with well-developed financial markets are able to benefit more from FDI in promoting their economic growth. Foreign investment gives advantage in terms of export market access arisingfrom economies of scale in marketing of foreign firms or from the ability to gain market access
abroad. It can also aid in bridging a host country’s foreign
exchange gap. Therefore, countrieslike Vietnam, India, Pakistan, China, Thailand, South Korea, Malaysia, South Africa,Mozambique, Singapore, Indonesia, Bangladesh and Cambodia have adopted proactive policiesto attract FDI in order to develop their economies.Secondly, the study has dealt with the details of the research methodology including typeand sources of data, sample size and sampling, procedure of collecting data, statistical tools andcoverage of the study.Thirdly, policies of Royal Government of Cambodia to attract FDI have been analyzed.In the country, both foreign and domestic investors enjoy the same rights of national treatment.All foreign investors can invest in all sectors of the Cambodia economy. Although, theownership of land is reserved to natural and legal Cambodia persons, but natural and legalforeign persons have the possibility to use land through lease contracts for a period of up to 99years. Further, investors can set up 100 per cent foreign-owned investment projects and employskilled workers from overseas, in cases where these workers cannot be found in the domesticlabour force. Investors in the special economic zones get the benefits like tax exemption on theimport of materials, equipment and construction materials, tax on profit exemption for amaximum period of nine years, and incentive of zero per cent Value Added Tax. Import dutyrates of zero per cent, seven per cent, 15 per cent, 35 per cent and 50 per cent are levied for goods as decided by the government, primary products and raw materials, machinery andequipment, finished products and government protected goods, and luxurious goods respectively.Fourthly, the overall growth of total project cost of all types of investment flows inCambodia during 1994-2004 was -18.38 per cent per annum with -7.18 per cent growth rate for foreign investment flows, 14.18 per cent for domestic investment flows and -30.02 per cent for joint countries investment flows. Further, the study found that the average annual growth rates of total fixed assets and equity of FDI during 1994-2004 were -6.31 per cent and -17.13 per centrespectively.Fifthly, the percentages of project costs of foreign investment projects in tourism,industry and manufacture, infrastructure and other, and agriculture and agro-industry sectors tototal project cost of foreign investment projects during 1994-2004 were 46.38, 33.02, 15.80 and4.80 respectively. The amount of fixed assets of FDI flow fluctuated with greater flow in late1990s then fell down considerably in early 2000s and bounced back in 2005 with amount of USD 1,162 million. During 1996-2005, the total approved fixed asset of FDI was 14 per cent of GDP. During this period, industry sector absorbed the largest share of FDI, i.e., 55 per centfollowed by 41 per cent in service sector, 21 per cent in tourism sector and seven per cent ininfrastructure sector.