Economic Zones (SEZs) and the country's strategic location within ASEAN facilitate efficient supply chain operations. The SEZs offer streamlined customs procedures and tax incentives, making them attractive to foreign investors. Additionally, the development of intermodal transport systems and enhanced logistics infrastructure, such as improved waterways, play a crucial role in bolstering Cambodia's position as a manufacturing hub.
Navigating regulatory and market entry in Cambodia
Navigating regulatory environment in Cambodia’s manufacturing industry can offer a strategic advantage for Chinese manufacturers. Cambodia offers a relatively business-friendly regulatory framework, actively encouraging foreign direct investment (FDI) through various incentives. For instance, the country's legal infrastructure supports ease of doing business, with simplified procedures for business registration and customs operations, enhancing overall investment attractiveness.
Concerning manufacturing industry entry, the government has implemented measures such as the “Single Portal” online business registration system, which allows businesses to register within eight days, significantly reducing the time and complexity involved in setting up operations. Additionally, Cambodia’s membership in ASEAN and various free trade agreements, such as the Regional Comprehensive Economic Partnership (RCEP), provides extensive market access and tariff reductions, benefiting foreign manufacturers.
Additionally, Chinese companies can find support in Cambodia’s familiar cultural and linguistic environment, which can ease communication and business negotiations. The presence of a large Chinese business community and bilateral trade agreements further facilitate market entry and expansion. To explore the regulatory landscape effectively, partnering with local legal experts and advisors can prove beneficial, ensuring compliance and leveraging available incentives to maximise operational efficiency.
By leveraging these supportive measures and understanding the regulatory framework, Chinese manufacturers can strategically enter and thrive in the Cambodian manufacturing industry.
Leveraging DHL Express global logistics network for expansion into Cambodia
Cambodia offers strategic advantages for Chinese manufacturers, including competitive labour costs, a favourable investment climate, and strong trade agreements. To successfully navigate the complexities of setting up operations in Cambodia, having a knowledgeable logistics partner is crucial.
DHL Express’s extensive expertise in international logistics and its established presence in Cambodia offer significant advantages for Chinese manufacturers looking to set up operations in the country. With a deep understanding of local and global logistics, DHL Express can provide tailored solutions that cater to the specific needs of manufacturers.
Our proficiency in supply chain optimisation ensures efficient management of resources, reducing costs and enhancing productivity. Furthermore, DHL Express’ custom solutions facilitate smooth cross-border transitions, handling everything from customs clearance to last-mile delivery, ensuring that goods move seamlessly across borders. By leveraging our robust network, Chinese enterprises can navigate the complexities of international logistics with confidence, thus accelerating their expansion into the Cambodian market.
