Cambodia approved $10 billion in investment projects in 2025, up 45% year-on-year. 75% of its FDI still comes from China. Total trade hit $65.2 billion. India ranks eleventh on the partner list, with just $511 million in two-way trade, well behind Vietnam, Japan, Korea, and even the UAE. In a country actively trying to diversify its capital base and move up the industrial value chain, that ranking is an anomaly. It is also an opportunity for both Cambodia and Indian industrial players who have spent the last decade building exactly the kind of integrated infrastructure capability that Southeast Asia now needs.
This article makes the case for why a deeper India-Cambodia industrial corridor is overdue, what each side brings, and why the commercial logic is sharper now than at any point in the last twenty years.
Why Cambodia Needs a Second Source
Cambodia is in a specific moment. The Hun Manet government, which succeeded Hun Sen in 2023, has made FDI diversification an explicit priority. The volume numbers say the strategy is working: 630 projects approved in 2025, roughly half a million projected jobs, and GDP growing at around 5%. The quality numbers say it is not. Chinese investors accounted for 52% of approved FDI in 2025. Most projects concentrated in low-tech manufacturing, garments, footwear, real estate, and SEZs in Phnom Penh, Preah Sihanouk, and Svay Rieng.
Northeastern and northwestern provinces received almost nothing. The Cambodia Development Resource Institute’s own research flags the shortage of technology transfer and skills upgrading. The US State Department’s 2025 investment climate report documents corruption, weak regulatory enforcement, and the absence of a commercial court as persistent deterrents to higher-quality investors from Japan, Korea, the EU, and the US.
The quality gap is structural, not accidental. When one country provides 52% of your FDI and 75% of cumulative inflows, you import that country’s industrial priorities along with the capital. China’s interests in Cambodia have centred on logistics corridors that serve its own BRI strategy, real estate that absorbs excess capital, and manufacturing that offshores low-margin work. All useful, none of it is particularly suited to helping Cambodia climb the value chain or build domestic industrial capacity.
Cambodia does not need to reduce Chinese investment. It needs credible second options in the sectors where quality matters most: ports and logistics, renewable energy and transmission, agro-processing, and advanced manufacturing. Without a second source, Cambodia will remain what it has been for a decade, a low-cost assembly platform with a single dominant patron. With a second source, Phnom Penh gains real negotiating leverage on everything from concession terms to technology transfer clauses.
Why India Is the Obvious Candidate
India has three things Cambodia specifically needs, and almost no other major economy has all three at once.
First, an integrated port and logistics capability at scale. India’s largest private port, Mundra, handles roughly 11% of the country’s maritime cargo and is being expanded at a cost of Rs 45,000 crore to reach a capacity of 514 million tonnes. Indian port operators have already demonstrated they can export this capability. The Colombo West International Terminal, an $800 million deepwater transhipment facility, began operations in Sri Lanka in 2025. A greenfield port has been approved in principle in Da Nang, Vietnam. Haifa, Colombo, and Dar es Salaam are operational.
Indian port expertise is now a real category in global infrastructure, not an aspiration. For Cambodia, which is expanding Sihanoukville Autonomous Port to 2.6 million TEU by 2029, building a new port at Kampot, and constructing a deepwater terminal at Kep as part of the Funan Techo Canal project, credible port partners are in short supply.
Second, large-scale renewable energy and transmission experience. India added 24 GW of renewable capacity in FY 2024-25 alone. Indian developers now routinely execute gigawatt-scale solar and wind projects on compressed timelines. Cambodia’s energy costs are consistently flagged as a top-tier drag on competitiveness. The 2030 renewable targets in the country’s power development plan are ambitious but underserved. An Indian developer bringing EPC capability, long-term PPA experience, and access to Indian manufacturing supply chains for modules and equipment could structurally reduce Cambodia’s industrial energy costs.
Third, geopolitical neutrality in a way neither China nor the West can replicate. India does not carry the baggage of a strategic rival in Cambodia’s calculations, and it is not subject to the kind of market-access conditionality the US and EU have attached to engagement. India is an ASEAN dialogue partner, not a member, which means it can move commercially without the political overlay that comes with Chinese BRI projects or Western ESG frameworks. For a country that has spent the last five years managing fallout from its perceived proximity to Beijing, from Western scrutiny of the Ream Naval Base to US tariff pressure on garments, Indian capital offers something valuable: commercial engagement without a political price tag.
To this, you can add the cultural layer. Cambodia and India share a civilisational history anchored in Angkor Wat, Hindu-Buddhist heritage, and centuries of maritime trade that predate modern diplomacy. This is not marketing language. It shapes how Cambodian leadership and publics perceive Indian engagement relative to other foreign capital. In a country where FDI quality is a public trust issue, cultural alignment is a soft-power advantage that no Chinese, American, or Japanese investor can easily replicate.
The Timing Is Not Neutral
Three developments make the next eighteen months the decisive window.
The Funan Techo Canal, the 180-km, $1.2 billion waterway designed to route Cambodian trade directly to the Gulf of Thailand instead of through Vietnam’s Cai Mep port, is targeted for completion by 2028. Chinese investors hold a 49% stake, and China Communications Construction Company is the lead builder, but the project has been repeatedly stalled through early 2026 due to land compensation and environmental disputes. If it works, it reshapes Cambodia’s logistics geography. Sihanoukville becomes the country’s actual maritime gateway rather than a Vietnamese dependency. Whoever has credible port and logistics capabilities positioned in that ecosystem by 2028 will have structural leverage for the next twenty years. Whoever arrives in 2029 is locked out.
The Sihanoukville Autonomous Port expansion is already underway, backed by Japanese financing, with capacity targeted to reach 1.4 million TEU by 2026 and 2.6 million TEU by 2029. The port’s channel is being dredged from 9.2 metres to 14.5 metres in phase one, which, for the first time, will allow it to receive vessels that currently bypass Cambodia entirely. Terminal concession structures, equipment supply contracts, and operations partnerships for the expanded capacity are being finalised now, not in 2028.
Cambodia’s trade architecture is also hardening. RCEP membership, bilateral FTAs with China, Korea, and the UAE, a comprehensive economic partnership agreement with the UAE, and a liberal investment regime that permits 100% foreign ownership and free capital repatriation in most sectors create a floor for foreign investors that did not exist five years ago. The US tariff pressure on Cambodian exports, which reached 36% on some categories, is pushing Phnom Penh to diversify its investor base and market mix faster than planned. Indian engagement lands in exactly the window Cambodia is actively opening.
What the Collaboration Should Actually Look Like
A serious India-Cambodia industrial corridor would not be a single headline transaction. It would be a layered engagement across three categories.
At the infrastructure layer, Indian port operators should bid for concession shares in Sihanoukville’s expanded capacity, the planned Kep deepwater terminal at the Funan Techo Canal outlet, and the Kampot port. These are bankable assets with twenty-year cash flow profiles, and they fit the pattern Indian operators have already executed in Colombo, Haifa, and Dar es Salaam.
At the energy layer, Indian developers should be structuring long-term PPAs for utility-scale solar, building transmission corridors linking Cambodia’s generation to industrial load centres, and supplying the storage capacity Cambodia’s grid will need as renewables scale. Module supply out of Indian manufacturing hubs makes the unit economics work in a way that Chinese supply chains, now subject to US tariff scrutiny, increasingly cannot.
At the manufacturing layer, Indian industrial houses should be anchoring SEZ development in agro-processing (Cambodian cashew, rice, mango, and rubber all have scaled export potential that India can process and distribute), pharmaceuticals (India already has preferential tariff access under the Duty-Free Tariff Preference Scheme), and advanced components where Cambodia’s labour cost advantage combined with Indian technical capability beats China on total landed cost.
None of this is unprecedented. Indian capital has executed exactly these structures in Sri Lanka, Vietnam, and across East Africa. What has been missing in Cambodia is intent, not capability.
The Upside for Both Sides
For Cambodia, a deeper Indian industrial partnership would deliver what Chinese capital structurally cannot: technology transfer into skilled manufacturing, competitive second-source pricing on infrastructure concessions, geopolitical hedging that preserves relationships with Beijing, Washington, and Tokyo simultaneously, and real export market access to the Indian consumer base, which is the fastest-growing large economy in the world. Cambodian cashew, rice, mango, and garment exports to India currently sit well below capacity. The Indian market alone could absorb multiples of what Cambodia currently exports across most of its priority categories.
For India, Cambodia offers what the rest of Southeast Asia is increasingly pricing out of reach: greenfield infrastructure opportunities at entry valuations, a strategic foothold in the Mekong subregion that complements the Vietnam presence, preferential market access inside ASEAN and RCEP without the political frictions of Vietnam or the Philippines, and a way to pressure-test Indian industrial capability in a compact, manageable operating environment before scaling into larger ASEAN markets. For Indian players working toward 2030 international revenue targets, Cambodia is a rare combination of accessible scale and strategic adjacency.
The Bottom Line
Cambodia does not need more FDI. It needs better FDI from a broader set of sources in sectors that build long-term industrial capacity rather than short-term operational employment. India offers exactly that combination: industrial scale, demonstrated export capability, cultural and geographic proximity, and the geopolitical neutrality that allows Phnom Penh to diversify its infrastructure partnerships without picking a side in anyone else’s competition.
The window is narrow. The Funan Techo Canal will be operational in roughly thirty months. The Sihanoukville expansion concessions are now being finalised. The next Cambodian five-year plan, which will set the framework for the 2026-2030 investment cycle, is being drafted. Corridors are not announced. They are accumulated over a decade through repeated transactions that each look small on their own. The first transactions in that corridor should occur this year. For both Cambodia and India, the commercial logic has been clear for some time. What has been missing is execution.
