Check out some other great resources on Realestate.com.kh in our Location Profiles and Investor Guides: Learn more about Cambodia, Phnom Penh, Siem Reap & Sihanoukville. Learn more about Investing in Cambodia, Foreign Ownership in Cambodia & the Cambodian Expat Experience!
Situated where both the Tonlé Sap and Mekong Rivers meet, Phnom Penh has been capital city of the kingdom of Cambodia since the mid-1860s. Since these humble beginnings, Phnom Penh has grown to become the nation’s unquestionable demographic and economic center, as well as the hub for foreign investment, security, politics and diplomacy. Phnom Penh, in 2015, was second only to Laos in Southeast Asia for the fastest rate of urban spatial extension, as indicated by the World Bank. An average growth rate of around 7 percent year-on-year for Cambodia has triggered an economic boom in Phnom Penh, and the city now offers all you would expect from an Asian metropolis. From expansive shopping centers, malls, skyscrapers and five-star hotels, to a variety of eateries and eclectic F&B options, and a vibrant nightlife; Phnom Penh is drawing guests from all around the world.
Extravagant modern buildings across Phnom Penh are changing the capital into a playground for a new generation of Khmers in the emerging middle class, international investors and local elite. Yet still – wealth distribution remains wholly unequal in Cambodia, meaning local tastes are ultimately decided by associated costs. According to the World Bank, around 21 percent of the population live at or below the poverty line of less than USD 1.50 per day; over 50 percent live within the vulnerable to poor category spending up to USD 2.60 per day; and approximately 20 percent of Khmers are considered to be middle class. A mere 3 percent are considered to be “prosperous,” meaning they are able to spend upwards of USD 5.00 per day on goods and services. Nevertheless, as this middle class continues to grow, consumer products and services are growing at a rate previously unseen in the country, and more so in Phnom Penh than anywhere else.
Originally the capital of Cambodia and birthplace of the Khmer Empire was Siem Reap. In the 14th century historical records reveal that the Khmer king at the time, King Pohea Yat, founded a new capital in Phnom Penh. Legends tell the story that Phnom Penh took its name from a local lady, named Lady Daun Penh, who apparently found 4 statues of the Buddha inside a tree floating on the Mekong River. She took her discovery to be profound and decided that a new capital should be established away from the Angkor capital. She placed these sacred objects in a shrine on a small hill to keep them safe, now known as Wat Phnom.
The city has long been renowned for its beautiful architecture and attractions. Once a French colonial urban center, Phnom Penh has been admired as one of the loveliest South East Asian cities because of its characteristic wide roads, pretty gardens and exquisite stately homes. For these reasons, the city was titled “the pearl of Asia” in the 1920’s. Over the following four decades, Phnom Penh experienced rapid growth with the building of railways to Sihanoukville and the opening of the first international airport, Phnom Penh International Airport. Phnom Penh’s infrastructure saw major modernization under the rule of King Sihanouk for much of the early to mid-1900s. However, in the 1970’s, within the shadow of America’s Vietnam War, this vibrant metropolis came under siege by Pol Pot’s Khmer Rouge, and his army took control of the Phnom Penh and ordered over two million of its inhabitants to evacuate.
The city was left to resemble a ghost town. To cut a long and complicated story short, the Khmer Rouge were finally driven out of Phnom Penh by a liberation army from Vietnam in 1979 and people began to return to live in the city. However, the Khmer people continued to experience exploitation and extreme hunger under the Vietnamese occupation. After the war, land titles for the entire country had been destroyed or lost, meaning those that returned to Phnom Penh essentially staked claims to property than was uninhabited. Later in the 1990s to early 2000s, with funding from various institutions including the World Bank, the land title system was renewed in Cambodia. But still today, the effects of the war impact land ownership rights and disputes continue.
In 1993, Norodom Sihanouk was restored as King of Cambodia after returning from exile in China, but all power was put in the hands of the democratic government established after the UNTAC sponsored elections. Samdech Hun Sen became prime minister, a role he still holds to this day – now representing the longest reign for a non-royal leader in the Southeast Asian region. A period of reconstruction begun after the end of the war, spurred by the relative stability of the government post UNTAC, and various opportunities for new foreign investment and aid support by countries including France, Australia, and Japan, to name a few of the major providers. Meanwhile, the internationally-endorsed new government passed a variety of investor friendly laws which opened the Cambodian economy to external influences to an extent unseen in neighboring nations.
A free market economic model was firmly emplaced. The US dollar was implemented as an official currency, providing an additional level of economic security alongside the national currency, the Khmer Riel. This dollarization remains in place today; however the National Bank of Cambodia has developed policies to encourage the use of the Khmer Riel with a view towards future de-dollarization as an attempt to eventually regain full control over monetary policy. In the early 90s, huge development loans were made to the Cambodian government from institutions such as the Asian Development Bank and the World Bank to fund projects supporting infrastructure development, such as clean water supply, roads and other infrastructure – much of which poured into Phnom Penh. The population grew extremely quickly with this new stability. The 1998 census estimated Phnom Penh’s population at 862,000, and the results of the 2008 census show this had risen to 1.3 million. Nowadays, the population of Phnom Penh has grown significantly to reach approximately 2.5 million.
The main economy of Phnom Penh is based on commercial interests such as garments, trading, and small and medium enterprises. While the CBD of the city is home to a host of banks and trading ventures – the outskirts of Phnom Penh, spilling over into Kandal province, is defined by huge zones of manufacturing factories and other industry. These low-skill sectors, along with agriculture, have remained Cambodia’s primary growth engine since the country reformed after the war.
In 2015, primary industries of garment and footwear production contributed to 26.1 percent of the total economy of Cambodia. Agriculture contributed 29 percent and service sector made up 39.4 percent of the economy. The main agricultural export products include rice, rubber, maize, cassava and palm oil. Secondary industries make up around 22 percent and tertiary industries represent 38 percent of the total economy. Amongst the tertiary industries, tourism-related activities are the most valuable to the sustained growth of the Cambodian economy. In recent times, construction has also become a key engine of growth for the Phnom Penh economy.
Cambodia’s trade activities remain robust with some of the major destination countries for exports being the USA, Hong Kong, China, Europe, Canada, and Vietnam. The Everything but Arms agreement supports and offers tax-free trade between Cambodia and Europe. The major import destinations of Cambodian products include the neighboring countries of Vietnam and Thailand, along with Hong Kong, China, and Taiwan. The kingdom’s primary export is clothing apparel and footwear, which represents more than 80 percent of total exports. Cars, textiles and energy products make up the country’s major imports.
In the past few years the property business has been booming too, with rapidly increasing real estate prices across the capital of Phnom Penh. The boom in construction throughout Phnom Penh has naturally fed into the real estate sphere, where new development offerings targeting almost all economic strata’s of society come online daily.
Tourism is also a major contributor to Phnom Penh’s economy as more shopping centers and attractions open, making Phnom Penh one of the major tourist destinations in the country along with Siem Reap and Sihanoukville. One factor influencing the continuous economic growth of both Phnom Penh and greater Cambodia is that it is an attractive environment for foreign investment. In 2015, Cambodia received over USD 4B in foreign direct investment (FDI) and has an expatriate population of over 78,000, most of which reside in Phnom Penh. Realestate.com.kh suggests that Cambodia is attractive destination for FDI due to the availability of low-priced labor, fast urbanization, an growing middle-class, easy free and open policies for foreign businesses, English language as the main business language, appealing tax incentives and import/export duty exemptions, continually improving infrastructure and logistical networks, and the predominance of the US dollar.
With Cambodia’s integration into ASEAN, Phnom Penh is particularly well located, surrounded by robust regional economies that are increasingly outsourcing manufacturing operations to the Kingdom. Cambodians are also more and more connected to the global community through access to technology via high mobile phone penetration, with Phnom Penh being the epicenter of this evolution. In 2015, Cambodia had over 5 million internet users, which represents one third of the current population.
Since 2010, foreigners have also been allowed to own apartments and condominium units in Cambodia – but not land, and, accordingly, not the first floor of buildings. Immediately after the passing of the law, tax revenues from property transactions rose 60% to around $19.5 million in 2010, from just $12.2 million in 2009. Learn more about land titles in Cambodia… This foreign ownership law has aided Phnom Penh’s growth hugely, and a range of properties being built are directly aimed at this foreign ownership market.
Foreigners can easily hold land on long renewable leases and also through local majority-owned companies that have been incorporated in the kingdom. These structures are more secure compared to other legislation in other neighboring countries where foreign-owned land is forbidden.