Cambodia has experienced rapid economic growth over the last two decades, with gross domestic product (GDP) growing around seven percent per year until the COVID-19 pandemic.  After Cambodia reopened its economy in November 2021, GDP growth has steadily recovered, and the World Bank predicts Cambodia’s GDP growth at 5.5 percent in 2023.

Cambodia’s Gross National Income (GNI) per capita stood at $1,700 in 2022, after having graduated to lower-middle income status as measured by the World Bank in 2016.  The country, however, relies heavily on foreign assistance, with donor support totaling approximately 25 percent of the government’s budget.  Despite its growing garment, tourism, construction, light manufacturing, and real estate sectors, Cambodia remains a largely agrarian country with 75 percent of its population living in rural areas.

Since Cambodia became the first least-developed country to join the World Trade Organization (WTO) in 2004, trade has steadily increased.  The United States is Cambodia’s largest single-country export destination, with approximately 40 percent of Cambodia’s total exports going to the United States – primarily comprised of garment, footwear, and travel goods products.  In 2022, Cambodia exported $12.2 billion of goods to the United States, an annual increase of 40 percent, and U.S. exports to Cambodia totaled $446 million.  Cambodia has benefitted greatly from preferential trade access to the U.S. market, after the country became eligible for the United States’ Generalized System of Preferences (GSP) in 1997.  For example, after travel goods (luggage, backpacks, etc.) were added to GSP in 2016, the sector grew rapidly in Cambodia, even despite the lapse in GSP authorization as of January 2021.  In 2022, Cambodia exported more than $1.7 billion in travel goods to the United States, an annual increase of 54 percent.

The United States and Cambodia are signatories to a 2006 Trade and Investment Framework Agreement (TIFA) to promote greater trade and investment in both countries and to provide a forum for addressing bilateral trade and investment issues.  Cambodia is a member of the Association of Southeast Asian Nations (ASEAN), the ASEAN Free Trade Area (AFTA) and the Regional Comprehensive Economic Partnership (RCEP).  Cambodia implemented bilateral free trade agreements (FTA) with the People’s Republic of China (PRC) and the Republic of Korea (ROK) in 2022, and the United Arab Emirates (UAE) in 2023.

While Cambodia is open to foreign investment, the country has not historically attracted significant U.S. investment for several reasons:  limited supply of skilled labor, inadequate infrastructure, systemic corruption, lack of transparency, and weak regulatory environment.  In light of some of these concerns, in 2021, the U.S. Departments of State, Treasury, and Commerce issued a business advisory to caution U.S. businesses currently operating, or considering operating, in Cambodia to be mindful of interactions with entities involved in corrupt business practices, criminal activities, and human rights abuses. 

Over the past decade, the PRC has eagerly stepped up to fill most of Cambodia’s foreign direct investment needs, highlighting the PRC’s desire for influence in Cambodia, and Southeast Asia more broadly.  Moreover, Chinese businesses, many of which are state-owned enterprises, may not assess the challenges in Cambodia’s business environment in the same manner as U.S. businesses.  A frequently cited downside risk to Cambodia’s economy is its heavy reliance on China, especially as the economic slowdown in China has had a commensurate negative impact on Cambodia’s growth. 

Political Environment

Visit the State Department’s website for background on Cambodia’s political and economic environment.