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Infrastructure blog

How private investment can unlock the potential of Cambodia’s infrastructure

16 November 2023

Political instability has set back infrastructure development in Cambodia, but policy reform has helped drive private investment.

How private investment can unlock the potential of Cambodia’s infrastructure
Policy reform in Cambodia has laid strong foundations for public-private partnerships. Image credit: Shutterstock

Private sector engagement is a key element of strategic infrastructure planning.

It boosts governments’ financial capacity to plan the infrastructure they need to deliver on their long-term vision.

In recent years, Cambodia has laid a strong foundation for private investment to unlock the true potential of its infrastructure system.

Using principle 10 of the Enabling Better Infrastructure (EBI) 12 guiding principles, we show how Cambodia has strengthened its enabling environment to attract private finance through policy and legal reform.

Closing Cambodia's infrastructure gap

Over the past decade, political instability has made infrastructure investment in Cambodia difficult.

With limited private investment, the country’s infrastructure quality has suffered.

Currently, Cambodia ranks 106 out of 140 countries on the Global Infrastructure Hub’s infrastructure quality ranking.

To bridge this gap, the Cambodian government has made key policy reforms to attract the private sector support needed to help improve its infrastructure services.

Long-term planning is integral to this approach.

Creating a strong enabling environment

To strengthen its enabling environment for private sector investment, the Cambodian government has focused on three key activities:

  • Developing policy to set public-private partnerships (PPPs).
  • Creating a PPP unit.
  • Refining the legal and regulatory environment for PPPs.

A closer look...

In a 2016 policy paper, the Cambodian government established a robust framework for the use of PPPs.

This paper set out a long-term roadmap for developing a consistent, interlinked system to oversee PPPs to encourage private investment in public infrastructure.

To support the smooth running of its PPP system, Cambodia established a Central Public-Private Partnerships Unit (CPU) under the Ministry of Economy and Finance.

The CPU makes recommendations on the selection and approval of PPP projects. It also monitors, reviews, and evaluates the progress made towards implementing PPPs.

In 2021, to strengthen the legal environment for PPPs, the government implemented a PPP law.

The law was designed to regulate public infrastructure projects in Cambodia in line with the PPP policy paper. It also helps PPP projects remain efficient and transparent.

By taking these steps, Cambodia has laid foundations to set up partnerships with the private sector and streamline infrastructure investment.

Strengthening Cambodia's enabling environment

The three steps taken by Cambodia to strengthen its enabling environment have built investor confidence and, in turn, unlocked a wider range of financing options.

What is an enabling environment?

From the Enabling Better Infrastructure report: 'The range of institutional, knowledge and human elements that need to be developed to create a supportive context for the creation and implementation of a national infrastructure strategy.'

This activity is helping the country bridge its infrastructure gap.

As a next step, a needs assessment to identify the most pressing national needs could inform a national infrastructure strategy. This strategy could then help identify the most urgently needed PPPs.

Developing a strategy will help policymakers better understand which projects will yield the most social, economic, and environmental benefits for the country.

To develop an infrastructure strategy, the country can follow a three-step process:

  1. Set objectives that consider country-specific factors.
  2. Assess needs through a cross-sectoral lens.
  3. Develop a strategy incorporating a range of funding and financing options.

EBI guidance neatly covers these three steps within its 12 principles, which provide a clear framework for strategic infrastructure planning.

To find out more about mobilising the private sector to strengthen infrastructure planning, read our EBI report.

  • Adina Nembhardt, EBI programme researcher at ICE