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Flows of Money
Trade-related financial flows are essential to competitiveness. These flows are facilitated by strong banking sectors and are flexible where there is adequate access to credit and foreign exchange. Poor access to credit for domestic-owned traders impedes start-ups and stifles expansion by the country’s producers. Burdensome foreign exchange requirements increase the costs of doing business and ward off foreign investors.
In Cambodia, cross-border transactions reflect a moderate amount of monetary exchange, as compared with neighboring countries. Over $6 billion in goods and services were traded in 2005 – exports at $2.7 billion and imports at $3.7 billion. Net foreign direct investment (FDI) inflows amounted to $216 million in 2005, which was up significantly from $121 million in 2004. The banking system is of moderate size with 28 domestic and foreign banks, including 15 fully-licensed commercial banks, four specialized banks, at least nine micro finance institutions, and one foreign bank representative office.
Overall, Cambodian laws and public and private institutions support basic trade-related money flows, but the system is underdeveloped. While improvements have been made in basic credit and automated teller machine (ATM) services, and fundamental trade finance products are available to traders, trade finance products are not broadly used. Foreign currency exchange poses few problems as it is easily exchanged for all traders, and the economy is heavily dollarized.
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