1 INTERNATIONAL BUSINESS Table of Contents a)National resources and factor endowments that create competitive advantage:.................2 b)Existing levels of FDI:........................................................................................................3 c)Summary and recommendation based on overall assessment:...........................................4 References:.................................................................................................................................5
2 INTERNATIONAL BUSINESS a)National resources and factor endowments that create competitive advantage: Cambodia is one of the most economically flourishing countries in the world. It has plenty of resources at its disposal which can be used to as a major source to attract the Foreign Direct Investment in this country of South East Asia. In 2016, the per capita income of the country stood at $3,735 in terms of Purchasing power parity and at $ 1227, in terms of nominal per capita. (World Bank, 2018) According to the reports of IMF, the annual average GDP growth in the time period from 2001-2010 stood at 7%, thus making it one of the world’s top ten countries having the highest annual growth in terms of GDP. Thus it could be concluded that this south East Asian country is one of the fastest growing economies in the world. Thus, FDI should be a welcoming prospect for this country. There are a wide variety of national resources, which have a bright prospect for attracting foreign investment in this country. Some of the most important ones have been discussed below: Agriculture:The country has a stable base in terms of agriculture and it is one of the most important economic activities of the country. In fact, most of the rural households of the economy, directly depend on agriculture as the primary sources of income. They primarily engage in sub sector of agriculture such as fishery, timber, production of rice, rubber for their livelihood. As the country has a robust agriculture base, it would be wise for the country to expand its FDI base towards thissector.Infact,theInternationalRiceResearchInstitutehas recently introduced more than 750 different varieties of rice in the
3 INTERNATIONAL BUSINESS agriculture sector of the country. Thus, it is one of the very important and strategic sources for attracting FDI in the country. Moreover, agricultureaccountsfor almost 90% of the country’sGDP, thus introducing FDI is a welcome affair for increasing the productivity in this sector (World Bank, 2018). Textiles:This is the largest manufacturing industry for the entire economy of Cambodia. It roughly accounts for almost about 80% of the exports of the country. It has consistently increased over the years from about 4% in 2011 to a staggering 8% in 2013 (Chhair and Ung 2013). Specially the garment industry has expanded convincingly and is now worth $1.56 billion. Moreover, the industry employs a huge amount of Cambodians amounting to 335,400 citizens, of which about 91% are female. Thus it is a strategic place to attract FDI. Tourism:This is the second largest source of money after textiles for the Cambodians. The footfalls of tourists has considerably increased amounting to over a staggering 18.5% since 2006 (Gulch, Heang and Moolio 2013). Sihanoukville, Kampot and Kep, Bokor Hill Station are some of the most important tourist destination. They open a huge scope of FDI in hotels and tourist destinations in Cambodia. Moreover, it has a world class reputation for being one of the safest destination for tourists across the world. b)Existing levels of FDI: Cambodia remains one of the poorest nations in the ASEAN body. Its government has been incessantly working with Asian Development bank, IMF and other international bodies to improve the financial conditions of the
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4 INTERNATIONAL BUSINESS country.Asaresultofwhich,exportshaveconsiderablyincreasedto US$11billion. The government’s stance is very open in case of FDI (Sothan 2017). The country has a poor score in the Foreign Investment index, paltry 4.5 out of 10. The country’s lack of proper infrastructure and regulatory restrictions have crippled the economy to attract FDI (Hill and Menon 2013). Although the country’s tourism industry is being regularly encouraged to invest in the economy. It is leading to a substantial growth in demand for hospitality, hotels, and recreational activities. The government’s efforts have led to bringing of top garment retailers like Armani, Adidas and others to invade the Cambodian market. Moreover, the government has even passed better labour laws with the intention of creating a stronger, just and motivating working environment. c)Summary and recommendation based on overall assessment: The Cambodian economy is robust in nature and the government has been incessantly putting its efforts in order to improve the economic fortunes of the economy. Foreign direct investment has provided a lone stop solution to the government, for this economic mess. Apart from gathering help from world finance bodies like ADB and IMF, the country‘s government must refocus its aims in improving its basic infrastructural demands. The country should also relax the regulatory settings of the country. Unless adequate infrastructural facilities are improved, top companies world-wide would be reluctant to invest in the country. Agriculture, textiles, and tourism present a wide variety of investment opportunities and the government should take advantage of the global economic situation and open up the economy for attracting world class foreign investment.
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6 INTERNATIONAL BUSINESS References: Chhair, S. and Ung, L., 2013.Economic history of industrialization in Cambodia(No. 2013/134). WIDER Working Paper. Documents.worldbank.org.(2018)Retrieved26April2018,from http://documents.worldbank.org/curated/en/780641494510994888/pdf/114938-PUBLIC- may-16-8pm-Cambodia-Economic-report-v2-s.pdf GuechHeang, L. and Moolio, P., 2013. The relationship between gross domestic product and foreign direct investment: The case of Cambodia.KASBIT Business Journal,6, pp.87-99. Hill, H. and Menon, J., 2013. Cambodia: rapid growth with weak institutions.Asian Economic Policy Review,8(1), pp.46-65. Overview.(2018).WorldBank.Retrieved26April2018,from http://www.worldbank.org/en/country/cambodia/overview Sothan, S., 2017. Causality between foreign direct investment and economic growth for Cambodia.Cogent Economics & Finance,5(1), p.1277860.