Over the past few years, there’s been a lot of attention drawn to Myanmar and the growing desire for the frontier market to open up both politically and economically. Multinational corporations, including Coca-Cola, Canon, Samsung, Mastercard and many others, have rushed to profit from what is called “Asia’s Last Frontier”.
However, there is a nearby emerging market that arguably has even greater potential but much less of the hype: Cambodia.
The two countries share a similar history. In March of 2012, one year after the military junta in Myanmar was dissolved, a draft for a law enabling foreign investment emerged. The Asian Development Bank engaged Myanmar later that year to finance infrastructure and development projects.
Cambodia’s turning point was about 15 years earlier. In 1995, one year before a mass defection from the Khmer Rouge, Cambodia’s first democratically elected government began a transition from a planned economy to its current market based economy.
Both countries can certainly qualify as a frontier market. Myanmar’s GDP per capita (PPP) is $1,740 which at the time of writing this, is the second lowest in the world outside of Africa. Cambodia’s is slightly higher at $2,576.
This is Cambodia’s strength. It has had 15 years more to develop itself and work out the kinks in its foreign investment laws, which are now clear and straightforward. In Cambodia, a foreigner can safely own a business and a condo, have the right to permanent residence and have no fear about the legal climate changing by the day. The same cannot be said for Myanmar, which was said to be “the country offering the least legal protection for foreign companies” according to Maplecroft, a British risk analysis group.
In addition, Myanmar is still politically unstable. The current government is backed by the old military junta, which still plays a prominent role in politics, and allegations of fraud in the latest elections are widespread. Freedom of speech is not guaranteed by law and political discussions are heavily censored.
While Cambodia is no bastion of democracy itself, it’s certainly an improvement over Myanmar. Freedom of speech is a right, most elections since 1993 have gone by without major allegations of fraud, and there has not been a coup since the Khmer Rouge ceased to exist in 1999, which is something that even Cambodia’s far wealthier neighbor of Thailand cannot claim.
Altogether, both countries are growing at a rapid pace and have great opportunities for investors. Cambodia’s economy grew by 7.3% in 2013 and Myanmar’s grew 7.5% during the same year. But while Myanmar may be the better country to invest in a decade from now, it is still too risky to recommend over Cambodia and its very strong potential.
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