A thesis submitted in partial fulfillment of the requirement for the degree of Master of Science

Thesis (M.Sc.) - Asian Institute of Technology, 1994

This study reviews the present government policies, legislation, institutional framework and incentives schemes and evaluates the motivation factors, roles and impact of foreign investment to economic, social and environmental aspects in Cambodia. It also identifies the main problems faced by investors in Cambodia and proposes some guidelines to improve the climate for foreign direct investment. It is found that Cambodia has become the new focus of foreign investment attraction in the region due to new market, political settlement, abundant natural resources and low labor cost. Though about 600 investment projects have been approved in principle, unfortunately, only about 20 to 30 percent of the projects have been able to operate due to a number of obstacles standing in the way of the development process. The obstacles are generally effected by economic and social factor and particularly by political, legal and administrative factors. Though there are remarkable positive impact on economic aspect, there are a number of negative impact on environmental and socio-cultural aspects. The existing incentive schemes in the country has not been fully implemented since the law on investment issued. The legal and institutional framework have not been clearly and sufficiently formulated. Therefore, the potential investors from industrialized countries have not yet invested in the country. FDI flows only in one area, Phnom Penh, while there is no industrial estate and other facilities in the province that may lead to worsening regional disparities. A set of recommendation which will be used as the guidelines for the government, for foreign investors and for the international organizations is proposed to improve the investment climate. An action plan containing several projects is also propose.