Classification: Confidential (C-3)

Cambodia Pitchbook Trade & Investment Opportunity

Prepared by TMB Analytics

Date: December 2016

-2-

2015 GDP size: 18.2 USD bil (Thai 395.3)

GDP growth: 6.9%(2015) 6.9%(2020F)

GDP per capita: 1,168 USD(2015) 1,609(2020F)

2015 Unemployment rate: 0.4%

Minimum wage per month 128 USD (Thai 274)

Inflation: 1.2%(2015) 3.2%(2020F)

Export toCambodia

Thailand 37%

China 29%

Vietnam 21%

Main Exporters Major Thai Exports(excl gold)

Energy 17%

Vehicle 13%

Machinery 8%

29% 28% 44%

Agriculture

Industry

Services

Source: UN, MOC, BOI, IMF, CEIC, and TMB Analytics

General Info

Size

181,035 sq km

Population

15.6mil people(Thai 68.1)

Economy

GDP Component (2015)

49% 20% 31%

Labor Force (2015)8.0 mil people (50.8% of total population)

FDI (2009-13)

From..China 39%UK 20%Thailand 5%In..Industry 39%Infra 35%Agri 16%

Country Summary

Lower Middle

Used currency

Riel and USD

Income Status

(As of July 2016)(Thai 513,000)

Capital

Phnom Penh(พนมเปญ)

0

400

800

1,200

1,600

2,000

5.5

6

6.5

7

7.5

8

2010 2012 2014 2016E 2018F 2020F

GDP Growth (LHS)

GDP per Capita

(RHS)

0

1

2

3

4

5

6

2010 2012 2014 2016E 2018F 2020F

-3-

Economy: Cambodia Macroeconomic Outlook

Strong Economic Growth

Sources: IMF and TMB Analytics

Stable Inflation Outlook

Inflation Rate

IMF’s forecast

IMF’s forecast

Strong economic growth from

garment exports, real estate, and

construction.

GDP growth is expected to be no

less than 6.5%. This leads to a

continue rise in GDP per capita,

and increasing purchasing power.

Inflation rate, which is a good

indicator of economic stability

and can affect real return on

investment, is expected to be quite stable around 3%.

Wage rate is increasing. Minimum wage standard exists

only in garment and footwear

industry at 140 USD per month.

Nevertheless, there is

uncertainty related to wage policy and labor disputes.

USD%

%

Stable around 3%

26

28

30

32

34

-5

-3

-1

1

3

5

7

2010 2012 2014 2016E 2018F 2020F

-4-

Economy: Cambodia Stability Conditions

Sources: IMF and TMB Analytics

Fiscal Balance (LHS)

Gross Public Debt (RHS)

%GDP%GDP

CA Balance

(RHS)

CA/GDP (LHS)

USD bn%

Current account deficit to

GDP is narrowing, while

international reserve is

increasing and expected to be

around 4 months of imports in 2016,

indicating improvement in external

stability. However, the current

amount of reserve may not be

adequate yet as most transactions are settled in dollar.

Government fiscal deficit is

improving while public debt is

decreasing.

Financial sector vulnerability risk stems from rapid credit growth.

Domestic credit to private sector as

percentage of GDP in 2015 was

standing above 50%. Without well-

designed macroprudential

measures, this could lead to

excessive risk taking or financial crisis.

IMF’s forecast

IMF’s forecast

Current Account is Improving

Healthy Fiscal Position

-2.5

-2

-1.5

-1

-0.5

0

-13

-11

-9

-7

-5

2010 2012 2014 2016E 2018F 2020F

-5-

Ease of Doing Business in Cambodia

Sources: World Bank and TMB Analytics

Ranking

170

139

131

82

78

46

23

Myanmar

Lao

Cambodia

Vietnam

China

Thailand

Malaysia

180

183136

120

7

114124

102

178

72

78

42

37

6882

27109

56

51

23

Starting a Business

Dealing with Construction Permits

Getting Electricity

Registering Property

Getting Credit

Protecting Minority Investors

Paying Taxes

Trading across Borders

Enforcing Contracts

Resolving Insolvency

Cambodia Thailand

Solving Insolvency

Starting a Business

9 steps or 99 days Dealing with

Construction Permit

20 steps or 652 days

Getting Electricity

4 steps or 179 days

Registering Property

7 steps or 56 days

Paying Taxes

40 payments or 173 hours Getting CreditDTF score 85

Protecting Minority Investors

Trading Cross Border

Cambodia Ranked 131th (out of 190) in Ease of Doing Business

!!

Enforcing Contracts

483 days and cost 103.4%

of claim

!

Note: 1) East of doing business is base on 2016 version, released on Oct 2016

Energy, 14%

Vehicle, 10%

+

++

+

++

+

(Others 64%)

10%

100%

40%

30%

70%

Thailand28%

18.9USD bil

5 yr Outlook

SEZ Phase I

• High economy growth and growing

domestic demand

• 2016-20 GDP average growth

= 7.2% (Thai 3.1 )

• Part of AEC Single Market

• Most good tariff reduce to 0%

Source: Ministry of Commerce, Index Mundi, CEIC and TMB Analytics

201510%

201240%

201313%

20146%

Thailand export to Cambodia landscape

TotalEx Growth

Note: 1)In 2015, Thai export 214.1 USD bil, 5.0 USD bil(2.3%) went to Cambodia2)Unless state otherwise, data in this slide is from 2015

Border Export3.1 USD bil

62%

Border

Est.Border Ratio

*The others are by plane and sea

*SEZs Phase I, began developing in 2014

Thai Export to Cambodia

5.0 USD bil

Trat

28% ++

Chanthaburi

12% ++

Ubonratchathani

0.3% -

Surin

2% -

Sakaeo

58% ++

Focus Cluster

Agriproduct

Processing Logistics

SEZ Phase I

Focus Cluster

Logistics Tourism

Though being small in size, Cambodia market for Thai export is growing

Currency

Settlement

60% USD

39% THB

Bev, 6%

Con Mat, 6%

Machinery, 7%

-6-

20158%

201227%

201312%

201415%

Border Ex Growth

Share Growth

FDI landscape and opportunity for in Cambodia

Potential FDI Sectors for Thailand

• Growing economy:

Improving infra and standard of living

• Relatively cheap labor

• Supportive trade agreement:

ASEAN 0-5% tariff rate (by 2018)

• Supportive tax system:

Tax exempted for imports used for export purpose

• Pro investment infra:

Over 15 industrial parks in SEZ

Supportive Investment Environment

Textile( i.e. Yarn, Fabric, Wool)

• Lack of major players, as textile

are mostly imported

Processed Foods

• No.2 in export value

• Lack of major players, as most

are SME

Phnom Penh

Siem Reap Stoeng Treng

Kra Chech

Note: *FDI inflow each year

16% 39% 35% 10%

Agri Industry Infra Tourism

0%

20%

40%

60%

0

2,000

4,000

6,000

2010 2011 2012 2013 2014 2015

Despite investment surge in 2011, FDI value

has been steady around 10% of GDP which has been growing for the past decade.

39% 20% 14% 5%

China UK S.Korea Thailand

By investment countries (2009-13 avg)

By sectors (2011-13 avg)

USDmn % of GDP

FDI* is the main engine of Cambodia growth

Source: Ministry of Commerce, CEIC, Index Mundi, and TMB Analytics

Note: Other potential sectors for TDI includes retail, con mat, construction, power, mining

Retail

Construction/Con Mat

Mining

-8-

Local currency Guide: Cambodia Riel

Source: Bloomberg, IMF, and TMB Analytics

Currency Description

FX Regime & Performances

Name

Regulator

Monetary Policy

Exchange

Rate Anchor

The monetary policy framework

is an exchange rate anchor vis-

à-vis the US dollar

Stabilized

Arrangement

Riel (เรียลกมัพชูา)

National Bank of

Cambodia (NBC)

The currency is soft peg with

US dollar within +/-2% band.

Year-to-date, KHR deprecated

0.55% against USD while most

ASEAN currencies gained

against USD

Spot Forward There is no formal spot exchange

market. Commercial banks and

money changers may buy and sell

foreign exchange at their own rates

Control on Exports and Imports of

Export/Import: imports or export of

Cash exceeding the equivalent of

US$10,000 must be declared to

Customs at border crossings

FX movement KHR and THB against USD

30.50

31.50

32.50

33.50

34.50

35.50

36.50

37.50

3,900

3,950

4,000

4,050

4,100

4,150

Sep-14 Mar-15 Sep-15 Mar-16 Sep-16

USD/KHR USD/THB

↑ KHR weaker↓ KHR stronger

↑ THB weaker

↓ THB stronger

(average price KHR/THB is 117 KHR per 1 THB)

KHR=3927+4THBR^2 =0.03

-9-

Regulations & Benefits for Thai Exporter

Check any quota/restriction on

good exported

General goods: Allowed

Goods affecting security and/or

environment:

Restricted*

Check inspection requirement

(see appendix for exception goods)

Goods value not over 5,000 USD:

No inspection

Goods value over 5,000 USD:

Inspection by Gov Agency**

Pay Import tax according to CIF pricing

0% Raw mat/ necessity

7% Intermediate goods

15% Machinery/equipment

35% Luxury

Declare at Custom on type, origin and

price of goods

Contact bank to facilitate

transaction

AEC Benefit

Inclusion List:

99% tariff exempted

Sensitive List:

Reduce to 5% tariff by 2018

• QIP

• AEC single market (AFTA)

• RCEP (in progress)

• ASEAN-Hong Kong (in process)

Pro

du

cti

on

& G

oo

ds D

elivery

Receive Export Order Payment

1

Production for export

goods. Seek bank advise if

needed.

No FX restriction for

payment in USD or any

other currencies

Path toward

Market Integration

2 3

Sources: BOI, CEIC and TMB Analytics

No Specific production

requirement

-10-Sources: Council for the Development of Cambodia (CDC) and TMB Analytics

Preparation1 Setting Up Business

Check Minimum investment requirement

Determine investment and business form

(see appendix for available entities)

• No minimum requirement

• Require to open account with

Cambodian commercial bank with deposit at least 4 mil riel

Company name reserve and data

disclose

2

Company Registration

Company Stamp Registration

Tax Registration Certificate

Start business

• Reserved name with Company

Registration Department

• Disclose investment data on

Cambodian local newspaper

• Time taken: at least 1 work day (up to MoC)

• Acquire Certificate of

Incorporation from MoC

• Time Taken: 2-7 work days

• Acquire the stamp from MoC

• Time taken 1 work day

• Acquire Certificate from

General Tax Department

• Corporate Income Tax =

20% (as of Mar 16,)**

• Time Taken: 30 work days

• Report to Ministry of Labor

and Vocational Training

for hiring purpose

• Time taken: 30 work days

Determine operation site and period

available

• Contact Ministry of Land Management,

Urban Planning and construction

• Land Lease <= 50 yearsLand Concession <= 99 years Register business for SEZ and QIP

• Council for the Development of

Cambodia (CDC) For QIP*• SEZ administration For SEZ

Regulations for Thai Investors

2.1 2.2

• No local partnership required

Note:

* Qualified Investment Project (QIP), is a government

investment incentive granted for project outside SEZ area

** Profits from oil, gas, and other natural resources is tax at 30%

-11-Sources: Council for the Development of Cambodia (CDC) and TMB Analytics

Benefits for Thai Investors

General Benefit

Investment Guarantee

• Equal treatment regardless of

nationality

• No nationalization policy

• No requirement of local equity

participation

• No price control

• No restriction on FX

• Permanent visa for investors & families

• Employment of foreign expatriate

authorized up to 10% of all employees,

staff and workers

Remittance

• No restrictions on the remittance of

capital/profits

Tax

Tax exempt on repatriation

+ or

Tax Holidays (trigger period +

3years+priority years)

Reduce income tax to 9% for 5 years

(after tax holidays benefit ends)

Import duty exemption

Raw material Machinery for import substitution

purpose

For QIP, benefit is similar to SEZ except

that VAT exemption for re export

purpose is only for agri, machine and

garment business

Business in non SEZ

Business in SEZ

• Either

• Up to 9 years profit tax holiday or

• 40% tax reduce on corporate

revenue

• Import duty exemption for

• Raw material

• Machinery/con mat import for

SEZ and for public interest

• VAT exemption for raw mat/cap good

import for export purpose

• Loss carried forward for up to 5 years

THANK YOU

Disclaimer

This document is issued by TMB Analytics, a division of TMB Bank PCL. All analyses are based on information available to

the public. Although the information contained herein is believed to be gathered from reliable sources, TMB makes no

guarantee to its accuracy and completeness. TMB may have issued, and may in the future issue, other reports that are

inconsistent with, and reach different conclusions from, the information presented in this report. Opinions or predictions

expressed herein reflect the authors’ views, not that of TMB, as of date of the analysis and are subject to change without

notice. TMB shall not be responsible for the use of contents and its implication.

Appendix

FDI in Cambodia

• Available investment entity option

• Wholly foreign owned enterprise

• JV

• Mutual contact

• Concession

• Available business operation option

• Sole Proprietorship

• Partnership

• LLC

• Foreign Business

• More FDI information in Cambodia at

• The Council for the Development of Cambodia (CDC) http://www.cdc-crdb.gov.kh/

• The Cambodian Investment Board (CIB) http://www.cambodiainvestment.gov.kh/

• Cambodian Special Economic Zone Board (CSEZB) http://www.cambodiasez.gov.kh/

• The Cambodian Rehabilitation and Development Board (CRDB)

Export to Cambodia

• Export goods with exception from pre shipment inspection

• (a) Precious stones, and precious metals. (b) Object of arts, (c) Explosives and pyrotechnic products, (d) Ammunition,

weapons, implement of war (e) Live animals, (f) Current newspapers and periodicals. 3 (g) Household and personal

effects. (h) Parcel post or commercial samples. (i) Gifts made by foreign governments or international organizations to

foundations, charities and recognized humanitarian organization. (j) Gift and supplies to diplomatic and consular

missions and to agencies depending from the United Nations Organization imported for their own needs. (k) Grants in

kind. (l) Goods imported for government use under government order. (m) Scrap metals. (n) Cigarettes (o) Temporarily

admitted goods (temporary import for inward processing for export)