Positive Developments For Tourism

BMI View: Cambodia is stepping up efforts to develop its emerging tourism industry by leasing a number of islands in the Gulf of Thailand to developers. The number of visitors to Cambodia last year topped 1.7mn, and the burgeoning sector is rapidly forming a key component of the country’s economy, as tourists flock to see the 800-year old Angkor Wat temple complex. However, the Cambodian government is keen to diversify the country’s tourism industry away from over reliance upon the ancient temples located outside Siem Reap in the northwest of the country, by developing its beaches.

Commerce Minister Cham Prasidh signed the leases of islands in Kampot Province and Sihanoukville on July 27 with representatives from six private companies at the Council for Development of Cambodia (CDC), granting them permission to undertake projects worth a total of US$627mn. Island DG has been granted permission to invest on Thas Island, Koh Takeav on some parts of Ta Keav Island, Brocon Investment on Oun and Bong Island and Sea Snake Investment group on Dek Korl, all of which are located off the coast of Sihanoukville, while another two companies, Vimean Sela and Monorum Akphiwat Teschar Thoamcheat won rights to invest in some parts of Ses Island in Kampot province. The six companies, which have signed long-term leases, now have one year to submit detailed plans and development programmes to the CDC for inspection and approval. Failure to submit plans by this deadline will result in the Cambodian government reclaiming the islands and subsequently leasing them out to other companies.

These latest agreements follow on from an accord signed last September when a group of Russian investors received approval to build a US$300mn tourist resort on Koh Pos, an island near to Sihanoukville. The world heritage site at Angkor has been the mainstay of tourism in Cambodia, and has encouraged a development boom in the surrounding Siem Reap region. The rapid expansion of the hotel sector in Siem Reap, the northern town which provides tourists with a base for Angkor Wat, helped contribute to real GDP growth of 10.5% in 2006, and the continued expansion of the tourism industry will further encourage the recent construction boom in 2007. This will consequently help economic growth to remain buoyant, with BMI forecasting economic expansion of 6.4% in 2007.

Although the rapid growth in tourism brought about by the development of Siem Reap has had a beneficial effect on the overall economy, it has also promoted uneven development. Income from tourism is predominantly concentrated in Siem Reap (or in the capital Phnom Penh), and as a result, development of the industry is also predominantly concentrated in these regions. As such, the Cambodian government is increasing its efforts to diversify its fledgling tourist sector, in order to more evenly distribute wealth around the country, and to reduce reliance upon the temples at Angkor, which are facing increasing pressure to limit visitor numbers in order to preserve the site.

If Cambodia’s venture into expanding its tourist sector is to be successful however, it must first make potential visitors aware of what it has to offer. A joint project with Laos and Vietnam will see the publication of a 140-page guidebook detailing tourism destinations and available activities in the three countries, aimed at promoting the less well known places to visit. Furthermore, the expansion of the internet in Asia will also help promote Cambodia’s tourist industry. The majority of tourists in Cambodia originate from other Asian countries, and the emerging middle classes and rising disposable incomes across the region, twinned with the growth in internet access has helped tourist numbers grow 22% y-o-y to date in 2007, as online travel continues to boom. Asia has one of the fastest growing tourism sectors in the world at present, and Cambodia has announced its intentions to take full advantage of this. However, it must move fast if it is to continue to compete with its regional counterparts, many of whom are direct rivals, although the latest developments provide encouragement that Cambodia will indeed keep pace.