Cambodia Urges Business Confidence Amid Political Tensions

PHNOM PENH — As the Cambodian government and its allied media continue to ramp up rhetoric against the United States, a government spokesperson in Phnom Penh has urged American investors to remain confident in doing business in the country.

Relations between Phnom Penh and Washington have grown heated since the Cambodian government ordered the closure of the local office of the U.S.’ National Democratic Institute, and the arrest of opposition leader Kem Sokha over a 2013 speech it claimed exposed U.S. support for regime change in Cambodia.

A series of so-called leaks have been published in pro-government media accusing the U.S. of plotting a “color revolution” in Cambodia by helping the opposition Cambodia National Rescue Party, and funding NGOs allegedly opposing Prime Minister Hun Sen’s Cambodian People’s Party.

Less than a week after Sokha’s arrest, the US-Asean Business Council warned of the “growing risk” its members faced doing business in the country because of the government’s “increasingly anti-U.S./anti-Western rhetoric.”

“Certain Cambodian politicians and government officials are more likely now to distance themselves from publicly engaging with U.S. firms until after the July 2018 elections, making government advocacy tougher than it normally would be,” the council added in the alert obtained by VOA Khmer.

In Cambodia, the U.S. Embassy warned that the escalating rhetoric would only serve to harm Phnom Penh.

“The anti-American rhetoric has made many Americans and other western tourists feel less welcome today in Cambodia. This year, they may spend their money in Halong Bay or Phuket instead of Angkor Wat,” U.S. Ambassador William Heidt said in a press conference on September 12.

But amid the rising tensions, Soeung Sophary, the spokeswoman for the Cambodian Ministry of Commerce, insisted that it is still “business as usual” for American investors.

“The American Embassy has not been moved anywhere, why would people have to worry?” she said, adding that anti-American rhetoric was being expressed in the context of “free speech.”

“American investors and businesspeople should keep being confident here as we [the government] won’t let or allow things to escalate” to the point that it would damage American business in the country, she said.

“Politics is politics and is not a thing you should worry about.”

In 2016, 21.3 percent of Cambodian exports went to the U.S., making it the second largest importer of goods from the country after the European Union. American investment in Cambodia also increased in 2016, while some 238,658 tourists visited the country.

More recently, U.S. ride-sharing service Uber launched in Cambodia last Thursday.

Anthony Galliano, CEO of the Cambodia Investment Management Group, said that as the US only makes up a minor share of Cambodia’s annual direct foreign investments, Cambodia would not be affected by the rising tensions.

“America has never really been a major investor in Cambodia, approximately 90 percent of Cambodia’s Foreign Direct Investment (FDI) comes from Asia. Therefore, Cambodia will not be materially impacted by current events, and American investors will not be encouraged either,” he said.

In July, the International Monetary Fund pointed at decreasing private investment in Cambodia in the first half of 2017, blaming “election-related uncertainties.”

But Miguel Chanco, a lead Asean analyst for The Economist Intelligence Unit, said economic links between the countries “are unlikely to be significantly affected.”

“For a start, Hun Sen's regime will remain cognizant of the fact that Cambodia remains heavily dependent on the U.S. to buy its exports; accordingly, the prime minister is unlikely to push the U.S. too far. Secondly, the US is unlikely to punish Cambodia too much either, even if the health of the latter's democracy continues to deteriorate,” he said.

Chanco added that while the “acute risk of political instability” would likely put American investors into waiting mode until the election is over, a long-term investment would not be affected.

“Once the dust settles after the ballot... I believe that US companies will continue to be enticed by what Cambodia's economy has to offer - open foreign investment rules, relatively low-cost labor, and good access to key markets”.

Meanwhile, Anthony Nelson, director of the East Asia and Pacific practice at the Washington-based Albright Stonebridge Group, said the tensions could test the resilience of American investors if they escalated further.

“For a lot of U.S. companies, they move slowly, they like to take their time, and they like to be thorough. And it is pretty natural right now to look at the type of remarks the Prime Minister is making [due] to the fact that the election is coming up that could be contentious to take a more delayed approach,” he said.