“Cambodia huh.”
That was my initial reaction in finding out that investors were interested in the Southeast Asian country as a potential location for data centers. It wasn’t all that surprising- Southeast Asia as a region had always been a growing hotspot for the industry, but I wasn’t expecting to see Cambodia on the list. With my existing knowledge of the country as being one of misfortune and less talked-about when compared to its neighbours, Cambodia didn’t strike me as a prime location investment.
Then I did my research.
Cambodia has been quietly rising as one of the fastest-growing economies in the world, with The World Bank recording the country’s annual growth rate at 7.7 per cent between 1998 and 2019. Couple this with economic stability and a foreign investment-focused market, it makes complete sense for data center investors to want to get in on Cambodia- and likewise.
Hardship
The country’s journey of progress has been arduous and meandering, a real rollercoaster in which the Cambodian people have been strapped into. From its founding in 1953 to the next 40-odd years, the nation has been put through its paces, to put it lightly. Politically, Cambodia suffered under the regime of the Khmer Rouge and its leader, Saloth Sar, more infamously known by his nom de guerre; Pol Pot. Under his dictatorship, Cambodia went through a brutal regime, which massively set the country back economically, culturally, politically, technologically, and most upsettingly, population-wise.
To put things into perspective; on 17th April 1975, the Khmer Rouge entered Cambodia’s capital, Phnom Penh, ending a bloody civil war and sparking off a four-year genocide, whose effects are still felt today. Meanwhile, less than a year later, Apple Inc was founded by Steve Jobs and Steve Wozniak out of a garage in Paolo Alto, California, and in Singapore, the now-defunct newspaper, New Paper, published a homey article on housewives with arthritis.
Starvation, poverty, civil war and occupation by Vietnam followed the fall of the Khmer Rouge, leading to the mass immigration of Cambodians to neighbouring country Thailand, and for some, the U.S. It was only until 1993, following the Paris Peace Agreements and under the watchful eye of the UN did general elections occur, which would subsequently pave the way for a careful, gradual, foundation of economic and political stability.
Wearing Not Tearing
The garment industry would spearhead the Cambodian economy, serving to drive infrastructure through textile-manufacturing and export. The country adopted an approach of open trade and inviting foreign investment, as well as generous fiscal support for the garment industry through incentives. Tax exemptions were provided on imported intermediate goods and on the exporting of finished goods, and Cambodia eventually gained international recognition by becoming a member of the ASEAN Free Trade Arena in 1999 and then the World Trade Organization (WTO) in 2003.
Cambodia offers foreign investors in the garment industry attractive incentives such as 100 per cent foreign equity ownership, tax holidays of up to nine years and exemption from import duty on machinery and equipment. Furthermore, investors can repatriate profit freely– uncommon in the Southeast Asian region, and reinvest earnings with special depreciation allowances. Other advantages for foreign investors in Cambodia include more affordable labour costs and the country’s strategic location of being centred in the east-west corridor of the Greater Mekong Sub-region (GMS). For foreign investors in the garment industry, Cambodia is a mecca of sorts.
Despite making strides economically, politically and health-wise, a massive still infrastructural gap exists between Phnom Penh and other parts of the country. Additionally, further diversification of the economy is required, and the young nation has a need to foster entrepreneurship, address an emerging labour market need and especially, expand the use of technology.
Opportunity In Growth
Since emerging in the early 2010s, the Cambodia’s tech startup market has been flourishing, from less than 50 in 2013, to approximately 300 just five years later. The majority of startups are involved in the fintech industry, followed by media and advertising, e-commerce, development services, and digital marketplaces. The Cambodian government has explicitly voiced its positive support for the burgeoning tech industry through the establishment of the Startup Cambodia National Program, and national policies such as the National Strategic Development Plan (2019– 2023) and Industrial Development Policy 2015–2025 have all addressed issues pertaining to the industry. Non-governmental support has been also observed through coworking spaces and private startup mentorship programs.
Within the context of the data center industry, Cambodia is in a uniquely advantageous position. The country has had a historically positive relationship with foreign investment; with a government open and encouraging to international trade and business- an approach that has undoubtedly paid dividends for the Cambodian economy. As a developing country, Cambodia also has relatively lower labour and employment costs when compared to her neighbouring countries, a trend that is likely to be observed across multiple industries. With an emerging tech startup scene and full-fledged government support, data center operators should think of Cambodia as a potential location.
Think About It
In 2019, work completed on the Urban Data Centre, a project by Singapore-based Kingsland Global Ltd. The central business district-located facility looks to be part of the larger IT Media Hub in Phnom Penh, which will service leading banking institutions, multinational corporate headquarters, ministries and key business operations that will be located in the area. The Urban Data Centre looks to join an exclusive data center market in Cambodia, as the country grows its digital needs.
From the 1920s to the 1970s, Cambodia was known as the ‘Pearl of Asia’, with its intricate royal palace and as a symbol of Indochina- but this reputation deteriorated as problems plagued the country. Today, Cambodia is thankfully and deservingly moving away from its tattered past of misfortune and grief, and the Cambodian people have forged through one of the worst human experiences in the past half-century. The new generation of Cambodians have inherited resilience from their country’s history and have cultivated opportunity for their future; with an economy set to continue growing in the years to come. With investor-friendly policies and a blossoming tech industry, data center investors could find a pearl in Cambodia, amid an increasingly-competitive sea of Southeast Asian nations.
